Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

Note 9.  Income Taxes

The U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”), enacted in December 2017, significantly changes U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. Under U.S. GAAP (specifically, ASC Topic 740), the effects of changes in tax rates and laws on deferred tax balances are recognized in the period in which the new legislation is enacted.

During 2018, we recorded a benefit of $4.4 million as a measurement period adjustment to the one-time mandatory tax on previously deferred earnings of non-U.S. subsidiaries.  The accounting for income tax effects of U.S. Tax Reform is complete based on additional tax regulations available as of December 31, 2018. Amounts recorded during 2018 and 2017, respectively, are reflected within the provision for income taxes in the Consolidated Statement of Income.

Additionally, U.S. Tax Reform subjects a U.S. shareholder to current tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. We have elected to not recognize deferred taxes for temporary differences until such differences reverse as GILTI in future years.

Income from operations before provision for taxes by domestic and foreign source is as follows:

	Year Ended December 31,
(millions of dollars)	2020		2019		2018
Income from operations before income taxes and income from affiliates and joint ventures:
Domestic	$	21.4	$	46.9	$	93.1
Foreign		116.6		110.4		111.0
	$	138.0	$	157.3	$	204.1

The provision (benefit) for taxes on income consists of the following:

	Year Ended December 31,
(millions of dollars)	2020			2019			2018
Domestic
Taxes currently payable
Federal	$	(7.1	)	$	(3.3	)	$	(3.7	)
State and local		0.2			0.8			1.4
Deferred income taxes		2.2			(6.6	)		11.1
Domestic tax provision (benefit)		(4.7	)		(9.1	)		8.8
Foreign
Taxes currently payable		34.0			26.7			21.3
Deferred income taxes		(4.9	)		5.2			4.3
Foreign tax provision		29.1			31.9			25.6
Total tax provision (benefit)	$	24.4		$	22.8		$	34.4

The provision (benefit) for taxes on income shown in the previous table is classified based on the location of the taxing authority, regardless of the location in which the taxable income is generated.

The major elements contributing to the difference between the U.S. federal statutory tax rate and the consolidated effective tax rate are as follows:

	Year Ended December 31,
	2020			2019			2018
U.S. statutory rate		21.0	%		21.0	%		21.0	%
Depletion		(6.2	)%		(5.0	)%		(3.9	)%
Difference between tax provided on foreign earnings and the U.S. statutory rate		3.3	%		3.8	%		1.1	%
Global Intangible Low-Tax Income (GILTI)		0.4	%		—			0.8	%
Foreign Derived Intangible Income		(1.0	)%		(0.8	)%		(0.7	)%
State and local taxes, net of federal tax benefit		—			0.2	%		1.9	%
Tax credits and foreign dividends		(0.6	)%		(0.7	)%		(0.3	)%
Change in valuation allowance		—			1.0	%		—
Impact of uncertain tax positions		(0.2	)%		(5.0	)%		0.5	%
Impact of officer's non-deductible compensation		1.0	%		0.8	%		0.8	%
Impact of U.S. Tax Reform		—			(1.1	)%		(2.2	)%
Other		—			0.3	%		(2.1	)%
Consolidated effective tax rate		17.7	%		14.5	%		16.9	%

The Company believes that its accrued liabilities are sufficient to cover its U.S. and foreign tax contingencies. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

	December 31,
(millions of dollars)	2020			2019
Deferred tax assets attributable to:
Accrued liabilities	$	29.8		$	29.7
Net operating loss carry forwards		31.1			33.9
Pension and post-retirement benefits costs		46.3			39.0
Other		28.2			31.4
Valuation allowance		(20.9	)		(23.8	)
Total deferred tax assets		114.5			110.2
Deferred tax liabilities attributable to:
Plant and equipment, principally due to differences in depreciation		169.5			181.3
Intangible assets		69.5			69.5
Other		13.9			17.0
Total deferred tax liabilities		252.9			267.8
Net deferred tax asset (liability)	$	(138.4	)	$	(157.6	)

Net deferred tax assets and net deferred tax liabilities are as follows:

	December 31,
(millions of dollars)	2020				2019
Net deferred tax asset, long-term		$	25.3			$	23.0
Net deferred tax liability, long-term			163.7				180.6
Net deferred tax asset (liability), long-term		$	(138.4	)		$	(157.6	)

The Company has $31.1 million of deferred tax assets arising from tax loss carry forwards which will be realized through future operations. Carry forwards of approximately $17.6 million expire over the next 20 years, and $13.5 million can be utilized over an indefinite period.

On December 31, 2020, the Company had $7.6 million of total unrecognized tax benefits. Included in this amount were a total of $5.1 million of unrecognized income tax benefits that, if recognized, would affect the Company's effective tax rate. While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, we do not expect the change to have a significant impact on the results of operations or the financial position of the Company.

The following table summarizes the activity related to our unrecognized tax benefits:

(millions of dollars)	2020			2019
Balance at beginning of the year	$	7.9		$	16.6
Increases related to current year tax positions		0.7			1.5
Increases related to new judgements		—			0.7
Decreases related to audit settlements and statue expirations		(1.0	)		(10.9	)
Balance at the end of the year	$	7.6		$	7.9

The Company's accounting policy is to recognize interest and penalties accrued, relating to unrecognized income tax benefits as part of its provision for income taxes. The Company recorded no interest and penalties during 2020 and had a total accrued balance on December 31, 2020 of $1.9 million.

The Company operates in multiple taxing jurisdictions, both within and outside the U.S. In certain situations, a taxing authority may challenge positions that the Company has adopted in its income tax filings. The Company, with a few exceptions (none of which are material), is no longer subject to U.S. federal, state, local, and international income tax examinations by tax authorities for years prior to 2010.

Net cash paid for income taxes were $28.5 million, $29.5 million and $43.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company had approximately $460.1 million of foreign subsidiaries' undistributed earnings as of December 31, 2020. We intend to continue to permanently reinvest these earnings overseas for the foreseeable future and while U.S. federal tax expense as been recognized as a result of U.S. Tax Reform, no deferred tax liabilities with respect to foreign withholding taxes or state taxes have been recognized.