Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income tax benefit (expense) from continuing operations for the three years ended December 31 are as follows:



	2019			2018			2017
Current
Federal	$	7,789		$	(8,630	)	$	10,871
Foreign	(4,201		)	(10,115		)	(121		)
State and other	536			(657		)	(201		)
	4,124			(19,402		)	10,549
Deferred
Federal	2,471			4,238			(34,635		)
Foreign	22,702			(11,901		)	4,563
State and other	379			25			290
	25,552			(7,638		)	(29,782		)
Income tax expense	$	29,676		$	(27,040	)	$	(19,233	)

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate for the three years ended December 31 is as follows:



	2019		2018		2017
U.S. federal statutory income tax rate	21.0	%	21.0	%	35.0	%
Nontaxable bargain purchase gain (a)	—		(4.2	)	(32.3	)
Change in valuation allowance (b)	(8.6	)	—		—
Tax credits (excluding FTC)	3.1		(3.0	)	(1.5	)
State credits	2.8		—		—
U.S. federal rate change (c)	—		—		3.2
Difference in foreign statutory rates	2.3		5.9		—
Global Intangible Low Taxed Income (Net of FTC)	—		3.7		—
Book tax differences related to joint venture	—		2.0		—
Net changes in uncertain tax positions	(1.2	)	(3.1	)	—
Adjustment to previously filed tax returns	0.1		(2.4	)	(0.1	)
Other	0.5		1.5		1.3
Income tax rate as reported	20.0	%	21.4	%	5.6	%


(a)	The bargain purchase gain from the acquisition of Tembec of $20 million and $317 million during the years ended December 31, 2018 and 2017, respectively, was not taxable resulting in a decrease in the income tax rate.

(b)

Each quarter, the Company evaluates both positive and negative evidence related to the likelihood of realization of the deferred tax assets in order to determine, based on all available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. In the year ended December 31, 2019, the Company established a new valuation allowance in the amount of $16 million against deferred tax assets associated with deferred U.S deductions of interest. The realizable amount of these deferred interest deductions could be positively or negatively impacted by future U.S. tax guidance, changes in U.S. taxable earnings, or changes in U.S. interest expense.

(c)

The income tax rate for the year ended December 31, 2017 was impacted by the Tax Cuts and Jobs Act through a decrease in the federal tax rate from 35 percent to 21 percent. Income tax expense of $11 million for the re-measurement of the deferred tax assets was recorded during the year ended December 31, 2017. This expense is the result of previously recorded deferred tax deductions which will now result in a lower after-tax benefit due to the reduced rate.

Schedule of Temporary Differences and Resulting Deferred Tax Liability

The nature of the temporary differences and the resulting net deferred tax liability for the two years ended December 31 were as follows:



	2019			2018
Gross deferred tax assets:
U.S. federal and Canadian net operating losses (a)	$	205,563		$	203,330
Canadian pool of scientific research and experimentation deductions ("SR&ED") (a)	87,315			87,253
Tax credit carryforwards (a)	74,503			80,182
Property, plant and equipment basis differences	66,653			57,073
Pension, postretirement and other employee benefits	52,126			56,687
Environmental liabilities	39,118			36,583
Deferred interest deductions (a)	15,537			5,820
Capitalized costs	2,979			5,275
State net operating losses (a)	3,249			2,942
Other	12,818			9,738
Total gross deferred tax assets	559,861			544,883
Less: valuation allowance (a)	(94,660		)	(85,938		)
Total deferred tax assets after valuation allowance	465,201			458,945
Gross deferred tax liabilities:
Property, plant and equipment basis differences	(90,290		)	(92,857		)
Intangible assets	(12,284		)	(15,579		)
Other	(2,961		)	(3,054		)
Total gross deferred tax liabilities	(105,535		)	(111,490		)
Net deferred tax asset	$	359,666		$	347,455

Included in:
Deferred tax assets	$	384,513		$	375,471
Deferred tax liabilities	(24,847		)	(28,016		)
	$	359,666		$	347,455


(a)	The following relates to net operating losses, tax credits, and certain other carryforwards as of December 31, 2019:



	Gross Amount		Tax Effected		Valuation Allowance			Expiration
Foreign R&D credit carryforwards	$	49,143	$	49,143	$	(49,143	)	2019-2037
State tax credit carryforwards	$	24,260	$	24,260	$	(24,018	)	2019-2028
State net operating losses	$	71,521	$	3,249	$	(2,782	)	2019-2039
Canada non-capital losses	$	910,097	$	201,504	$	(3,180	)	2026-2039
Canadian pool of SR&ED	$	407,587	$	87,315	$	—		None
Interest limitation carryforward	$	70,624	$	15,537	$	(15,537	)	None
U.S. Federal net operating losses	$	19,329	$	4,059	$	—		None

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending unrecognized tax benefits for the three years ended December 31 is as follows:



	2019			2018			2017
Balance at January 1,	$	8,844		$	23,804		$	—
Decreases related to prior year tax positions	(193		)	(17,872		)	—
Increases related to prior year tax positions	1,904			1,137			11,171
Increases related to current year tax positions	—			1,775			12,633
Balance at December 31,	$	10,555		$	8,844		$	23,804

Summary of Income Tax Examinations

table provides detail of tax years that remain open to examination by significant taxing jurisdictions:



Taxing Jurisdiction	Open Tax Years
U.S.	2014-2019
France	2017-2019
Canada	2015-2019