Income Tax Provision

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Tax Provision

Note 7 - Income Tax Provision

TimkenSteel’s provision for income taxes in interim periods is computed by applying the appropriate estimated annual effective tax rates to income or loss before income taxes for the period. In addition, non-recurring or discrete items, including interest on prior-year tax liabilities, are recorded during the periods in which they occur.

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Provision (benefit) for incomes taxes	$	1.5		$	1.4		$	2.4		$	1.6
Effective tax rate		2.0	%		2.5	%		2.1	%		2.4	%

Income tax expense for the three and six months ended June 30, 2022 was calculated using forecasted multi-jurisdictional annual effective tax rates to determine a blended annual effective tax rate. The effective tax rate is lower than the U.S. federal statutory rate of 21%, due to the reversal of valuation allowance the Company has on deferred tax assets in the U.S., as a result of current year forecasted income. This is partially offset by state, local, and foreign taxes.

Each reporting period we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize the Company’s deferred tax assets. Due to TimkenSteel’s historical operating performance in the U.S., we have been limited in our ability to rely on other subjective evidence such as projections of our future profitability.

As a result, the Company maintains a full valuation allowance against its deferred tax assets in the U.S. and applicable foreign countries until sufficient positive evidence exists to conclude that a valuation allowance is not necessary. We will continue to assess available positive and negative evidence in future periods. The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries may cause variability in the Company’s effective tax rate. The majority of TimkenSteel’s income taxes are derived from domestic state and local taxes.

The effective tax rate of 2.0% and 2.1% for the three and six months ended June 30, 2022 was lower than the rate of 2.5% and 2.4% for the three and six months ended June 30, 2021, primarily driven by decreased permanent adjustments.

For the six months ended June 30, 2022, TimkenSteel made $1.5 million in state and local tax payments, $1.0 million in U.S. federal payments, and $0.1 million in foreign tax payments. For the six months ended June 30, 2021, TimkenSteel made $0.3 million in state and local tax payments, no U.S. federal payments, and $0.5 million in foreign tax payments.