Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 10. Income Taxes

The components of income (loss) before income taxes for the years ended December 31, 2021, 2020 and 2019 were as follows:

	2021			2020			2019
U.S.	$	(75.8	)	$	(123.8	)	$	(65.1	)
Foreign		124.5			107.9			115.7
Total	$	48.7		$	(15.9	)	$	50.6

The components of income tax expense for the years ended December 31, 2021, 2020 and 2019 were as follows:

	2021			2020			2019
U.S. Federal:
Current	$	6.5		$	(4.8	)	$	7.7
Deferred		7.0			(5.3	)		6.3
State:
Current		(2.3	)		(0.7	)		0.4
Deferred		2.4			(5.2	)		7.6
Foreign:
Current		27.8			27.3			24.4
Deferred		3.5			(1.3	)		8.5
Total	$	44.9		$	10.0		$	54.9

The following is a reconciliation of income tax expense at the U.S. federal statutory tax rate for the years ended December 31, 2021, 2020 and 2019:

	2021			2020			2019
Income taxes at the U.S. federal statutory tax rate	$	10.3		$	(3.3	)	$	10.6
Change in valuation allowances		(3.2	)		(3.7	)		8.1
Interest limitation valuation allowance		18.8			(8.0	)		27.8
State and local income taxes, net of U.S. federal income tax benefit		5.5			4.7			(7.3	)
Foreign tax		2.9			(2.1	)		5.1
Adjustment of uncertain tax positions and interest		(5.6	)		1.1			(0.6	)
Foreign tax rate differential		(0.3	)		(0.8	)		(0.5	)
Tax impact of net gain on sale of Donnelley Financial and LSC shares		—			—			0.5
Global intangible low-taxed income		5.0			3.5			5.2
Corporate owned life insurance policies		—			17.3			—
Non-deductible compensation	9.1				—			—
Other		2.4			1.3			6.0
Total	$	44.9		$	10.0		$	54.9

For 2021, we continue to report the tax impact of limitations on our interest expense deduction. Non-deductible interest expense will be carried forward as a deferred tax asset; however, it is more likely than not that the benefit of the deferred tax asset will not be fully realized and a full valuation allowance was recorded. Also included in 2021 is the tax impact of non-deductible compensation.

Included in 2020 is the impact from the surrender of corporate owned life insurance policies as well as tax benefits from additional interest expense deductions as result of the CARES Act and additional tax guidance issued in 2020.

 Deferred income taxes

The significant deferred tax assets and liabilities at December 31, 2021 and 2020 were as follows:

	2021			2020
Deferred tax assets:
Pension and OPEB plan liabilities	$	—		$	29.1
Net operating losses and other tax carryforwards		189.5			195.6
Interest limitation carryforward		38.6			21.4
Accrued liabilities		37.7			48.6
Foreign depreciation		8.2			19.4
Operating lease liabilities		55.9			59.4
Other		14.1			16.7
Total deferred tax assets		344.0			390.2
Valuation allowances		(200.7	)		(195.7	)
Net deferred tax assets	$	143.3		$	194.5
Deferred tax liabilities:
Accelerated depreciation	$	(36.3	)	$	(50.0	)
Other intangible assets		(6.4	)		(8.1	)
Inventories		(10.4	)		(8.6	)
Operating lease assets		(54.6	)		(58.1	)
Pension and OPEB plan liabilities		(10.3	)		—
Other		(8.3	)		(5.7	)
Total deferred tax liabilities		(126.3	)		(130.5	)
Total net deferred tax assets	$	17.0		$	64.0

Transactions affecting the valuation allowances on deferred tax assets during the years ended December 31, 2021, 2020 and 2019 were as follows:

	2021			2020			2019
Balance, beginning of year	$	195.7		$	237.5		$	255.9
Current year expense-net		13.3			(44.8	)		34.5
Write-offs		—			—			(50.1	)
Foreign exchange and other		(8.3	)		3.0			(2.8	)
Balance, end of year	$	200.7		$	195.7		$	237.5

As of December 31, 2021, we had domestic and foreign net operating loss and other tax credit carryforwards of approximately $120.5 million and $69.0 million ($126.8 million and $68.8 million, respectively, at December 31, 2020), of which $110.0 million expires between 2022 and 2031. Limitations on the utilization of these deferred tax assets may apply therefore we have provided valuation allowances of $162.1 million on these deferred tax assets as of December 31, 2021 ($174.4 million at December 31, 2020).

We are not permanently reinvested on certain foreign earnings yet remain permanently reinvested on all other foreign earnings and other outside basis differences. We have recognized deferred tax liabilities of $5.0 million, $4.5 million and $6.7 million as of December 31, 2021, 2020 and 2019, respectively, related to local taxes on certain foreign earnings which are not considered to be permanently reinvested.

Cash payments for income taxes were $43.0 million, $68.7 million and $73.1 million during the years ended December 31, 2021, 2020 and 2019, respectively. Cash refunds for income taxes were $3.8 million, $7.2 million and $12.1 million during the years ended December 31, 2021, 2020 and 2019, respectively.

Our income taxes payable for federal and state purposes has been reduced by the tax benefits associated with the vesting of stock based compensation awards.

As a result of the Tax Cuts and Jobs Act of 2017, in our 2017 (and adjusted in 2018) results of operations, a one-time transition tax on foreign earnings was recorded and such liability is payable over a period of eight years.  The long-term income tax liability is $60.3 million and $68.3 million at December 31, 2021 and 2020, respectively.

See Note 14, Other Comprehensive Loss, for details of the income tax expense or benefit allocated to each component of other comprehensive loss.

Uncertain tax positions

Changes in unrecognized tax benefits at December 31, 2021, 2020 and 2019 were as follows:

	2021			2020			2019
Balance at beginning of year	$	20.7		$	23.1		$	25.0
Additions for tax positions of the current year		—			—			0.1
Additions for tax positions of prior years		—			4.1			—
Reductions for tax positions of prior years		—			(2.1	)		—
Settlements during the year		(3.9	)		(2.9	)		(0.4	)
Lapses of applicable statutes of limitations		(2.8	)		(1.5	)		(1.6	)
Balance at end of year	$	14.0		$	20.7		$	23.1

As of December 31, 2021, 2020 and 2019, we had $14.0 million, $20.7 million and $23.1 million, respectively, of unrecognized tax benefits. Unrecognized tax benefits of $6.0 million as of December 31, 2021, if recognized, would decrease income taxes.

As of December 31, 2021, it is reasonably possible that the total amount of unrecognized tax benefits will decrease within twelve months by as much as $6.9 million due to the resolution of audits or expirations of statutes of limitations related to U.S. federal, state and international tax positions.

We classify interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. The total interest (benefit) expense related to tax uncertainties recognized in the Consolidated Statements of Operations were insignificant for the years ended December 31, 2021, 2020 and 2019, respectively. There were no benefits from the reversal of accrued penalties for the years ended December 31, 2021, 2019 and 2019. Accrued interest of $2.1 million and $3.7 million related to income tax uncertainties are reported in Other noncurrent liabilities in the Consolidated Balance Sheets at December 31, 2021 and 2020, respectively. There were no accrued penalties related to income tax uncertainties for the years ended December 31, 2021 and 2020.

We have tax years from 2010 and thereafter that remain open and subject to examination by the IRS, certain state taxing authorities or certain foreign tax jurisdictions.