Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

During the three months ended March 31, 2020, gross unrecognized tax benefits decreased by $7.3 million to $32.2 million. The decrease is primarily related to releasing a reserve in the U.S. for AMT sequestration. If recognized, approximately $16.9 million of the $32.2 million in unrecognized tax benefits would affect our effective tax rate and net earnings in future periods. 

We recognize interest and penalties related to unrecognized tax benefits as a component of our income tax provision. We had accrued interest and penalties totaling $7.1 million and $7.4 million as of March 31, 2020 and December 31, 2019, respectively, that were included in other noncurrent liabilities in the Condensed Consolidated Balance Sheets.

Accounting for uncertain tax positions is determined by prescribing the minimum probability threshold that a tax position is more likely than not to be sustained based on the technical merits of the position. Mosaic is continually under audit by various tax authorities in the normal course of business. Such tax authorities may raise issues contrary to positions taken by the Company. If such positions are ultimately not sustained by the Company, this could result in material assessments to the Company. The costs related to defending, if needed, such positions on appeal or in court may be material. The Company believes that any issues raised are properly accounted for.

For the three months ended March 31, 2020, tax expense specific to the period was a benefit of approximately $28.3 million. This consisted primarily of tax benefit of $25.1 million recorded related to the impacts of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to prior years. The CARES Act provides various tax relief measures to taxpayers impacted by the coronavirus. Tax expense specific to the period also included a benefit of $5.5 million related to release of the sequestration on AMT, which was partially offset by a share-based excess cost of $1.7 million and changes in estimates related to prior years of $0.6 million. In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, by a benefit associated with depletion, and by the impact of certain entities being taxed in both foreign jurisdictions and the U.S., including foreign tax credits for various taxes incurred.

Generally, for interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by our forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where we expect to report losses for which we do not expect to receive tax benefits, we are required to apply separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated effective tax rate. For the three months ended March 31, 2020, income tax expense was impacted by this set of rules, resulting in an additional cost of $12.6 million compared to what would have been recorded under the general rule on a consolidated basis.

For the three months ended March 31, 2019, tax expense specific to the period was a benefit of approximately $0.4 million. In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, by a benefit associated with depletion, and by the impact of certain entities being taxed in both foreign jurisdictions and the U.S., including foreign tax credits for various taxes incurred.