Income Taxes

We are subject to corporate level federal and state income taxes in the United States. On December 22, 2017, H.R. 1, the Tax Cuts and Jobs Act (the Act), was enacted. The Act contained significant changes to corporate taxation, including the reduction of the corporate tax rate from 35% to 21% effective January 1, 2018 and interest limitation rules under IRC Section 163(j). The Act required a remeasurement of our deferred tax assets and liabilities as of the date of enactment due to the corporate tax rate reduction. Accordingly, the 2017 tax provision included a tax benefit of $70.1 million resulting from a decrease in net deferred tax liabilities.

In 2019, we deferred $9.9 million of interest expense under the interest limitation rules, compared to $2.5 million in 2018. During 2018, we recorded $41.0 million of tax expense related to impairment of non-deductible goodwill.

The income tax provision (benefit) is comprised of the following:



	For The Years Ended December 31,
(In millions)	2019			2018		2017
Current
Federal	$	(2.1	)	$	1.1	$	(16.7	)
State	0.1			2.1		0.9
Total current	(2.0		)	3.2		(15.8		)
Deferred
Federal	(0.6		)	3.6		(36.8		)
State	0.3			3.5		(3.8		)
Total deferred	(0.3		)	7.1		(40.6		)
Income tax provision (benefit)	$	(2.3	)	$	10.3	$	(56.4	)

The income tax provision (benefit) differs from the amount computed by applying the statutory federal income tax rate of 21.0% in 2019 and 2018 and 35.0% in 2017 to income (loss) before income taxes due to the following:



	For The Years Ended December 31,
(In millions)	2019			2018			2017
Tax at the statutory rate	$	(1.7	)	$	(28.0	)	$	14.3
Goodwill impairment	—			41.0			—
Federal rate change	—			—			(70.1		)
State and local taxes, net of federal income tax impact	(0.9		)	4.4			(1.2		)
Adjustment for state deferred tax rate	(1.2		)	0.1			(0.7		)
Federal credits and net operating losses	(2.3		)	(10.9		)	(3.2		)
Uncertain tax positions	0.7			—			0.3
Stock compensation	0.6			0.7			2.2
Non-deductible expenses	0.4			0.2			0.3
Change in valuation allowances	2.3			—			0.8
Other, net¹	(0.2		)	2.8			0.9
Income tax provision (benefit)	$	(2.3	)	$	10.3		$	(56.4	)


¹	Includes $2.9 million of expense associated with the write-off of goodwill as part of our divestiture discussed in Note 10, "Other Operating Charges, net" for the year ended December 31, 2018.

During 2019, the valuation allowance for deferred tax assets increased by $2.3 million and during 2018 the valuation allowance for deferred tax assets remained comparable to the prior year. The increase of $2.3 million was offset by a release of state valuation allowances of $0.8 million during the period due to the lapse of statutes.

The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:



(In millions)	2019			2018
Deferred tax assets:
Employee benefits	$	3.8		$	4.2
Postretirement employee benefits	17.1			15.9
Incentive compensation	4.4			4.3
Inventories	7.6			6.2
Pensions	3.2			7.4
Federal and state credit carryforwards	10.3			10.7
Federal and state net operating losses	8.8			2.0
Deferred interest expense	12.4			2.5
Operating leases	20.5			—
Other	1.6			3.0
Total deferred tax assets	89.7			56.2
Valuation allowance	(5.3		)	(3.8		)
Deferred tax assets, net of valuation allowance	84.4			52.4
Deferred tax liabilities:
Property, plant and equipment, net	(179.2		)	(161.8		)
Operating leases	(18.9		)	—
Intangible assets, net	(3.8		)	(5.6		)
Total deferred tax liabilities	(201.9		)	(167.4		)
Net deferred tax liabilities	$	(117.5	)	$	(115.0	)

Net deferred tax assets (liabilities) consist of:



(In millions)	2019			2018
Non-current deferred tax assets¹	$	3.8		$	6.2
Non-current deferred tax liabilities	(121.3		)	(121.2		)
Net deferred tax liabilities	$	(117.5	)	$	(115.0	)


¹	Included in "Other assets, net" on our accompanying December 31, 2019 and 2018 Consolidated Balance Sheets.

We have tax benefits associated with state jurisdictions totaling $7.7 million which expire between 2020 and 2039.

We use the flow-through method to account for investment tax credits earned on eligible expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense in the year they are earned. During 2019 and 2018, we recognized $1.3 million and $10.0 million related to energy investment tax credits.

The following presents a roll forward of our unrecognized tax benefits and associated interest and penalties. At December 31, 2019 and 2018, $3.4 million and $2.8 million were included in the "Other long-term obligations" line item in non-current liabilities in our Consolidated Balance Sheets. The remaining amount consisted of uncertain receivables and tax benefits associated with state net operating losses, which were netted with the associated deferred tax asset.



(In millions)	Gross Unrecognized Tax Benefits, Excluding Interest and Penalties			Interest and Penalties			Total Gross Unrecognized Tax Benefits
Balance at December 31, 2017	$	4.1		$	0.3		$	4.4
Change in prior year tax positions	(0.6		)	0.1			(0.5		)
Reductions as a result of a lapse of the applicable statute of limitations	(0.7		)	(0.1		)	(0.8		)
Change in current year tax positions	0.3			—			0.3
Balance at December 31, 2018	3.1			0.3			3.4
Change in prior year tax positions	0.3			0.1			0.4
Change in current year tax positions	0.3			—			0.3
Balance at December 31, 2019	$	3.7		$	0.4		$	4.1

Unrecognized tax benefits net of related deferred tax assets at December 31, 2019, if recognized, would have favorably impacted our effective tax rate by decreasing our tax provision by $3.5 million. For each of the years ended December 31, 2018 and 2017, if recognized, the balance of unrecognized tax benefits would have favorably impacted our effective tax rate by $2.8 million and $3.6 million. We reflect accrued interest related to tax obligations, as well as penalties, in our provision for income taxes. For each of the years ended December 31, 2019, 2018, and 2017, we accrued interest of less than $0.1 million each year in our income tax provision and no penalties in our income tax provision.

We have operations in many states within the U.S. and are subject, at times, to tax audits in these jurisdictions. With a few exceptions, we are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2015. We expect that the outcome of any examination will not have a material effect on our consolidated financial statements. Although the timing of resolution of audits is not certain, we evaluate all audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimate that it is reasonably possible the total gross unrecognized tax benefits could decrease by approximately $1.1 million within the next 12 months.