Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

9. INCOME TAXES

The components of income before taxes and the provision for income taxes recorded in the consolidated statements of income are as follows:

	For the Years Ended December 31,
Components of Income before Taxes		2020		2019		2018
Domestic	$	151.1	$	185.1	$	163.3
Foreign		15.2		14.8		15.8
Income before taxes	$	166.3	$	199.9	$	179.1

	For the Years Ended December 31,
Components of Income Tax Provision		2020		2019		2018
Current expense
U.S. Federal	$	38.5	$	41.9	$	20.5
State		11.4		12.4		6.9
Foreign		4.5		4.4		4.6
Total current expense	$	54.4	$	58.7	$	32.0
Deferred (benefit) expense
U.S. Federal	$	(7.8)	$	(3.0)	$	2.5
State		(2.3)		(0.8)		0.8
Foreign		(0.1)		0.1		0.1
Total deferred (benefit) expense	$	(10.2)	$	(3.7)	$	3.4
Total income tax provision	$	44.2	$	55.0	$	35.4

A reconciliation between the statutory U.S. federal income tax rate and the effective tax rate in the consolidated statements of income is as follows:

	For the Years Ended December 31,
	2020		2019		2018
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal benefit	4.3		4.5		3.1
Deemed repatriation of foreign earnings	—		—		(1.0)
Effect of tax rate changes	—		—		(5.1)
Nondeductible meals and entertainment	0.5		1.4		1.4
Other, net	0.8		0.6		0.4
Effective tax rate	26.6	%	27.5	%	19.8	%

We determine our deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of our assets and liabilities calculated using enacted applicable tax rates.  We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.  Changes in the valuation allowance, when recorded, are included in the provision for income taxes in the consolidated financial statements. The following deferred tax assets (liabilities) were recorded at December 31:

Assets (Liabilities)		2020		2019
Pension	$	47.2	$	38.7
Operating lease liabilities		31.3		30.6
Postretirement benefits		20.8		19.6
Inventory		12.3		14.9
Other deferred tax assets		5.2		5.0
Payroll accruals		7.6		2.9
Bad debt reserves		0.8		1.0
Subtotal		125.2		112.7
Less: valuation allowances		(0.6)		(0.4)
Deferred tax assets		124.6		112.3
Fixed assets		(34.5)		(32.2)
Operating lease right-of-use assets		(29.1)		(28.7)
Other deferred tax liabilities		(4.9)		(4.5)
Computer software		(2.4)		(2.9)
Deferred tax liabilities		(70.9)		(68.3)
Net deferred tax assets	$	53.7	$	44.0

Deferred income taxes included in non-current assets (liabilities) at December 31 were:

		2020		2019
Deferred tax assets included in other non-current assets	$	54.1	$	44.5
Deferred tax liabilities included in other non-current liabilities		(0.4)		(0.5)
Total	$	53.7	$	44.0

Operating loss and tax credit carryforwards included in net deferred tax assets at December 31 were:

		2020		2019
U.S. Federal(A)	$	0.5	$	0.4
State(A)		0.3		0.3
Foreign(B)		—		0.1

^(A)Expires between 2023 and 2030

^(B)Indefinite life

We have placed a partial valuation allowance on certain state net operating losses of less than $0.1 million and a full valuation allowance on U.S. federal tax credits of $0.5 million that are not expected to be utilized prior to expiration.

We have no material undistributed earnings of non-U.S. subsidiaries as of December 31, 2020, due to the one-time transition tax and global intangible low-taxed income (“GILTI”) provisions enacted under the Tax Cuts and Jobs Act (“TCJA”). No additional income taxes have been provided for any outside basis differences inherent in these foreign entities, as these amounts continue to be indefinitely reinvested in foreign operations. We have made an accounting policy election to treat GILTI as a period cost rather than accounting for it as part of deferred taxes. Due to the high-tax exception election made in 2019 and 2020, our GILTI period cost was immaterial in each year.

Our federal income tax returns for the tax years 2017 and forward are available for examination by the United States Internal Revenue Service (“IRS”).  The statute of limitation for the 2017 federal return will expire on October 15, 2021, unless extended by consent. Our state income tax returns for 2016 through 2020 remain subject to examination by various state authorities with the latest period closing on December 31, 2025.  We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2016.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss utilization and carryback periods, modifications to net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). The CARES Act did not have a material impact on our income tax provision for 2020.

Our unrecognized tax benefits of $1.7 million, $1.9 million, and $2.6 million as of December 31, 2020, 2019, and 2018, respectively, are uncertain tax positions that would impact our effective tax rate if recognized.  We are periodically engaged in tax return examinations, reviews of statute of limitations periods, and settlements surrounding income taxes.  We do not anticipate a material change in unrecognized tax benefits during the next twelve months.

Our uncertain tax benefits, and changes thereto, during 2020, 2019, and 2018 were as follows:

		2020		2019		2018
Balance at January 1,	$	1.9	$	2.6	$	2.3
Additions based on tax positions related to current year		0.2		0.2		1.1
Reductions for tax positions of prior years		(0.1)		(0.1)		(0.8)
Settlements		(0.3)		(0.8)		—
Balance at December 31,	$	1.7	$	1.9	$	2.6

We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/underpayment percentages.  We have accrued $0.3 million and $0.4 million in interest and penalties at December 31, 2020 and 2019, respectively. Interest was computed on the difference between the provision for income taxes recognized in accordance with GAAP and the amount of benefit previously taken or expected to be taken in our federal, state, and local income tax returns.