NOTE 9 - INCOME TAXES
Income 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 |
2017 |
Ìý |
2016 |
Ìý |
2015 |
United States |
Ìý |
$ |
90.7 |
|
Ìý |
$ |
124.9 |
|
Ìý |
$ |
314.2 |
|
Foreign |
Ìý |
38.7 |
|
Ìý |
82.1 |
|
Ìý |
(1.1 |
) |
|
Ìý |
$ |
129.4 |
|
Ìý |
$ |
207.0 |
|
Ìý |
$ |
313.1 |
|
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 |
2017 |
Ìý |
2016 |
Ìý |
2015 |
Current provision (benefit): |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
United States federal |
Ìý |
$ |
(252.6 |
) |
Ìý |
$ |
(11.1 |
) |
Ìý |
$ |
8.2 |
|
United States stateÌý& local |
Ìý |
(0.1 |
) |
Ìý |
(0.5 |
) |
Ìý |
0.3 |
|
Foreign |
Ìý |
0.3 |
|
Ìý |
(0.1 |
) |
Ìý |
0.9 |
|
Ìý |
Ìý |
(252.4 |
) |
Ìý |
(11.7 |
) |
Ìý |
9.4 |
|
Deferred provision (benefit): |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
United States federal |
Ìý |
— |
|
Ìý |
(0.5 |
) |
Ìý |
165.8 |
|
Foreign |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(5.9 |
) |
Ìý |
Ìý |
— |
|
Ìý |
(0.5 |
) |
Ìý |
159.9 |
|
Total provision (benefit) on income from continuing operations |
Ìý |
$ |
(252.4 |
) |
Ìý |
$ |
(12.2 |
) |
Ìý |
$ |
169.3 |
|
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 |
2017 |
Ìý |
2016 |
Ìý |
2015 |
Tax at U.S. statutory rate of 35% |
Ìý |
$ |
45.3 |
|
Ìý |
35.0 |
Ìý% |
Ìý |
$ |
72.5 |
|
Ìý |
35.0 |
Ìý% |
Ìý |
$ |
109.6 |
|
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 - remeasurement of deferred taxes |
Ìý |
407.5 |
|
Ìý |
314.8 |
|
Ìý |
149.1 |
|
Ìý |
72.0 |
|
Ìý |
— |
|
Ìý |
— |
|
Prior year adjustments in current year |
Ìý |
(1.1 |
) |
Ìý |
(0.8 |
) |
Ìý |
(11.8 |
) |
Ìý |
(5.7 |
) |
Ìý |
5.9 |
|
Ìý |
1.9 |
|
Valuation allowance build (reversal) |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Tax law change - remeasurement of deferred taxes |
Ìý |
(407.5 |
) |
Ìý |
(314.8 |
) |
Ìý |
(149.1 |
) |
Ìý |
(72.0 |
) |
Ìý |
— |
|
Ìý |
— |
|
Current year activity |
Ìý |
(471.7 |
) |
Ìý |
(364.4 |
) |
Ìý |
93.9 |
|
Ìý |
45.4 |
|
Ìý |
(104.6 |
) |
Ìý |
(33.4 |
) |
Repeal of AMT |
Ìý |
(235.3 |
) |
Ìý |
(181.7 |
) |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Prior year adjustments in current year |
Ìý |
(3.0 |
) |
Ìý |
(2.4 |
) |
Ìý |
6.5 |
|
Ìý |
3.1 |
|
Ìý |
165.8 |
|
Ìý |
52.9 |
|
Tax uncertainties |
Ìý |
(1.4 |
) |
Ìý |
(1.1 |
) |
Ìý |
(11.3 |
) |
Ìý |
(5.5 |
) |
Ìý |
84.1 |
|
Ìý |
26.9 |
|
Worthless stock deduction |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(73.4 |
) |
Ìý |
(35.5 |
) |
Ìý |
— |
|
Ìý |
— |
|
Impact of foreign operations |
Ìý |
475.4 |
|
Ìý |
367.2 |
|
Ìý |
(42.7 |
) |
Ìý |
(20.6 |
) |
Ìý |
(53.9 |
) |
Ìý |
(17.2 |
) |
Percentage depletion in excess of cost depletion |
Ìý |
(61.6 |
) |
Ìý |
(47.6 |
) |
Ìý |
(36.1 |
) |
Ìý |
(17.4 |
) |
Ìý |
(34.9 |
) |
Ìý |
(11.1 |
) |
Non-taxable loss (income) related to noncontrolling interests |
Ìý |
1.3 |
|
Ìý |
1.0 |
|
Ìý |
(8.8 |
) |
Ìý |
(4.2 |
) |
Ìý |
(3.0 |
) |
Ìý |
(1.0 |
) |
State taxes, net |
Ìý |
(0.1 |
) |
Ìý |
— |
|
Ìý |
0.4 |
|
Ìý |
0.2 |
|
Ìý |
0.2 |
|
Ìý |
0.1 |
|
Other items, net |
Ìý |
(0.2 |
) |
Ìý |
(0.2 |
) |
Ìý |
(1.4 |
) |
Ìý |
(0.7 |
) |
Ìý |
0.1 |
|
Ìý |
— |
|
Provision for income tax (benefit) expense and effective income tax rate including discrete items |
Ìý |
$ |
(252.4 |
) |
Ìý |
(195.0 |
)% |
Ìý |
$ |
(12.2 |
) |
Ìý |
(5.9 |
)% |
Ìý |
$ |
169.3 |
|
Ìý |
54.1 |
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 |
2017 |
Ìý |
2016 |
Ìý |
2015 |
Other comprehensive (income) loss: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Postretirement benefit liability |
Ìý |
$ |
— |
|
Ìý |
$ |
— |
|
Ìý |
$ |
5.9 |
|
Mark-to-market adjustments |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
0.3 |
|
Other |
Ìý |
— |
|
Ìý |
0.5 |
|
Ìý |
— |
|
Total |
Ìý |
$ |
— |
|
Ìý |
$ |
0.5 |
|
Ìý |
$ |
6.2 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Discontinued Operations |
Ìý |
$ |
— |
|
Ìý |
$ |
— |
|
Ìý |
$ |
(6.0 |
) |
Significant components of our deferred tax assets and liabilities as of DecemberÌý31, 2017 and 2016 are as follows:
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Ìý |
Ìý |
(In Millions) |
Ìý |
Ìý |
2017 |
Ìý |
2016 |
Deferred tax assets: |
Ìý |
Ìý |
Ìý |
Ìý |
Pensions |
Ìý |
$ |
76.3 |
|
Ìý |
$ |
114.6 |
|
Postretirement benefits other than pensions |
Ìý |
25.6 |
|
Ìý |
35.2 |
|
Alternative minimum tax credit carryforwards |
Ìý |
— |
|
Ìý |
251.2 |
|
Deferred income |
Ìý |
24.2 |
|
Ìý |
44.5 |
|
Intangible assets |
Ìý |
12.2 |
|
Ìý |
— |
|
Financial instruments |
Ìý |
— |
|
Ìý |
71.3 |
|
Asset retirement obligations |
Ìý |
9.9 |
|
Ìý |
22.3 |
|
Operating loss carryforwards |
Ìý |
2,368.1 |
|
Ìý |
2,699.7 |
|
Property, plant and equipment and mineral rights |
Ìý |
188.2 |
|
Ìý |
181.2 |
|
State and local |
Ìý |
74.2 |
|
Ìý |
59.2 |
|
Lease liabilities |
Ìý |
9.6 |
|
Ìý |
12.9 |
|
Other liabilities |
Ìý |
100.4 |
|
Ìý |
108.3 |
|
Total deferred tax assets before valuation allowance |
Ìý |
2,888.7 |
|
Ìý |
3,600.4 |
|
Deferred tax asset valuation allowance |
Ìý |
(2,238.5 |
) |
Ìý |
(3,334.8 |
) |
Net deferred tax assets |
Ìý |
650.2 |
|
Ìý |
265.6 |
|
Deferred tax liabilities: |
Ìý |
|
Ìý |
|
Property, plant and equipment and mineral rights |
Ìý |
(1.5 |
) |
Ìý |
(34.0 |
) |
Investment in ventures |
Ìý |
(137.5 |
) |
Ìý |
(203.1 |
) |
Intangible assets |
Ìý |
— |
|
Ìý |
(1.0 |
) |
Product inventories |
Ìý |
(3.8 |
) |
Ìý |
(3.4 |
) |
Intercompany notes |
Ìý |
(465.7 |
) |
Ìý |
— |
|
Other assets |
Ìý |
(41.7 |
) |
Ìý |
(24.1 |
) |
Total deferred tax liabilities |
Ìý |
(650.2 |
) |
Ìý |
(265.6 |
) |
Net deferred tax assets (liabilities) |
Ìý |
$ |
— |
|
Ìý |
$ |
— |
|
At DecemberÌý31, 2017, we had no gross deferred tax asset related to U.S. AMT credits compared to $251.2 million at DecemberÌý31, 2016. This deferred tax asset is now recorded as an income tax receivable as a result of the recently enacted income tax legislation allowing the credits to be refunded between the years 2019 through 2022.
We had gross domestic (including states) and foreign net operating loss carryforwards, inclusive of discontinued operations, of $4.2 billion and $7.2 billion, respectively, at DecemberÌý31, 2017. We had gross domestic and foreign net operating loss carryforwards at DecemberÌý31, 2016 of $3.7 billion and $6.9 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, 2017 and 2016. The foreign tax credit carryforwards will begin to expire in 2020.
We recorded a $1,096.3 million net decrease in the valuation allowance of certain deferred tax assets. Of this amount, a $465.7 million decrease relates to impairment income on Luxembourg intercompany notes, a $407.5 million decrease relates to the reversal of deferred tax assets due to the change in the U.S. and Luxembourg statutory rates, a $235.3 million decrease relates to the repeal of AMT as a result of U.S. income tax reform and the remainder relates to current year activity.
At DecemberÌý31, 2017 and 2016, 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 |
2017 |
Ìý |
2016 |
Ìý |
2015 |
Unrecognized tax benefits balance as of JanuaryÌý1 |
Ìý |
$ |
30.7 |
|
Ìý |
$ |
156.2 |
|
Ìý |
$ |
72.6 |
|
Increase (decrease) for tax positions in prior years |
Ìý |
(2.8 |
) |
Ìý |
(61.0 |
) |
Ìý |
6.7 |
|
Increase for tax positions in current year |
Ìý |
4.5 |
|
Ìý |
0.2 |
|
Ìý |
78.5 |
|
Decrease due to foreign exchange |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Settlements |
Ìý |
1.0 |
|
Ìý |
(64.7 |
) |
Ìý |
(1.1 |
) |
Lapses in statutes of limitations |
Ìý |
— |
|
Ìý |
— |
|
Ìý |
(0.5 |
) |
Other |
Ìý |
0.1 |
|
Ìý |
— |
|
Ìý |
— |
|
Unrecognized tax benefits balance as of DecemberÌý31 |
Ìý |
$ |
33.5 |
|
Ìý |
$ |
30.7 |
|
Ìý |
$ |
156.2 |
|
At DecemberÌý31, 2017 and 2016, we had $33.5 million and $30.7 million, respectively, of unrecognized tax benefits recorded. Of this amount, $6.1 million and $8.3 million, respectively, were recorded in Other liabilities and $27.4 million and $22.4 million, respectively, were recorded as Other non-current assets in the Statements of Consolidated Financial Position for both years. If the $33.5 million were recognized, only $6.1 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, 2017 and 2016, we had $2.1 million and $0.8 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 2015 and forward remain subject to examination for the U.S. and tax years 2013 and forward for Australia. Tax years 2008 and forward remain subject to examination for Canada.