Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 — Income Taxes

The components of income (loss) from continuing operations before income taxes were as follows:

	Years Ended December 31,
	2020			2019
	(In millions)
U.S.	$	(63.6	)	$	11.4
International		—			—
Total	$	(63.6	)	$	11.4

The components of the income tax (provision) benefit from continuing operations were as follows:

		Years Ended December 31,
		2020		2019
		(In millions)
Current
Federal	$	—	$	—
International		—		—
Deferred
International		—		—
Total	$	—	$	—

The income tax provision from continuing operations differs from the amount computed by applying the statutory United States income tax rate (21 percent) because of the following items:

	Years Ended December 31,
	2020			2019
	(In millions)
Tax at statutory U.S. tax rate	$	(13.3	)	$	2.4
State income taxes, net of federal benefit		(2.5	)		0.5
Valuation allowances		(4.5	)		(28.6	)
Goodwill impairment		10.6			—
Pension and debt forgiveness		9.7			—
Tax on unremitted earnings of foreign subsidiaries		—			(0.4	)
Stock-based compensation		—			0.3
Net effect of subsidiary sale		—			25.0
Reclassification to discontinued operations and other		—			0.8
Income tax (provision) benefit	$	—		$	—

The 2020 tax law change that had the most significant impact was in the CARES Act, which accelerated the refund schedule for alternative minimum tax credit carryovers. The Company had recorded a tax benefit of $2.2 million in 2017-2018 which was originally scheduled to be received as cash refunds in 2019 through 2022. The CARES Act allowed the Company to file a refund claim for the entire remaining balance of $0.6 million which was received (with interest) in February 2021.

Tax laws require certain items to be included in our tax returns at different times than the items are reflected in our results of operations. Some of these items are temporary differences that will reverse over time. We record the tax effect of temporary differences as deferred tax assets and deferred tax liabilities in our Consolidated Balance Sheets.

In 2020 and 2019 the net cash paid for income taxes, relating to both continuing and discontinued operations, was $0.0 million and $0.0 million, respectively.

The components of net deferred tax assets and liabilities were as follows:

	As of December 31,
	2020			2019
	(In millions)
Tax credit carryforwards		20.3			21.4
Net operating loss carryforwards		134.2			144.1
Accrued liabilities and other reserves		0.1			—
Pension		—			3.4
Capital losses		33.1			26.9
Other, net		44.2			40.6
Total deferred tax assets		231.9			236.4
Valuation allowance		(231.9	)		(236.4	)
Net deferred tax assets		—			—
Unremitted earnings of foreign subsidiaries		0.2			(0.2	)
Total deferred tax liabilities		0.2			(0.2	)
Valuation allowance		—			—
Total deferred tax liabilities		(0.2	)		(0.2	)
Net deferred tax liabilities	$	(0.2	)	$	(0.2	)

We regularly assess the likelihood that our deferred tax assets will be recovered in the future. A valuation allowance is recorded to the extent we conclude a deferred tax asset is not considered more-likely-than-not to be realized. We consider all positive and negative evidence related to the realization of the deferred tax assets in assessing the need for a valuation allowance.

Our accounting for deferred tax consequences represents our best estimate of future events. A valuation allowance established or revised as a result of our assessment is recorded through income tax provision in our Consolidated Statements of Operations. Changes in our current estimates due to unanticipated events, or other factors, could have a material effect on our financial condition and results of operations.

We maintain a valuation allowance related to our deferred tax assets. The valuation allowance was $231.9 million and $236.4 million as of December 31, 2020 and 2019, respectively. The deferred tax asset changes and corresponding valuation allowance changes in 2020 compared to 2019 were due primarily to a decrease in net operating loss carryovers.

The net deferred tax liability not offset by valuation allowance of $0.2 million relates to foreign tax withholding on unremitted foreign earnings.

The table below shows the components of our deferred tax balances as they are recorded on our Consolidated Balance Sheets:

	As of December 31
	2020			2019
	(In millions)
Deferred tax liability - non-current		(0.2	)		(0.2	)
Total	$	(0.2	)	$	(0.2	)

Federal net operating loss carryforwards totaling $594.0 million will begin expiring in 2029. The Company’s $584.0 million in federal net operating loss carryforwards generated through 2017 continue to be subject to historical tax rules that allow carryforward for 20 years from origin, with the ability to offset 100 percent of future taxable income. Subsequent year tax losses have an indefinite life.

The Company performed an analysis to confirm that none of the federal net operating loss carryovers should be limited by Section 382. This limitation could result if there is a more than 50 percent ownership shift in the GlassBridge shares within a three-year testing period. No such ownership shift has occurred through December 31, 2020.

However, on the Effective Date of AEC’s prepackaged chapter 11 plan of reorganization, 100% of the equity in AEC, as reorganized, was issued to ESW and its affiliate ESW Capital LLC. Accordingly, the deferred tax assets resulting from AEC’s standalone net operating losses effectively became an asset of ESW and its affiliate, ESW Capital LLC, as of June 15, 2021, reducing GlassBridge’s federal net operating loss carryforwards from $594.0 million to $158.8 million as a result of the reorganization. See Note 8 – Debt for additional information regarding the ESW Loan Agreement.

We have state income tax loss carryforwards of $156.0 million, which will expire at various dates up to 2037. GlassBridge’s state loss carryforwards would be reduced to approximately $42 million after a 2021 AEC reorganization. GlassBridge has U.S. and foreign tax credit carryforwards of $20.3 million, $16.6 million of which will expire between 2021 and 2023, and the remainder of which will expire between 2024 and 2033. Federal capital losses of $132.3 million will expire between 2021 and 2025.

Our income tax returns are subject to review by various U.S. and foreign taxing authorities. As such, we record accruals for items that we believe may be challenged by these taxing authorities. The threshold for recognizing the benefit of a tax return position in the financial statements is that the position must be more-likely-than-not to be sustained by the taxing authorities based solely on the technical merits of the position. If the recognition threshold is met, the tax benefit is measured and recognized as the largest amount of tax benefit that, in our judgment, is greater than 50 percent likely to be realized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2020		2019
	(In Millions)
Beginning Balance	$	0.2	$	0.6
Additions:
Additions for tax positions of current years		—		—
Additions for tax positions of prior years		—		—
Reductions:
Reductions for tax positions of prior years		—		(0.4	)
Settlements with taxing authorities		—		—
Reductions due to lapse of statute of limitations		—		—
Total		0.2		0.2

Our federal income tax returns for 2017 through 2020 are subject to examination by the Internal Revenue Service. For state purposes, the statutes of limitation vary by jurisdiction. With few exceptions, we are no longer subject to examination for years before 2014.