Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The components of income (loss) before income tax (benefit) expense and loss from equity method investment are as follows:

	Years Ended December 31,
	2015		2014			2013
	(Dollars in millions)
Domestic	$	8.6	$	(137.0	)	$	46.5
Foreign	14.5		11.4			12.5
Total	$	23.1	$	(125.6	)	$	59.0

The components of income tax (benefit) expense are as follows:

	Years Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Income taxes currently (receivable) payable:
U.S. federal	$	(3.1	)	$	3.6		$	2.3
State	(3.3		)	(1.0		)	0.1
Foreign	3.2			3.0			2.7
Total taxes currently (receivable) payable	(3.2		)	5.6			5.1
Deferred tax (benefit) expense:
U.S. federal	(12.7		)	(58.1		)	(6.3		)
State	7.1			(6.3		)	7.9
Total deferred tax (benefit) expense	(5.6		)	(64.4		)	1.6
Total	$	(8.8	)	$	(58.8	)	$	6.7

The reconciliation of the income tax (benefit) expense at the U.S. statutory rate to the income tax (benefit) expense is as follows:

	Years Ended December 31,
	2015					2014					2013
	(Dollars in millions)
Income tax (benefit) expense at 35 percent U.S. statutory rate	$	8.0		35.0	%	$	(43.9	)	35.0	%	$	20.7		35.0	%
Increase (reduction) in income taxes resulting from:
Income attributable to noncontrolling interests(1)	(11.2		)	(48.3	)%	(8.7		)	6.9	%	(8.8		)	(14.9	)%
Nonconventional fuel credit	—			—	%	—			—	%	(9.5		)	(16.0	)%
State and other income taxes, net of federal income tax effects	1.8			7.7	%	(5.6		)	4.5	%	3.2			5.4	%
Return-to-provision adjustments	—			—	%	—			—	%	(1.7		)	(2.9	)%
Change in valuation allowance(2)	(8.8		)	(38.0	)%	11.2			(9.1	)%	2.0			3.4	%
Impact of tax sharing agreement	—			—	%	(0.7		)	0.6	%	0.7			1.2	%
Investment in subsidiary(2)	1.0			4.4	%	(11.9		)	9.5	%	—			—	%
Coal impairment	—			—	%	2.4			(1.9	)%	—			—	%
Prior year adjustment	—			—	%	(1.1		)	0.9	%	—			—	%
Other	0.4			1.2	%	(0.5		)	0.4	%	0.1			0.2	%
	$	(8.8	)	(38.0	)%	$	(58.8	)	46.8	%	$	6.7		11.4	%

(1) No income tax expense is reflected in the Consolidated Statements of Operations for partnership income attributable to noncontrolling interests.

(2) On December 22, 2014, SunCoke executed a definitive agreement to sell 100 percent of its interest in the entities that made up the Harold Keene Coal Companies. This required SunCoke to record a deferred tax asset of $11.9 million related to the outside basis difference on the Harold Keene investment. This deferred tax asset was offset by a $9.8 million valuation allowance. SunCoke canceled the definitive agreement during the third quarter of 2015. Due to the cancellation of the agreement, the deferred tax asset and the valuation allowance recorded during 2014 were reversed during 2015.

The tax effects of temporary differences that comprise the net deferred income tax liability from operations are as follows:

	December 31,
	2015			2014
	(Dollars in millions)
Deferred tax assets:
Retirement benefit liabilities	$	13.4		$	14.6
Black lung benefit liabilities	19.4			16.8
Share-based compensation	8.4			6.9
Federal tax credit carryforward(1)	23.0			19.8
Foreign tax credit carryforward(2)	8.9			—
Federal net operating loss(3)	8.2			—
State tax credit carryforward, net of federal income tax effects(4)	6.4			9.2
State net operating loss carryforward, net of federal income tax effects(5)	7.4			5.4
Other liabilities not yet deductible	12.0			19.4
Properties, plants and equipment	12.0			—
Investment in subsidiaries	—			11.8
Total deferred tax assets	119.1			103.9
Less valuation allowance(6)	(5.8		)	(14.7		)
Deferred tax asset, net	113.3			89.2
Deferred tax liabilities:
Properties, plants and equipment	—			(85.0		)
Investment in partnerships	(462.3		)	(299.7		)
Total deferred tax liabilities	(462.3		)	(384.7		)
Net deferred tax liability	$	(349.0	)	$	(295.5	)

(1) Federal tax credit carryforward expires in 2032 through 2033.

(2) Foreign tax credit carryforward expires in 2022 through 2025.

(3) Federal net operating loss expires in 2035.

(4) State tax credit carryforward, net of federal income tax effects expires in 2016 through 2020.

(5) State net operating loss carryforward, net of federal income tax effects expires in 2017 through 2035.

(6) Primarily related to state tax credit carryforward and state net operating loss carryforward.

Sunoco’s consolidated federal income tax returns have been examined by the Internal Revenue Service (“IRS”) for all years through the year ended October 4, 2012, the last year for which SunCoke was included on a Sunoco consolidated federal income tax return.  Specifically related to SunCoke, the Sunoco consolidated federal income tax returns for all tax years between the years ended December 31, 2007 and October 4, 2012 remain open.  Sunoco combined state income tax returns which specifically include SunCoke entities remain open for the years ended December 31, 2009 through October 4, 2012. SunCoke is currently open to examination by the IRS for the tax years ended December 31, 2012 and forward.

State and foreign income tax returns are generally subject to examination for a period of three to five years after the filing of the respective returns. The state impact of any amended federal returns remains subject to examination by various states for a period of up to one year after formal notification of such amendments to the states.

There were no uncertain tax positions at December 31, 2015, and 2014 and there were no interest or penalties recognized during the years ended December 31, 2015, 2014 and 2013. The Company does not expect that any unrecognized tax benefits pertaining to income tax matters will be required in the next twelve months.

At December 31, 2015, our VISA SunCoke joint venture had cumulative losses. As such, there are currently no unconsolidated earnings that if remitted would result in additional tax. Further, in the event of earnings, such earnings are intended to be reinvested indefinitely to finance foreign activities. These additional foreign earnings could be subject to additional tax if remitted, or deemed remitted, as a dividend.

On July 18, 2011, SunCoke Energy and Sunoco entered into a new tax sharing agreement that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.

SunCoke Energy is generally not entitled to receive payment from Sunoco in respect of any of SunCoke Energy’s tax attributes or tax benefits or any reduction of taxes of Sunoco. Moreover, Sunoco is generally entitled to refunds of income taxes with respect to periods ending at or prior to the distribution. If SunCoke Energy realizes any refund, credit or other reduction in otherwise required tax payments in any period beginning after the distribution date as a result of an audit adjustment resulting in taxes for which Sunoco would otherwise be responsible, then, subject to certain exceptions, SunCoke Energy must pay Sunoco the amount of any such taxes for which Sunoco would otherwise be responsible. Further, if any taxes are imposed on Sunoco as a result of a reduction in SunCoke Energy’s tax attributes for a period ending at or prior to the distribution date pursuant to an audit adjustment (relative to the amount of such tax attribute reflected on Sunoco’s tax return as originally filed), then, subject to certain exceptions, SunCoke Energy is generally responsible to pay Sunoco the amount of any such taxes.

SunCoke Energy has also agreed to certain restrictions that are intended to preserve the tax-free status of the contribution and the distribution. These covenants include restrictions on SunCoke Energy’s issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements), and sales of assets outside the ordinary course of business and entering into any other corporate transaction which would cause SunCoke Energy to undergo a 50 percent or greater change in its stock ownership. Certain key restrictions expired on January 18, 2014.

SunCoke Energy has generally agreed to indemnify Sunoco and its affiliates against any and all tax-related liabilities incurred by them relating to the contribution or the Distribution to the extent caused by an acquisition of SunCoke Energy’s stock or assets, or other of its actions. This indemnification applies even if Sunoco has permitted SunCoke Energy to take an action that would otherwise have been prohibited under the tax-related covenants as described above.

As of December 31, 2015, SunCoke Energy estimates that all tax benefits have been settled under the provisions of the tax sharing agreement. SunCoke Energy will continue to monitor the full utilization of all tax attributes when the respective tax returns are filed and will, consistent with the terms of the tax sharing agreement, record additional adjustments through earnings when necessary.