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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Kraton Corporation, the parent company, is domiciled in the U.S. and is subject to U.S. statutory rate of 21.0% from January 1, 2019 through December 31, 2021.
The provision for income taxes is comprised of the following:
 Years Ended December 31,
 202120202019
 (In thousands)
Current tax benefit (expense):   
U.S.$(37,169)$(9,579)$13,968 
Foreign(5,886)(14,501)(2,314)
Current tax benefit (expense)(43,055)(24,080)11,654 
Deferred tax benefit (expense):   
U.S.3,868 (3,376)(1,621)
Foreign(315)59,490 1,780 
Deferred tax benefit (expense)3,553 56,114 159 
Income tax benefit (expense)$(39,502)$32,034 $11,813 
Income (loss) before income taxes is comprised of the following: 
 Years Ended December 31,
 202120202019
 (In thousands)
Income (loss) before income taxes:   
U.S.$170,599 $(484,131)$1,998 
Foreign44,475 230,411 42,006 
Income (loss) before income taxes$215,074 $(253,720)$44,004 
The provision for income taxes differs from the amount computed by applying the U.S. corporate statutory income tax rate to income (loss) before income taxes for the reasons set forth below:
Years Ended December 31,
 202120202019
Income taxes at the statutory rate(21.0)%(21.0)%(21.0)%
Foreign tax rate differential(1.0)(0.2)5.1 
State taxes, net of federal benefit(1.5)(0.7)(0.1)
Permanent differences(0.9)0.6 8.7 
Cariflex disposition— (4.3)— 
Dutch transfer of assets— (25.9)— 
Tax credits0.4 (0.5)3.6 
Uncertain tax positions(0.2)(1.2)40.3 
Valuation allowance0.8 (0.6)10.6 
Goodwill impairment— 33.1 — 
Deferred tax rate change and transition tax0.8 0.2 (7.7)
U.S. minimum tax on foreign entities2.1 2.0 (17.8)
Return to provision adjustments2.1 5.9 5.1 
Effective tax rate(18.4)%(12.6)%26.8 %
During the year ended December 31, 2020, we recorded a deferred tax asset of $65.8 million related to the intercompany transfer of certain intellectual property rights to our Dutch subsidiary. This transfer was to align the ownership of these rights with our evolving business. The transfer did not result in a taxable gain; however, our Dutch subsidiary received a step-up in tax basis based on the fair value of the transferred intellectual property rights. The fair value was determined utilizing certain estimates within the income approach based on our expectations of future cash flows, long-term growth rates, and discount rates. We recorded a one-time benefit of $65.8 million for the recognition of the deferred tax asset in the Netherlands.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted by the U.S. on March 27, 2020. The CARES Act among other things, includes provisions relating to modifications of the net interest deduction limitations and revisions to alternative minimum tax credit (“AMT”) refunds. We have recognized a current tax benefit of $9.7 million related to the modification to the interest deduction limitation. As a result of the CARES Act, we reclassified $1.6 million of expected AMT refunds from long-term to current. We are continuing to analyze the CARES Act, but we do not anticipate the other income tax provisions of the CARES Act to have a material impact on our financial statements.
Deferred income taxes reflect the net 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, as well as net operating loss and tax credit carryforwards. The tax effects of temporary differences are comprised of the following:
 December 31,
 20212020
 (In thousands)
Deferred tax assets:  
Net operating loss carryforwards$35,863 $36,093 
Interest carryforwards6,254 4,974 
Tax credit carryforwards4,732 4,938 
Inventory4,203 8,309 
Benefit plans accrual24,908 31,431 
Operating leases12,013 13,279 
Deferred income31,160 36,999 
Other accruals and reserves6,454 11,821 
Deferred tax assets125,587 147,844 
Valuation allowance for deferred tax assets(33,894)(39,517)
Net deferred tax assets after valuation allowance91,693 108,327 
Deferred tax liabilities:  
Property, plant, and equipment104,318 117,678 
Intangible assets8,496 2,603 
Operating leases9,806 11,715 
Investment in subsidiaries 18,356 18,356 
Deferred tax liabilities140,976 150,352 
Net deferred tax liabilities$49,283 $42,025 
 December 31,
 20212020
 (In thousands)
Net deferred tax liabilities consist of: 
Non-current deferred tax assets$79,627 $83,534 
Non-current deferred tax liabilities128,910 125,559 
Net deferred tax liabilities$49,283 $42,025 
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We consider all available material evidence, both positive and negative, in assessing the appropriateness of a valuation allowance for our deferred tax assets. As of December 31, 2021 and December 31, 2020, we recorded a valuation allowance of $33.9 million and $39.5 million, respectively, against our net operating loss carryforwards (“NOL”) and other deferred tax assets.
We currently believe that certain unremitted foreign earnings of our subsidiaries will be permanently reinvested for an infinite period of time. Accordingly, we have not provided deferred taxes for the differences between these subsidiaries’ book basis and underlying tax basis or on related foreign currency translation adjustment amounts.
As of December 31, 2021, we had $130.6 million of NOL carryforwards, related to foreign jurisdictions of which $118.1 million is subject to a valuation allowance. Of the NOL carryforwards, $12.5 million are set to expire at various times between 2027 through 2037, and $118.1 million are non-expiring.
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Our U.S. federal income tax returns, for 2004 remain open to examination, as a result of the utilization of NOL carryforwards from 2004. In addition, open tax years for state and foreign jurisdictions remain subject to examination. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest, and penalties have been provided for in the accompanying financial statements for any adjustments that might be incurred due to federal, state, or foreign audits.
As of December 31, 2021 and December 31, 2020, we had unrecognized tax benefits of $8.8 million and $8.8 million, respectively, if recognized, would impact our effective tax rate.
Interest and penalties relating to income taxes are included in income tax expense. As of December 31, 2021 and December 31, 2020, we had $2.2 million and $1.7 million of penalties and interest included in the total unrecognized tax benefits. Accrued interest and penalties relating to uncertain tax positions that are not actually assessed will be reversed in the year of resolution.
It is reasonable that the existing liabilities for the unrecognized tax benefits may increase or decrease over the next 12 months as a result of audit closures and statute expirations; however, the ultimate timing of the resolution and/or closure of audits is highly uncertain.
The following presents a roll forward of our unrecognized tax benefits including associated interest and penalties. 
 December 31,
 20212020
 (In thousands)
Balance at January 1$8,849 $11,294 
Increase in current year tax positions155 148 
Increase in prior year tax positions172 1,142 
Decrease in prior year tax positions(24)— 
Lapse of statute of limitations(331)(3,735)
Balance at December 31$8,821 $8,849