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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 14. INCOME TAXES
Years ended December 31,
202120202019
Components of Income (Loss) Before Taxes($ in millions)
Domestic$977.3 $(1,025.2)$(1.3)
Foreign561.4 5.2 (35.6)
Income (loss) before taxes$1,538.7 $(1,020.0)$(36.9)
Components of Income Tax Provision (Benefit)
Current provision (benefit):
Federal$139.6 $(42.9)$9.3 
State24.5 0.5 3.2 
Foreign131.3 12.5 7.6 
295.4 (29.9)20.1 
Deferred provision (benefit):
Federal39.1 (36.0)(32.4)
State6.2 (13.2)(9.3)
Foreign(98.7)29.0 (4.0)
(53.4)(20.2)(45.7)
Income tax provision (benefit) $242.0 $(50.1)$(25.6)

The following table accounts for the difference between the actual tax provision and the amounts obtained by applying the statutory U.S. federal income tax rate to the income (loss) before taxes.
Years ended December 31,
Effective Tax Rate Reconciliation (Percent)202120202019
Statutory federal tax rate21.0 %21.0 %21.0 %
State income taxes, net1.9 1.1 (5.4)
Foreign rate differential2.9 (0.2)19.4 
U.S. tax on foreign earnings0.3 (1.8)— 
Salt depletion(0.6)1.0 29.0 
Change in valuation allowance(10.4)(3.5)(64.9)
Remeasurement of U.S. state deferred taxes0.1 (0.1)16.1 
Change in tax contingencies1.5 0.2 35.4 
Share-based payments(0.7)— 0.7 
Dividends paid to Contributing Employee Ownership Plan— — 1.1 
Return to provision(0.5)0.3 15.0 
U.S. federal tax credits— 0.2 6.4 
Goodwill impairment charge— (13.3)— 
Other, net0.2 — (4.4)
Effective tax rate15.7 %4.9 %69.4 %

The effective tax rate for 2021 included benefits from a net decrease in the valuation allowance related to deferred tax assets in foreign jurisdictions and domestic tax credits, a benefit associated with prior year tax positions, a benefit associated with stock-based compensation, an expense from remeasurement of deferred taxes due to an increase in our state effective tax rates and an expense from a change in tax contingencies. These factors resulted in a net $103.6 million tax benefit. After giving consideration to these items, the effective tax rate for 2021 of 22.5% was higher than the 21% U.S. federal statutory rate primarily due to state taxes, foreign income inclusions and foreign income taxes, partially offset by a net decrease in the valuation allowance related to utilization of losses in foreign jurisdictions and favorable permanent salt depletion deductions.
The effective tax rate for 2020 included expenses associated with a net increase in the valuation allowance related to foreign and domestic tax credits and deferred tax assets in foreign jurisdictions, a remeasurement of deferred taxes due to an increase in our state effective tax rates and a change in tax contingencies, and stock-based compensation, partially offset by a benefit associated with prior year tax positions. These factors resulted in a net $27.9 million tax expense. For 2020, a tax benefit of $10.8 million was recognized associated with the $699.8 million goodwill impairment charge. After giving consideration to these items, including the goodwill impairment charge on Olin’s loss before taxes, the effective tax rate for 2020 of 21.0% was equal to the 21.0% U.S. federal statutory rate as foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to losses in foreign jurisdictions were offset by state taxes and favorable permanent salt depletion deductions.

The effective tax rate for 2019 included benefits associated with the finalization of the Internal Revenue Service (IRS) review of years 2013 to 2015 U.S. income tax claims, stock-based compensation, prior year tax positions, foreign tax law changes, a remeasurement of deferred taxes due to a decrease in our state effective tax rates and a change in tax contingencies. The effective tax rate also included expenses associated with a net increase in the valuation allowance primarily related to foreign deferred tax assets and liabilities. These factors resulted in a net $19.4 million tax benefit. After giving consideration to these items, the effective tax rate for 2019 of 16.8% was lower than the 21.0% U.S. federal statutory rate primarily due to state taxes and a net increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by foreign income taxes and favorable permanent salt depletion deductions.

December 31,
Components of Deferred Tax Assets and Liabilities20212020
Deferred tax assets:($ in millions)
Pension and postretirement benefits$92.4 $181.9 
Environmental reserves36.4 36.3 
Asset retirement obligations14.7 16.4 
Accrued liabilities49.4 54.1 
Lease liabilities89.7 87.4 
Tax credits40.8 49.8 
Net operating losses22.6 141.0 
Capital loss carryforward0.5 0.9 
Interest deduction limitation— 7.0 
Total deferred tax assets346.5 574.8 
Valuation allowance(70.1)(239.6)
Net deferred tax assets276.4 335.2 
Deferred tax liabilities:
Property, plant and equipment496.7 530.4 
Right-of-use lease assets88.2 86.2 
Intangible amortization41.2 40.0 
Inventory and prepaids7.9 17.4 
Partnerships87.0 80.9 
Taxes on unremitted earnings8.7 6.1 
Other miscellaneous items6.3 6.2 
Total deferred tax liabilities736.0 767.2 
Net deferred tax liability$(459.6)$(432.0)

Realization of the net deferred tax assets, irrespective of indefinite-lived deferred tax liabilities, is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards.  Although realization is not assured, we believe that it is more likely than not that the net deferred tax assets will be realized.

At December 31, 2021, we had deferred state tax assets of $14.2 million relating to state NOLs, which will expire in years 2022 through 2042, if not utilized.
At December 31, 2021, we had deferred state tax assets of $21.2 million relating to state tax credits, which will expire in years 2022 through 2036, if not utilized.

At December 31, 2021, we had a capital loss carryforward of $2.2 million (representing $0.5 million of deferred tax assets) which is available to offset future consolidated capital gains that will expire in years 2022 through 2025, if not utilized.  

At December 31, 2021, we had foreign tax credits of $18.5 million, that will expire in years 2027 through 2031, if not utilized.

At December 31, 2021, we had NOLs of approximately $39.2 million (representing $8.4 million of deferred tax assets) in various foreign jurisdictions. Of these, $30.8 million (representing $7.0 million of deferred tax assets) expire in various years from 2023 to 2031. The remaining $8.4 million (representing $1.4 million of deferred tax assets) do not expire.

As of December 31, 2021, we had recorded a valuation allowance of $70.1 million, compared to $239.6 million as of December 31, 2020. The decrease of $169.5 million is primarily due to a release of the $156.9 million valuation allowance related to deferred tax assets of our German operations, of which $103.8 million was released in the second quarter of 2021. As a result of significant taxable income during the first six months of 2021, our German operations reported cumulative income before tax (adjusted for permanent items) over the previous twelve quarters. Additionally, we projected taxable income in our German operations for the remainder of 2021 and we expected that net operating loss carryovers and other deductible amounts in Germany would ultimately be realizable against future income. We concluded, based upon the preponderance of positive evidence over negative evidence and the anticipated ability to use the deferred tax assets, that it was more likely than not that the deferred tax assets in Germany would be realizable due to U.S. GAAP forecasted income. If there are unfavorable changes to actual operating results or to projections of future income, we may determine that it is more likely than not such deferred tax assets may not be realizable. All German net operating loss carryovers were realized in 2021.

We continue to have net deferred tax assets in several jurisdictions which we expect to realize, assuming sufficient taxable income can be generated to utilize these deferred tax benefits, which is based on certain estimates and assumptions. If these estimates and related assumptions change in the future, we may be required to reduce the value of the deferred tax assets resulting in additional tax expense.

The activity of our deferred income tax valuation allowance was as follows:
December 31,
20212020
($ in millions)
Beginning balance$239.6 $182.1 
Increases to valuation allowances3.2 54.6 
Decreases to valuation allowances(169.6)(2.2)
Foreign currency translation adjustments(3.1)5.1 
Ending balance$70.1 $239.6 
As of December 31, 2021, we had $43.4 million of gross unrecognized tax benefits, which would have a net $43.6 million impact on the effective tax rate, if recognized.  As of December 31, 2020, we had $21.3 million of gross unrecognized tax benefits, which would have a net $21.2 million impact on the effective tax rate, if recognized.  The change for both 2021 and 2020 primarily relates to additional gross unrecognized benefits for current and prior year tax positions, as well as decreases for prior year tax positions.  The amounts of unrecognized tax benefits were as follows:
December 31,
20212020
($ in millions)
Beginning balance$21.3 $22.8 
Increase for current year tax positions5.8 1.7 
Increase for prior year tax positions24.4 0.2 
Decrease for prior year tax positions(4.1)(3.5)
Reduction due to lapse in statute of limitations(3.0)— 
Foreign currency translation adjustments(1.0)0.1 
Ending balance$43.4 $21.3 

We recognize interest and penalty expense related to unrecognized tax positions as a component of the income tax provision.  As of December 31, 2021 and 2020, interest and penalties accrued were $0.5 million and $0.1 million, respectively.  For 2021, 2020 and 2019, we recorded expense (benefit) related to interest and penalties of $0.5 million, $(0.1) million and $(1.5) million, respectively.

As of December 31, 2021, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $13.5 million over the next twelve months.  The anticipated reduction primarily relates to settlements with tax authorities and the expiration of federal, state and foreign statutes of limitation.

We operate globally and file income tax returns in numerous jurisdictions.  Our tax returns are subject to examination by various federal, state and local tax authorities.  Additionally, examinations are ongoing in various states and foreign jurisdictions. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:
Tax Years
U.S. federal income tax2018 - 2020
U.S. state income tax2012 - 2020
Canadian federal income tax2013 - 2020
Brazil2015 - 2020
Germany2015 - 2020
China2014 - 2020
The Netherlands2015 - 2020