Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 16. INCOME TAXES

The tax effects of principal temporary differences between the carrying amounts of assets and liabilities and their tax basis are summarized below. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income in the appropriate jurisdiction to realize deferred tax assets, net of valuation allowances. In arriving at this conclusion, we considered the profit before tax generated for the years 2020 through 2022, future reversals of existing taxable temporary differences, and projections of future profit before tax.

We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard for all periods, we consider all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses and forecasts of future profitability, the duration of statutory carryforward periods, and our experience with operating loss and tax credit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses is incurred for a tax jurisdiction, forecasts of future profitability are not used as positive evidence related to the realization of the deferred tax assets in the assessment.

As of December 31, 2022 and 2021, we had $675.5 million and $700.9 million, respectively, of gross state net operating loss (“NOL”) carryforwards expiring between 2023 and 2042. As of December 31, 2022, we had capital loss carryforwards of $18.8 million that expire between 2024 and 2036. Capital loss carryforwards as of December 31, 2021 were $18.8 million. As of December 31, 2022, we did not have any foreign tax credit (“FTC”) carryforwards. U.S. FTC carryforwards as of December 31, 2021 were $0.6 million.

As of December 31, 2022 and 2021, we had valuation allowances of $48.7 million and $60.6 million, respectively. As of December 31, 2022, our valuation allowance consisted of $28.0 million for state deferred tax assets related to operating loss carryforwards, $17.4 million for federal and state deferred tax assets related to capital loss carryforwards and $3.3 million for state deferred tax assets related to state tax credits.

We estimate we will need to generate future taxable income of approximately $360.1 million for state income tax purposes during the respective realization periods (ranging from 2023 to 2042) to be able to fully realize the net deferred income tax assets discussed above. We estimate we will need to generate capital gain income of $66.4 million to fully realize our federal capital loss carryforwards before they expire between 2024 and 2026. We estimate we will need to generate capital gain income of $184.6 million to fully realize our state capital loss carryforwards before they expire between 2024 and 2036. Our ability to utilize deferred tax assets may be impacted by certain future events, such as changes in tax legislation or insufficient future taxable income prior to expiration of certain deferred tax assets.

	December 31, 2022			December 31, 2021
Deferred income tax assets (liabilities)
Net operating losses	$	34.2		$	42.5
Postretirement benefits		16.7			20.7
Pension benefit liabilities		8.2			11.0
Deferred compensation		7.1			7.9
Foreign tax credit carryforwards		-			0.6
State tax credit carryforwards		4.7			8.7
Capital loss carryforwards		18.8			18.8
Capitalized research expenses		9.4			-
Lease right-of-use liabilities		9.7			9.8
Other		3.8			12.3
Total deferred income tax assets		112.6			132.3
Valuation allowances		(48.7	)		(60.6	)
Net deferred income tax assets		63.9			71.7
Intangibles		(85.1	)		(87.4	)
Partnerships and investments		(25.5	)		(26.4	)
Accumulated depreciation		(86.4	)		(80.4	)
Prepaid pension costs		(21.2	)		(27.8	)
Inventories		(4.9	)		(4.9	)
Lease right-of-use assets		(9.9	)		(10.1	)
Other		(0.3	)		(1.6	)
Total deferred income tax liabilities		(233.3	)		(238.6	)
Net deferred income tax liabilities	$	(169.4	)	$	(166.9	)

	2022			2021		2020
Details of taxes
Earnings (loss) from continuing operations before income taxes
Domestic	$	251.7		$	239.3	$	(130.0	)
Foreign		5.9			3.4		3.3
Total	$	257.6		$	242.7	$	(126.7	)
Income tax expense (benefit):
Current:
Federal	$	46.3		$	39.4	$	40.8
Foreign		1.3			0.6		1.0
State		11.3			8.7		5.6
Total current		58.9			48.7		47.4
Deferred:
Federal		(1.9	)		3.6		(75.5	)
Foreign		(0.2	)		0.6		-
State		0.9			4.5		(14.5	)
Total deferred		(1.2	)		8.7		(90.0	)
Total income tax expense (benefit)	$	57.7		$	57.4	$	(42.6	)

The unremitted earnings of our foreign subsidiaries are not permanently reinvested. Accordingly, at December 31 2022 and 2021, we have recorded deferred income taxes for foreign withholding taxes of $0.9 million and $0.7 million on approximately $17.7 million and $13.0 million of net undistributed earnings of foreign subsidiaries, respectively.

	2022			2021			2020
Reconciliation to U.S. statutory tax rate
Continuing operations tax expense (benefit) at statutory rate	$	54.1		$	51.0		$	(26.6	)
Decrease in valuation allowances on deferred income tax assets		(1.7	)		(17.8	)		(0.1	)
Expiration of deferred income tax assets		0.7			18.3			-
State income tax expense (benefit), net of federal impact		11.0			11.0			(7.3	)
Capital loss on sale of investment		-			-			(4.6	)
Statute closures		(5.1	)		(3.8	)		(1.3	)
State deferred tax adjustments		-			-			(1.5	)
Excess tax benefits on share-based compensation		(0.5	)		(0.8	)		(0.9	)
U.S. permanent differences		(0.8	)		(1.3	)		(2.2	)
Other		-			0.8			1.9
Tax expense (benefit) at effective rate	$	57.7		$	57.4		$	(42.6	)

We recognize the tax benefits of an uncertain tax position only if those benefits are more likely than not to be sustained based on existing tax law. Additionally, we establish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained upon examination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold is met, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, whichever is earlier.

We had $27.3 million of Unrecognized Tax Benefits (“UTB”) as of December 31, 2022, $11.5 million ($10.6 million, net of federal benefit) of this amount, if recognized in future periods, would impact the reported effective tax rate.

It is reasonably possible that certain UTB’s may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities. Over the next twelve months we estimate that UTB’s may decrease by $0.1 million related to state statutes expiring.

We account for all interest and penalties on uncertain income tax positions as income tax expense. We have $1.7 million of interest and penalties accrued in non-current income tax payable in the Consolidated Balance Sheet as of December 31, 2022.

We had the following activity for UTB’s for the years ended December 31, 2022, 2021 and 2020:

	2022			2021			2020
Unrecognized tax benefits balance at January 1,	$	35.6		$	41.7		$	34.7
Gross change for current year positions		0.4			1.7			2.3
Increase for prior period positions		0.2			-			8.7
Decrease for prior period positions		(1.4	)		(3.6	)		-
Decrease due to statute expirations		(7.5	)		(4.2	)		(4.0	)
Unrecognized tax benefits balance at December 31,	$	27.3		$	35.6		$	41.7

We file income tax returns in the U.S. and various states and international jurisdictions. In the normal course of business, we are subject to examination by taxing authorities in Canada and the United States. Generally, we have open tax years subject to tax audit on average of between three years and six years. The statute of limitations is no longer open for U.S. federal returns before 2018. However, the U.S. federal return remains subject to examination by taxing authorities for 2017, specifically as it relates to the Section 965 Transition Tax incurred related to the Tax Cuts and Jobs Act of 2017. With few exceptions, the statute of limitations is no longer open for state or non-U.S. income tax examinations for years before 2018. With the exception of extending the 2018 and 2019 statute of limitations to July 31, 2023 as a result of ongoing U.S. federal income tax audits, we have not significantly extended any open statutes of limitation for any major jurisdiction and have reviewed and accrued for, where necessary, tax liabilities for open periods.

	2022		2021		2020
Other taxes
Payroll taxes	$	18.3	$	13.4	$	15.6
Property, franchise and capital stock taxes		4.5		4.4		4.2

In 2021, we recorded a $5.9 million ERC benefit, representing a refundable payroll tax credit for eligible wages paid to our employees in 2020 and 2021 under the CARES Act. We accounted for the ERC by applying the grant model. Based on our evaluation, we recognized the ERC benefit during 2021, primarily as an offset to payroll tax expenses within cost of goods sold and SG&A expenses in our Consolidated Statements of Operations and Comprehensive Income.