Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Components of income before income tax expense

The components of income before income tax (benefit) expense and loss from equity method investment are as follows:

	Years Ended December 31,
	2018		2017		2016
	(Dollars in millions)
Domestic	$	39.3	$	4.3	$	52.5
Foreign	17.7		17.6		15.6
Total	$	57.0	$	21.9	$	68.1

Components of income tax expense

ncome tax expense (benefit) consisted of the following:

	Years Ended December 31,
	2018			2017			2016
	(Dollars in millions)
Current tax expense:
U.S. federal	$	1.4		$	1.7		$	2.7
State	2.1			(1.0		)	(2.2		)
Foreign	4.5			4.9			5.0
Total current tax expense	8.0			5.6			5.5
Deferred tax expense:
U.S. federal	(3.1		)	(99.7		)	(1.5		)
State	(0.3		)	12.5			4.6
Total deferred tax (benefit) expense	(3.4		)	(87.2		)	3.1
Total	$	4.6		$	(81.6	)	$	8.6

Reconciliation of income tax expense

The reconciliation of income tax expense at the U.S. statutory rate to income tax expense (benefit) is as follows:

	Years Ended December 31,
	2018					2017					2016
	(Dollars in millions)
Income tax expense at U.S. statutory rate	$	12.0		21.0	%	$	7.7		35.0	%	$	23.8		35.0	%
Increase (reduction) in income taxes resulting from:
Impact of Final Regulations(1)	(1.4		)	(2.5	)%	64.2			293.2	%	—			—	%
Impact of Tax Legislation(2)	(4.8		)	(8.4	)%	(154.7		)	(706.4	)%	—			—	%
Income attributable to noncontrolling interests in partnerships(3)	(3.9		)	(6.8	)%	(5.4		)	(24.7	)%	(15.6		)	(23.0	)%
State and other income taxes, net of federal income tax effects	1.6			2.8	%	2.0			9.1	%	1.1			1.7	%
Change in valuation allowance(4)	0.7			1.2	%	3.9			17.8	%	0.4			0.6	%
Other	0.4			0.7	%	0.7			3.2	%	(1.1		)	(1.6	)%
Income tax (benefit) expense at effective tax rate	$	4.6		8.0	%	$	(81.6	)	(372.8	)%	$	8.6		12.7	%

(1) In January 2017, the Internal Revenue Service ("IRS") announced its decision to exclude cokemaking as a qualifying income generating activity in its final regulations (the "Final Regulations") issued under section 7704(d)(1)(E) of the Internal Revenue Code relating to the qualifying income exception for publicly traded partnerships. Subsequent to the 10-year transition period, certain cokemaking entities in the Partnership will become taxable as corporations. As a result, the Partnership recorded deferred income tax expense of $148.6 million to set up its initial deferred income tax liability during 2017, primarily related to differences in the book and tax basis of fixed assets, which are expected to exist at the end of the 10-year transition period when the cokemaking operations become taxable.  However, the Company had previously recorded $84.4 million of the deferred income tax liability in its financial statements related to the Company's share of the deferred tax liability for the book and tax differences in its investment in the Partnership. As such, the Company's 2017 financial statements reflect the $64.2 million incremental impact from the Final Regulations solely attributable to the Partnership’s public unitholders, which was also recorded as an equal reduction to noncontrolling interest.

In 2018, the Partnership recorded a deferred tax benefit of $3.6 million related to its changes in projected deferred tax liability associated with projected book and tax differences at the end of the 10-year transition period due to current period additions and changes in estimated useful lives of certain assets. The Company's 2018 financial statements reflect a $1.4 million benefit, which is solely attributable to the Partnership’s public unitholders and was also recorded as an equal reduction to noncontrolling interest. 

As a result, the Final Regulations have no impact to net income attributable to the Company.

(2) On December 22, 2017, the Tax Legislation was enacted. The Tax Legislation significantly revised the U.S. corporate income tax structure, including lowering corporate income tax rates. In addition, the SEC staff released Staff Accounting Bulletin 118 on December 23, 2017, which provided for companies to record a provisional impact of the Tax Legislation during a measurement period, not to exceed one year, in situations where companies do not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting under ASC 740, "Income Taxes", for certain income tax effects of the Tax Legislation for the reporting period which includes enactment. During 2017, SunCoke recorded a provisional net income tax benefit of $154.7 million, of which $125.0 million was attributable to the Company, for the impact of this Tax Legislation. These benefits were primarily due to the $169.0 million net benefit resulting from the remeasurement of U.S. deferred income tax liabilities and assets at the lower enacted corporate tax rates. During 2017, based on information available at the time, the Company recorded provisional income tax expense of $14.3 million for a valuation allowance against $19.0 million of foreign tax credit carryforwards that the Company believed would not be realized prior to their expiration as a result of the Tax Legislation. Based on an updated analysis of the foreign tax credit rules relating to the new Tax Legislation, the Company revised its estimate of the realizability of its foreign tax credits, resulting in a net $4.8 million benefit during the third quarter of 2018. There were no other significant changes to previous estimates and amounts recorded in 2017 relating to this Tax Legislation.

(3) Excludes the impact of the Final Regulations on qualifying income discussed above. No income tax expense is reflected in the Consolidated Statements of Income for income attributable to noncontrolling interests in partnership entities.

(4)

Tax effects of temporary differences that comprise the net deferred income tax liability

The tax effects of temporary differences that comprise the net deferred income tax liability from operations are as follows:

	December 31,
	2018			2017
	(Dollars in millions)
Deferred tax assets:
Retirement benefit liabilities	$	6.4		$	7.1
Black lung benefit liabilities	11.3			11.6
Share-based compensation	6.4			6.1
Federal tax credit carryforward(1)	21.5			23.2
Foreign tax credit carryforward(2)	15.9			19.0
Federal net operating loss	—			2.5
Section 163(j) interest limitation carryforward(3)	1.8			—
State tax credit carryforward, net of federal income tax effects(4)	2.4			4.0
State net operating loss carryforward, net of federal income tax effects(5)	13.5			13.9
Other liabilities not yet deductible	4.9			4.3
Total deferred tax assets	84.1			91.7
Less valuation allowance(6)	(20.7		)	(26.2		)
Deferred tax asset, net	63.4			65.5
Deferred tax liabilities:
Properties, plants and equipment	(111.5		)	(114.9		)
Investment in partnerships	(206.6		)	(208.4		)
Total deferred tax liabilities	(318.1		)	(323.3		)
Net deferred tax liability	$	(254.7	)	$	(257.8	)

(1) Federal tax credit carryforward expires in 2032 through 2034.

(2) Foreign tax credit carryforward expires in 2023 through 2028.

(3) The Tax Legislation generally limits the deductibility of business interest expense to 30 percent of adjusted taxable income. This limitation resulted in a deferred tax asset as it is eligible for deduction in future taxable years and has no expiration.

(4) State tax credit carryforward, net of federal income tax effects expires in 2019 through 2023.

(5) State net operating loss carryforward, net of federal income tax effects expires in 2023 through 2038.

(6) Primarily related to state tax credit and net operating loss carryforwards and the $9.9 million allowance against the foreign tax credit carryforward.