Note 10. Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

The components of the provision (benefit) for income taxes from continuing operations are as follows:

	Year Ended December 31,
	2023		2022		2021
	(in millions)
Current:
Federal:
Effect of CARES Act	$	—	$	(0.5)	$	2.1
Other	38.7		2.1		(3.0)
	38.7		1.6		(0.9)
State	1.3		3.5		(0.6)
Foreign	10.5		7.8		4.3
Total current	50.5		12.9		2.8
Deferred:
Federal:
Effect of CARES Act	—		—		0.4
Other	(20.7)		14.5		10.4
	(20.7)		14.5		10.8
State	(8.1)		0.4		2.4
Foreign	(12.7)		(0.2)		(0.1)
Total deferred	(41.5)		14.7		13.1
Provision (benefit)	$	9.0	$	27.6	$	15.9

The provision for income taxes from continuing operations results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and our effective income tax rate on income before income taxes:

	Year Ended December 31,
	2023		2022		2021
Statutory rate	21.0	%	21.0	%	21.0	%
Foreign branch taxes	1.8		2.1		3.0
State taxes	2.2		1.7		3.0
Executive compensation limitations	1.3		1.3		1.8
Noncontrolling interest in partially-owned subsidiaries	(1.8)		(2.1)		—
Equity compensation	(0.5)		(1.1)		(4.0)
Changes in valuation allowance and reserves	(2.2)		(0.9)		(4.3)
Changes in state laws and apportionment	(7.1)		(0.5)		0.3
Release of residual taxes from OCI	(8.1)		—		—
Effect of CARES Act	—		(0.5)		4.5
Foreign rate differential	—		—		1.4
Nondeductible excise tax	—		—		1.3
Nondeductible compensation	—		—		1.2
Other, net	(0.6)		0.8		(0.4)
Effective rate	6.0	%	21.8	%	28.8	%

The effective tax rate is based upon the U.S. statutory rate of 21.0% for the years ended December 31, 2023, 2022, and 2021. For the year ended December 31, 2023, the difference between the U.S. statutory rate and the Company's effective tax rate is primarily due to the release of residual taxes out of AOCI; the re-measurement of our net deferred state income tax liabilities due to apportionment and state law changes, reducing our net deferred tax liability; changes in our valuation allowances; state income taxes; and foreign income taxes.

During the year ended December 31, 2023, one of our partially-owned subsidiaries released residual tax effects that had previously been recorded in AOCI. This deferred tax benefit was originally recorded before the partially-owned subsidiary was treated as a flow-through entity, remaining in AOCI until the underlying book-to-tax difference no longer existed, which occurred during the year ended December 31, 2023. As a result, we recorded an $11.9 million income tax benefit in our Consolidated Statements of Operations during the year ended December 31, 2023.

We remeasure our state deferred tax liability on a regular basis to reflect changes in our overall state tax footprint based upon current apportionment information. We also adjust our deferred balances based upon changes in tax laws and rates during the period in which those laws and rates are enacted, as well as adjusting for acquisition and disposition activity of businesses. As a result of our changes in apportionment, tax law changes, and business additions this year, we recorded a non-cash, deferred tax benefit of $10.6 million during the year ended December 31, 2023.

The tax provision for the year ended December 31, 2023 also reflects a $3.2 million tax benefit related to the net impact of an adjustment to valuation allowances, primarily for deferred tax assets in Mexico, state tax loss carryforwards, and federal tax credits.

For the year ended December 31, 2022, the difference between the U.S. statutory rate and the Company's effective tax rate is primarily due to foreign taxes, state income taxes and non-deductible executive compensation, offset by taxes not recorded on our non-controlling interests in partially-owned subsidiaries, reductions in tax reserves for uncertain tax positions, and excess tax benefits associated with equity-based compensation.

For the year ended December 31, 2021, the difference between the U.S. statutory rate and effective tax rate is primarily due to an adjustment to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") carryback benefit previously recognized, state taxes, and foreign taxes, partially offset by excess tax benefits associated with equity-based compensation. See Note 5 for a further explanation of activities with respect to our partially-owned subsidiaries.

Due to the enactment of the CARES Act, Trinity filed a carryback claim for the 2018-2020 tax losses to the 2013-2015 tax years, allowing the recovery of taxes previously paid, resulting in a tax benefit of $0.5 million and a tax expense of $2.5 million for the years ended December 31, 2022 and 2021, respectively.

Income (loss) from continuing operations before income taxes for the years ended December 31, 2023, 2022, and 2021 was $137.2 million, $127.1 million, and $44.6 million, respectively, for U.S. operations, and $11.8 million, $(0.6) million, and $10.6 million, respectively, for foreign operations.

Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:

	December 31,
	2023		2022
	(in millions)
Deferred tax liabilities:
Depreciation, depletion, and amortization	$	1,100.6	$	1,072.6
Partially-owned subsidiaries basis difference	129.9		134.3
Right-of-use assets	22.3		20.9
Equity items	3.5		4.8
Accrued liabilities and other	4.8		3.0
Total deferred tax liabilities	1,261.1		1,235.6
Deferred tax assets:
Workers compensation, pensions, and other benefits	30.0		27.4
Interest expense	85.0		31.3
Warranties and reserves	1.5		2.8
Tax loss carryforwards and credits	31.2		40.4
Inventory	5.9		3.6
Lease liabilities	26.4		25.8
Total deferred tax assets	180.0		131.3
Net deferred tax liabilities before valuation allowances	1,081.1		1,104.3
Valuation allowances	21.6		29.5
Net deferred tax liabilities before reserve for uncertain tax positions	1,102.7		1,133.8
Deferred tax assets included in reserve for uncertain tax positions	(0.7)		(0.7)
Net deferred tax liability	$	1,102.0	$	1,133.1

At December 31, 2023, we had $20.0 million of tax-effected state loss carryforwards and $11.2 million of net federal and state credits remaining. We have established valuation allowances for federal, state, and foreign tax operating losses and credits that we have estimated may not be realizable.

Taxing authority examinations

Our federal tax return years through 2021 are effectively settled. We have state tax returns that are under audit in the normal course of business, and our Mexican subsidiaries' tax returns statutes of limitations remain open for auditing 2018 forward. We believe we are appropriately reserved for any potential matters.

Unrecognized tax benefits

The change in unrecognized tax benefits was as follows:

	Year Ended December 31,
	2023		2022		2021
	(in millions)
Beginning balance	$	3.8	$	2.3	$	2.3
Additions for tax positions related to the current year	—		1.1		—
Additions for tax positions of prior years	—		1.7		—
Reductions for tax positions of prior years	(2.8)		—		—
Settlements	—		—		—
Expiration of statute of limitations	—		(1.3)		—
Ending balance	$	1.0	$	3.8	$	2.3

The total amount of unrecognized tax benefits, including interest and penalties, at December 31, 2023 and 2022, that would affect our effective tax rate if recognized, was $2.6 million and $2.5 million, respectively. The additions for tax positions in the current year and prior years are due to foreign positions of an acquired subsidiary that was recorded as part of our purchase accounting. The expiration of statute of limitations relates to a state tax position for which the statute of limitations has lapsed.

The Company accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties from continuing operations as of December 31, 2023 and 2022 was $2.3 million and $2.2 million, respectively. Income tax expense (benefit) for the years ended December 31, 2023, 2022, and 2021 included an increase of $0.1 million, a decrease of $0.8 million, and an increase of $0.1 million, respectively, with regard to interest expense and penalties related to uncertain tax positions.