NOTE 9 - INCOME TAXES
Income (Loss) from Continuing Operations Before Income Taxes and Equity Loss from Ventures includes the following components:
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|
|
Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2016 |
Ìý |
2015 |
Ìý |
2014 |
United States |
Ìý |
$ |
124.9 |
|
Ìý |
$ |
314.2 |
|
Ìý |
$ |
(447.5 |
) |
Foreign |
Ìý |
82.1 |
|
Ìý |
(1.1 |
) |
Ìý |
427.8 |
|
|
Ìý |
$ |
207.0 |
|
Ìý |
$ |
313.1 |
|
Ìý |
$ |
(19.7 |
) |
The components of the provision (benefit) for income taxes on continuing operations consist of the following:
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|
|
|
|
Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2016 |
Ìý |
2015 |
Ìý |
2014 |
Current provision (benefit): |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
United States federal |
Ìý |
$ |
(11.1 |
) |
Ìý |
$ |
8.2 |
|
Ìý |
$ |
(125.2 |
) |
United States stateÌý& local |
Ìý |
(0.5 |
) |
Ìý |
0.3 |
|
Ìý |
(0.6 |
) |
Foreign |
Ìý |
(0.1 |
) |
Ìý |
0.9 |
|
Ìý |
11.7 |
|
Ìý |
Ìý |
(11.7 |
) |
Ìý |
9.4 |
|
Ìý |
(114.1 |
) |
Deferred provision (benefit): |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
United States federal |
Ìý |
(0.5 |
) |
Ìý |
165.8 |
|
Ìý |
20.4 |
|
United States stateÌý& local |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(24.9 |
) |
Foreign |
Ìý |
— |
|
Ìý |
(5.9 |
) |
Ìý |
32.6 |
|
Ìý |
Ìý |
(0.5 |
) |
Ìý |
159.9 |
|
Ìý |
28.1 |
|
Total provision (benefit) on income (loss) from continuing operations |
Ìý |
$ |
(12.2 |
) |
Ìý |
$ |
169.3 |
|
Ìý |
$ |
(86.0 |
) |
Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate is as follows:
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|
Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2016 |
Ìý |
2015 |
Ìý |
2014 |
Tax at U.S. statutory rate of 35% |
Ìý |
$ |
72.5 |
|
Ìý |
35.0 |
Ìý% |
Ìý |
$ |
109.6 |
|
Ìý |
35.0 |
Ìý% |
Ìý |
$ |
(6.9 |
) |
Ìý |
35.0 |
Ìý% |
Increase (decrease) due to: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Impact of tax law change |
Ìý |
149.1 |
|
Ìý |
72.0 |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
13.0 |
|
Ìý |
(66.0 |
) |
Valuation allowance build/(reversal) on tax benefits recorded in prior years |
Ìý |
(142.6 |
) |
Ìý |
(68.9 |
) |
Ìý |
165.8 |
|
Ìý |
52.9 |
|
Ìý |
15.2 |
|
Ìý |
(77.2 |
) |
Tax uncertainties |
Ìý |
(11.3 |
) |
Ìý |
(5.5 |
) |
Ìý |
84.1 |
|
Ìý |
26.9 |
|
Ìý |
— |
|
Ìý |
— |
|
Valuation allowance build/(reversal) in current year |
Ìý |
93.9 |
|
Ìý |
45.4 |
|
Ìý |
(104.6 |
) |
Ìý |
(33.4 |
) |
Ìý |
318.3 |
|
Ìý |
(1,615.7 |
) |
Prior year adjustments in current year |
Ìý |
(11.8 |
) |
Ìý |
(5.7 |
) |
Ìý |
5.9 |
|
Ìý |
1.9 |
|
Ìý |
(6.3 |
) |
Ìý |
32.1 |
|
Worthless stock deduction |
Ìý |
(73.4 |
) |
Ìý |
(35.5 |
) |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Impact of foreign operations |
Ìý |
(42.7 |
) |
Ìý |
(20.6 |
) |
Ìý |
(53.9 |
) |
Ìý |
(17.2 |
) |
Ìý |
51.4 |
|
Ìý |
(260.9 |
) |
Percentage depletion in excess of cost depletion |
Ìý |
(36.1 |
) |
Ìý |
(17.4 |
) |
Ìý |
(34.9 |
) |
Ìý |
(11.1 |
) |
Ìý |
(87.9 |
) |
Ìý |
446.2 |
|
Non-taxable income related to noncontrolling interests |
Ìý |
(8.8 |
) |
Ìý |
(4.2 |
) |
Ìý |
(3.0 |
) |
Ìý |
(1.0 |
) |
Ìý |
(9.4 |
) |
Ìý |
47.7 |
|
State taxes, net |
Ìý |
0.4 |
|
Ìý |
0.2 |
|
Ìý |
0.2 |
|
Ìý |
0.1 |
|
Ìý |
(25.4 |
) |
Ìý |
128.9 |
|
Settlement of financial guaranty |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(347.1 |
) |
Ìý |
1,761.9 |
|
Income not subject to tax |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(27.7 |
) |
Ìý |
140.6 |
|
Goodwill impairment |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
22.7 |
|
Ìý |
(115.2 |
) |
Other items — net |
Ìý |
(1.4 |
) |
Ìý |
(0.7 |
) |
Ìý |
0.1 |
|
Ìý |
— |
|
Ìý |
4.1 |
|
Ìý |
(20.9 |
) |
Provision for income tax (benefit) expense and effective income tax rate including discrete items |
Ìý |
$ |
(12.2 |
) |
Ìý |
(5.9 |
)% |
Ìý |
$ |
169.3 |
|
Ìý |
54.1 |
Ìý% |
Ìý |
$ |
(86.0 |
) |
Ìý |
436.5 |
Ìý% |
The components of income taxes for other than continuing operations consisted of the following:
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Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2016 |
Ìý |
2015 |
Ìý |
2014 |
Other comprehensive (income) loss: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Pension/OPEB liability |
Ìý |
$ |
— |
|
Ìý |
$ |
— |
|
Ìý |
$ |
37.1 |
|
Mark-to-market adjustments |
Ìý |
— |
|
Ìý |
0.3 |
|
Ìý |
3.6 |
|
Other |
Ìý |
0.5 |
|
Ìý |
5.9 |
|
Ìý |
0.2 |
|
Total |
Ìý |
$ |
0.5 |
|
Ìý |
$ |
6.2 |
|
Ìý |
$ |
40.9 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Paid in capital — stock based compensation |
Ìý |
$ |
— |
|
Ìý |
$ |
— |
|
Ìý |
$ |
(4.8 |
) |
Discontinued Operations |
Ìý |
$ |
— |
|
Ìý |
$ |
(6.0 |
) |
Ìý |
$ |
(1,216.0 |
) |
Significant components of our deferred tax assets and liabilities as of DecemberÌý31, 2016 and 2015 are as follows:
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Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2016 |
Ìý |
2015 |
Deferred tax assets: |
Ìý |
Ìý |
Ìý |
Ìý |
Pensions |
Ìý |
$ |
114.6 |
|
Ìý |
$ |
106.6 |
|
Postretirement benefits other than pensions |
Ìý |
35.2 |
|
Ìý |
36.5 |
|
Alternative minimum tax credit carryforwards |
Ìý |
251.2 |
|
Ìý |
218.7 |
|
Deferred income |
Ìý |
44.5 |
|
Ìý |
57.2 |
|
Financial instruments |
Ìý |
71.3 |
|
Ìý |
— |
|
Investments in ventures |
Ìý |
— |
|
Ìý |
4.9 |
|
Asset retirement obligations |
Ìý |
22.3 |
|
Ìý |
5.3 |
|
Operating loss carryforwards |
Ìý |
2,699.7 |
|
Ìý |
2,791.6 |
|
Property, plant and equipment and mineral rights |
Ìý |
181.2 |
|
Ìý |
189.8 |
|
State and local |
Ìý |
59.2 |
|
Ìý |
59.9 |
|
Lease liabilities |
Ìý |
12.9 |
|
Ìý |
18.3 |
|
Other liabilities |
Ìý |
108.3 |
|
Ìý |
148.9 |
|
Total deferred tax assets before valuation allowance |
Ìý |
3,600.4 |
|
Ìý |
3,637.7 |
|
Deferred tax asset valuation allowance |
Ìý |
(3,334.8 |
) |
Ìý |
(3,372.5 |
) |
Net deferred tax assets |
Ìý |
265.6 |
|
Ìý |
265.2 |
|
Deferred tax liabilities: |
Ìý |
|
Ìý |
|
Property, plant and equipment and mineral rights |
Ìý |
(34.0 |
) |
Ìý |
(35.5 |
) |
Investment in ventures |
Ìý |
(203.1 |
) |
Ìý |
(206.6 |
) |
Intangible assets |
Ìý |
(1.0 |
) |
Ìý |
(1.5 |
) |
Product inventories |
Ìý |
(3.4 |
) |
Ìý |
(2.5 |
) |
Other assets |
Ìý |
(24.1 |
) |
Ìý |
(19.1 |
) |
Total deferred tax liabilities |
Ìý |
(265.6 |
) |
Ìý |
(265.2 |
) |
Net deferred tax assets (liabilities) |
Ìý |
$ |
— |
|
Ìý |
$ |
— |
|
At DecemberÌý31, 2016 and 2015, we had $251.2 million and $218.7 million, respectively, of gross deferred tax assets related to U.S. alternative minimum tax credits that can be carried forward indefinitely.
We had gross domestic (including states) and foreign net operating loss carryforwards, inclusive of discontinued operations, of $3.7 billion and $6.9 billion, respectively, at DecemberÌý31, 2016. We had gross domestic and foreign net operating loss carryforwards at DecemberÌý31, 2015 of $3.9 billion and $11.1 billion, respectively. The U.S. Federal net operating losses will begin to expire in 2035 and state net operating losses will begin to expire in 2019. The foreign net operating losses can be carried forward indefinitely. We had foreign tax credit carryforwards of $5.8 million at DecemberÌý31, 2016 and DecemberÌý31, 2015. The foreign tax credit carryforwards will begin to expire in 2020. Additionally, there is a net operating loss carryforward, inclusive of discontinued operations, of $1.4 billion for Alternative Minimum Tax. No benefit has been recorded in the financials for this attribute as ASC 740, Income Taxes, does not allow for the recording of deferred taxes under alternative taxing systems.
We recorded a $37.7 million net decrease in the valuation allowance of certain deferred tax assets. Of this amount, a $149.1 million decrease was due to the change in the Luxembourg statutory rate and a $33.1 million decrease resulted from prior year adjustments due to a change in estimate of the 2015 net operating loss. Offsetting increases to the valuation allowance included a $104.9 million increase related to the recording of deferred tax assets due to current year operating activities and a $39.6 million increase related to the close of audits.
At DecemberÌý31, 2016 and 2015, we had no cumulative undistributed earnings of foreign subsidiaries included in consolidated retained earnings. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Ìý
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|
Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2016 |
Ìý |
2015 |
Ìý |
2014 |
Unrecognized tax benefits balance as of JanuaryÌý1 |
Ìý |
$ |
156.2 |
|
Ìý |
$ |
72.6 |
|
Ìý |
$ |
71.8 |
|
Increases/(decreases) for tax positions in prior years |
Ìý |
(61.0 |
) |
Ìý |
6.7 |
|
Ìý |
— |
|
Increases for tax positions in current year |
Ìý |
0.2 |
|
Ìý |
78.5 |
|
Ìý |
5.9 |
|
Decrease due to foreign exchange |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(0.2 |
) |
Settlements |
Ìý |
(64.7 |
) |
Ìý |
(1.1 |
) |
Ìý |
— |
|
Lapses in statutes of limitations |
Ìý |
— |
|
Ìý |
(0.5 |
) |
Ìý |
(3.7 |
) |
Other |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(1.2 |
) |
Unrecognized tax benefits balance as of DecemberÌý31 |
Ìý |
$ |
30.7 |
|
Ìý |
$ |
156.2 |
|
Ìý |
$ |
72.6 |
|
At DecemberÌý31, 2016 and 2015, we had $30.7 million and $156.2 million, respectively, of unrecognized tax benefits recorded. Of this amount, $8.3 million and $21.5 million, respectively, were recorded in Other liabilities and $22.4 million and $134.7 million, respectively, were recorded as Other non-current assets in the Statements of Consolidated Financial Position for both years. If the $30.7 million were recognized, only $8.3 million would impact the effective tax rate. We do not expect that the amount of unrecognized benefits will change significantly within the next 12 months. At DecemberÌý31, 2016 and 2015, we had $0.8 million and $2.1 million, respectively, of accrued interest and penalties related to the unrecognized tax benefits recorded in Other liabilities in the Statements of Consolidated Financial Position.
Tax years 2012 and forward remain subject to examination for the U.S. and Australia. Tax years 2008 and forward remain subject to examination for Canada.