Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

19. Income Taxes

Components of earnings before income taxes and noncontrolling interests are as follows (in thousands):

	Year Ended December 31,
	2021		2020			2019
United States	$	9,076,921	$	1,215,909		$	1,806,704
Foreign		123,937		(380,371	)		(23,897	)
	$	9,200,858	$	835,538		$	1,782,807

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2021			2020			2019
Current:
Federal	$	1,753,376		$	(177,159	)	$	241,074
State		293,752			(4,298	)		62,685
Foreign		19,695			18,131			8,981
Total current		2,066,823			(163,326	)		312,740
Deferred:
Federal		10,916			177,035			101,946
State		(3,042	)		(25,500	)		8,013
Foreign		3,791			11,301			(10,802	)
Total deferred		11,665			162,836			99,157
Total provision for income taxes	$	2,078,488		$	(490	)	$	411,897

A reconciliation of the federal statutory tax rate (21%) to the total provision is as follows:

	Year Ended December 31,
	2021	2020	2019
Taxes computed at statutory rate	21.00%	21.00%	21.00%
State income taxes, net of federal income tax benefit	2.49%	-3.37%	3.16%
Federal research credit	-0.07%	-0.79%	-0.34%
Equity in losses of foreign joint venture	—	0.64%	0.19%
Impairment on investment in foreign joint venture	—	11.20%	—
Tax loss on investment in foreign joint venture	—	-22.73%	—
Foreign rate differential	-0.03%	1.15%	—
Noncontrolling interests	-0.67%	-2.88%	-1.18%
CARES Act NOL carryback	—	-5.77%	—
Other, net	-0.13%	1.49%	0.27%
Provision for income taxes	22.59%	-0.06%	23.10%

For the year ended December 31, 2021, the effective tax rate on continuing operations was 22.59% compared to -0.06% for the year ended December 31, 2020.

The 2020 effective tax rate included a net tax benefit of $201.9 million (-24.16%, -22.73% included in the tax loss on investment in foreign joint venture line and -1.43% included in the state income taxes, net of federal income tax benefit line) for a tax loss on our investment in a foreign joint venture, a net tax benefit of $45.2 million (-5.41%, included in the state income taxes, net of federal income tax benefit line) for state tax credits, and a federal tax benefit of $48.2 million (-5.77%, included in the CARES Act NOL carryback line) for the carryback of a federal tax net operating loss (an “NOL”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). These benefits were all recognized in 2020 and were partially offset by the rate impact (11.20%) of financial statement impairments of $445.6 million which did not affect the provision for income taxes. The CARES Act allows for an NOL generated in 2020 to be carried back to taxable years where the federal income tax rate was 35%. The difference in the tax rate in 2020 and tax years before the enactment of the Tax Cuts and Jobs Act of 2017 is the main driver of the federal tax NOL benefit in 2020, but this was partially offset by the partial loss of the domestic manufacturing deduction in the carryback year.    

Deferred tax assets and liabilities resulted from the following (in thousands):                

	December 31,
	2021			2020
Deferred tax assets:
Accrued liabilities and reserves	$	232,898		$	171,998
Allowance for doubtful accounts		34,124			16,434
Inventory		81,437			62,755
Post-retirement benefits		10,763			12,714
Commodity hedges		243			4,033
Net operating loss carryforward		38,290			63,952
Tax credit carryforwards		172,629			187,267
Other deferred tax assets		11,336			10,674
Valuation allowance		(183,759	)		(207,653	)
Total deferred tax assets		397,961			322,174
Deferred tax liabilities:
Holdbacks and amounts not due under contracts		(13,956	)		(14,051	)
Intangibles		(178,304	)		(177,061	)
Property, plant and equipment		(770,791	)		(680,688	)
Book/Tax differences on debt modifications		(45,173	)		(46,813	)
Total deferred tax liabilities		(1,008,224	)		(918,613	)
Total net deferred tax liabilities	$	(610,263	)	$	(596,439	)

Non-current deferred tax liabilities included in deferred credits and other liabilities in the consolidated balance sheets were $610.3 million at December 31, 2021 ($596.4 million at December 31, 2020). Current federal and state income taxes receivable included in other current assets in the consolidated balance sheets were $115.2 million at December 31, 2021 ($456.1 million at December 31, 2020). Nucor paid $1.68 billion in net federal, state and foreign income taxes in 2021 ($50.3 million and $525.2 million in 2020 and 2019, respectively).    

Nucor has not recognized deferred tax liabilities on its investment in foreign subsidiaries with undistributed earnings that satisfy the permanent reinvestment requirements (the deferred tax liabilities on the investments not permanently reinvested are immaterial). While Nucor considers future earnings to be permanently reinvested, it is expected that potential future distributions will likely be of a nontaxable manner. If this assertion of permanent reinvestment were to change, there may be deferred tax liabilities related to the withholding tax impacts on the actual distribution of certain cumulative undistributed foreign earnings, but the Company believes this amount to be immaterial.    

State NOL carryforwards were $380.1 million at December 31, 2021 ($1.41 billion at December 31, 2020). If unused, they will expire between 2022 and 2041. Foreign NOL carryforwards were $113.6 million at December 31, 2021 ($142.3 million at December 31, 2020). If unused, the foreign NOL carryforwards will expire between 2025 and 2041.      

At December 31, 2021, Nucor had approximately $95.1 million of unrecognized tax benefits, of which $94.4 million would affect Nucor's effective tax rate, if recognized. At December 31, 2020, Nucor had approximately $48.0 million of unrecognized tax benefits, of which $47.3 million would affect Nucor's effective tax rate, if recognized.    

A reconciliation of the beginning and ending amounts of unrecognized tax benefits recorded in deferred credits and other liabilities in the consolidated balance sheets is as follows (in thousands):

	December 31,
	2021			2020			2019
Balance at beginning of year	$	47,965		$	50,920		$	48,605
Additions based on tax positions related to current year		52,853			4,138			9,272
Reductions based on tax positions related to    current year		—			—			—
Additions based on tax positions related to prior years		2,405			223			2,106
Reductions based on tax positions related to    prior years		(3,060	)		—			(2,863	)
Reductions due to settlements with taxing authorities		—			—			(1,514	)
Reductions due to statute of limitations lapse		(5,027	)		(7,316	)		(4,686	)
Balance at end of year	$	95,136		$	47,965		$	50,920

We estimate that in the next 12 months, our gross uncertain tax positions, exclusive of interest, could decrease by as much as $10.4 million, as a result of the expiration of the applicable statute of limitations.    

During 2021, Nucor recognized $5.5 million of expense in interest and penalties ($0.1 million of expense in 2020 and $0.7 million of expense in 2019). The interest and penalties are included in interest expense, net and marketing, administrative and other expenses, respectively, in the consolidated statements of earnings. As of December 31, 2021, Nucor had approximately $17.5 million of accrued interest and penalties related to uncertain tax positions (approximately $12.0 million as of December 31, 2020).  The accrued interest and penalties are included in accrued expenses and other current liabilities and deferred credits and other liabilities, respectively, in the consolidated balance sheets.  

Nucor has concluded U.S. federal income tax matters for tax years through 2014 and for tax year 2016. The tax years 2015 and 2017 through 2020 remain open to examination by the Internal Revenue Service. The 2015 Canadian income tax returns for Harris Steel Group Inc. and certain related affiliates are currently under examination by the Canada Revenue Agency. The tax years 2015 through 2020 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).