

	Years ended December 31,
	2019			2018			2017
Components of Income (Loss) Before Taxes	($ in millions)
Domestic	$	(1.3	)	$	288.0		$	53.3
Foreign	(35.6		)	149.3			63.9
Income (loss) before taxes	$	(36.9	)	$	437.3		$	117.2
Components of Income Tax (Benefit) Provision
Current expense (benefit):
Federal	$	9.3		$	21.7		$	(4.0	)
State	3.2			5.1			3.0
Foreign	7.6			48.0			24.1
	20.1			74.8			23.1
Deferred (benefit) expense:
Federal	(32.4		)	27.0			(549.6		)
State	(9.3		)	(0.8		)	14.6
Foreign	(4.0		)	8.4			79.6
	(45.7		)	34.6			(455.4		)
Income tax (benefit) provision	$	(25.6	)	$	109.4		$	(432.3	)



	Years ended December 31,
Effective Tax Rate Reconciliation (Percent)	2019		2018		2017
Statutory federal tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net	(5.4	)	2.0		(1.2	)
Foreign rate differential	19.4		1.8		(7.7	)
U.S. tax on foreign earnings	—		1.1		(70.8	)
Salt depletion	29.0		(2.4	)	(16.1	)
Change in valuation allowance	(64.9	)	3.8		76.0
Remeasurement of U.S. state deferred taxes	16.1		(0.6	)	10.2
Change in tax contingencies	35.4		(0.7	)	(7.7	)
U.S. Tax Cuts and Jobs Act	—		(0.8	)	(373.5	)
Share-based payments	0.7		—		(5.7	)
Dividends paid to Contributing Employee Ownership Plan	1.1		(0.1	)	(0.6	)
Return to provision	15.0		(0.1	)	(0.6	)
U.S. federal tax credits	6.4		(0.4	)	(4.2	)
Other, net	(4.4	)	0.4		(2.0	)
Effective tax rate	69.4	%	25.0	%	(368.9	)%

The effective tax rate for 2019 included benefits associated with the finalization of the Internal Revenue Service (IRS) review of years 2013 to 2015 U.S. income tax claims, stock-based compensation, prior year tax positions, foreign tax law changes, a remeasurement of deferred taxes due to a decrease in our state effective tax rates and a change in tax contingencies. The effective tax rate also included expenses associated with a net increase in the valuation allowance primarily related to foreign deferred tax assets and liabilities. These factors resulted in a net $19.4 million tax benefit. After giving consideration to these items, the effective tax rate for 2019 of 16.8% was lower than the 21% U.S. federal statutory rate primarily due to state taxes and a net increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by foreign income taxes and favorable permanent salt depletion deductions.

The effective tax rate for 2018 included benefits associated with the U.S. Tax Cuts and Jobs Act (2017 Tax Act), stock-based compensation, changes in tax contingencies, a foreign dividend payment, changes associated with prior year tax positions and the remeasurement of deferred taxes due to a decrease in our state effective tax rates. The effective tax rate also included expenses associated with a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and the remeasurement of deferred taxes due to changes in our foreign tax rates. These factors resulted in a net $2.9 million tax benefit, of which $3.8 million related to the increase of the 2017 Tax Act benefit. After giving consideration to these items, the effective tax rate for 2018 of 25.7% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to current year losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions.

The effective tax rate for 2017 included benefits associated with the 2017 Tax Act, an agreement with the IRS on prior period tax examinations, stock based compensation, U.S. federal tax credits, changes to prior year tax positions and a reduction to the deferred tax liability on unremitted foreign earnings. The effective tax rate also included an expense associated with a net increase in the valuation allowance, primarily related to foreign net operating losses and remeasurement of deferred taxes due to an increase in our state effective tax rates. These factors resulted in a net $452.3 million tax benefit, of which $437.9 million was a provisional benefit from the 2017 Tax Act. After giving consideration to these items, the effective tax rate for 2017 of 17.1% was lower than the 35% U.S. federal statutory rate, primarily due to favorable permanent salt depletion deductions.



	December 31,
Components of Deferred Tax Assets and Liabilities	2019			2018
Deferred tax assets:	($ in millions)
Pension and postretirement benefits	$	190.6		$	156.8
Environmental reserves	34.5			31.9
Asset retirement obligations	13.2			15.5
Accrued liabilities	38.6			37.0
Right of use lease liabilities	90.0			—
Tax credits	25.1			19.5
Net operating losses	70.0			50.2
Capital loss carryforward	0.9			2.0
Interest deduction limitation	41.8			9.3
Other miscellaneous items	20.2			14.6
Total deferred tax assets	524.9			336.8
Valuation allowance	(182.1		)	(147.4		)
Net deferred tax assets	342.8			189.4
Deferred tax liabilities:
Property, plant and equipment	525.0			541.8
Right of use lease assets	88.8			—
Intangible amortization	54.6			61.6
Inventory and prepaids	20.6			8.3
Partnerships	67.3			65.2
Taxes on unremitted earnings	5.7			5.1
Total deferred tax liabilities	762.0			682.0
Net deferred tax liability	$	(419.2	)	$	(492.6	)

Realization of the net deferred tax assets, irrespective of indefinite-lived deferred tax liabilities, is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, we believe that it is more likely than not that the net deferred tax assets will be realized.

At December 31, 2019, we had a capital loss carryforward of $3.6 million (representing $0.9 million of deferred tax assets) which is available to offset future consolidated capital gains that will expire in years 2020 through 2023, if not utilized.

At December 31, 2019, we had NOLs of approximately $317.0 million (representing $57.5 million of deferred tax assets) in various foreign jurisdictions. Of these, $58.1 million (representing $14.1 million of deferred tax assets) expire in various years from 2020 to 2039. The remaining $258.9 million (representing $43.4 million of deferred tax assets) do not expire.

As of December 31, 2019, we had recorded a valuation allowance of $182.1 million, compared to $147.4 million as of December 31, 2018. The increase of $34.7 million is primarily due to the recent history of cumulative losses within foreign jurisdictions and projections of future taxable income insufficient to overcome the loss history. We continue to have net deferred tax assets in several jurisdictions which we expect to realize, assuming sufficient taxable income can be generated to utilize these deferred tax benefits, which is based on certain estimates and assumptions. If these estimates and related assumptions change in the future, we may be required to reduce the value of the deferred tax assets resulting in additional tax expense.



	December 31,
	2019			2018
	($ in millions)
Beginning balance	$	147.4		$	121.4
Increases to valuation allowances	38.1			31.9
Decreases to valuation allowances	(0.7		)	(0.9		)
Foreign currency translation adjustments	(2.7		)	(5.0		)
Ending balance	$	182.1		$	147.4

As of December 31, 2019, we had $22.8 million of gross unrecognized tax benefits, which would have a net $22.4 million impact on the effective tax rate, if recognized. As of December 31, 2018, we had $33.8 million of gross unrecognized tax benefits, which would have a net $33.0 million impact on the effective tax rate, if recognized. The change for 2019 primarily relates to additional gross unrecognized benefits for current and prior year tax positions, as well as decreases for prior year tax positions. The change for 2018 primarily relates to additional gross unrecognized benefits for current and prior year tax positions, as well as decreases for prior year tax positions. The amounts of unrecognized tax benefits were as follows:



	December 31,
	2019			2018
	($ in millions)
Beginning balance	$	33.8		$	36.3
Increase for current year tax positions	2.0			2.1
Increase for prior year tax positions	1.5			0.3
Decrease for prior year tax positions	(14.3		)	(4.9		)
Decrease due to tax settlements	(0.2		)	—
Ending balance	$	22.8		$	33.8

In July 2019, the review of certain U.S. income tax claims by the IRS for the years 2013 to 2015 was finalized which resulted in a $14.3 million income tax benefit primarily related to favorable adjustments in uncertain tax positions for prior tax years.

We recognize interest and penalty expense related to unrecognized tax positions as a component of the income tax provision. As of December 31, 2019 and 2018, interest and penalties accrued were $0.1 million and $1.6 million, respectively. For 2019, 2018 and 2017, we recorded (benefit) expense related to interest and penalties of $(1.5) million, $0.4 million and $(1.8) million, respectively.

As of December 31, 2019, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $3.8 million over the next twelve months. The anticipated reduction primarily relates to settlements with tax authorities and the expiration of federal, state and foreign statutes of limitation.

We operate globally and file income tax returns in numerous jurisdictions. Our tax returns are subject to examination by various federal, state and local tax authorities. Our 2016 U.S. federal income tax return is currently under examination by the IRS. In connection with the October 5, 2015 acquisition of Dow’s U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, the prior owner of the businesses retained liabilities relating to taxes to the extent arising prior to October 5, 2015. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. For our primary tax jurisdictions, the tax years that remain subject to examination are as follows: