Clearwater Paper Corp
For the period ended Dec 31, 2024. Filed Feb 24, 2025.
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FY2024 · Filed Feb 24, 2025
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Income Taxes
NOTE 8 Income Taxes
INCOME TAX PROVISION (BENEFIT)
The components of income tax provision (benefit) from continuing operations is comprised of the following:
| For The Years Ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Current | |||
| Federal | $(73.9) | $17.4 | $19.8 |
| State | (1.1) | 3.0 | 1.9 |
| Total current | (75.0) | 20.5 | 21.7 |
| Deferred | |||
| Federal | 50.9 | (3.7) | 3.2 |
| State | (3.0) | 0.1 | 4.3 |
| Total deferred | 47.9 | (3.6) | 7.5 |
| Income tax provision (benefit) | $(27.1) | $16.9 | $29.2 |
The income tax provision (benefit) from continuing operations differs from the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes due to the following:
| For The Years Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2024% | 2023% | 2022% | ||||
| Tax at the statutory rate | $(21.2) | 21.0% | $13.8 | 21.0% | $17.2 | 21.0% |
| State and local taxes, net of federal income tax impact | (4.5) | 4.5% | 2.6 | 4.0% | 3.2 | 3.9% |
| Adjustment for state deferred tax rate 1 | (0.1) | 0.1% | (0.2) | (0.2)% | (4.7) | (5.7)% |
| Federal credits 2 | (3.0) | 3.0% | (1.0) | (1.6)% | 7.5 | 9.2% |
| Uncertain tax positions | 0.1 | (0.1)% | 2.2 | 3.3% | (0.6) | (0.7)% |
| Non-deductible expenses | 0.7 | (0.7)% | 1.3 | 1.9% | 1.6 | 1.9% |
| Change in valuation allowances1 | 0.4 | (0.4)% | (0.7) | (1.1)% | 4.2 | 5.1% |
| Other, net | 0.6 | (0.6)% | (1.0) | (1.5)% | 0.6 | 0.8% |
| Income tax provision (benefit) | $(27.1) | 26.8% | $16.9 | 25.8% | $29.2 | 35.5% |
1 In 2022, Idaho revised their state income tax rate. Given our expected utilization, we recorded an offset to our valuation allowances for the amount of this reduction.
2 In 2022, we adjusted our tax positions under audit related to the disallowance of a previously taken federal tax credits based upon interpretation of the law.
DEFERRED TAXES
The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:
| 2024 | 2023 | |
|---|---|---|
| Deferred tax assets: | ||
| Employee benefits | $2.2 | $2.1 |
| Postretirement employee benefits | 11.4 | 13.0 |
| Incentive compensation | 2.6 | 3.7 |
| Inventories | 5.2 | 0.9 |
| Pensions | 0.9 | — |
| Federal and state credit carryforwards | 9.6 | 8.6 |
| Federal and state net operating losses | 1.0 | 1.4 |
| Operating leases | 6.9 | 8.1 |
| Capitalized research credits | 10.7 | 4.4 |
| Other | 1.7 | — |
| Total deferred tax assets | 52.1 | 42.2 |
| Valuation allowance | (8.0) | (7.6) |
| Deferred tax assets, net of valuation allowance | 44.2 | 34.6 |
| Deferred tax liabilities: | ||
| Property, plant and equipment, net | (124.6) | (59.0) |
| Operating leases | (6.8) | (7.9) |
| Pensions | — | (0.5) |
| Intangible assets, net | — | (1.3) |
| Other | (0.7) | (1.2) |
| Total deferred tax liabilities | (132.1) | (69.8) |
| Net deferred tax liabilities | $(88.0) | $(35.2) |
Net deferred tax assets (liabilities) consist of:
| December 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Non-current deferred tax assets1 | $1.7 | $0.8 |
| Non-current deferred tax liabilities | (89.7) | (36.0) |
| Net deferred tax liabilities | $(88.0) | $(35.2) |
1 Included in "Other assets, net" on our accompanying December 31, 2024 and 2023 Consolidated Balance Sheets.
We have tax benefits associated with state jurisdictions totaling $2.6 million which expire between 2025 and 2038.
UNCERTAIN TAX POSITIONS
The following table provides a roll forward of our unrecognized tax benefits.
| For The Years Ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Beginning balance | $80.9 | $70.4 | $5.9 |
| Increases: | |||
| Tax position taken in current year | 0.9 | 0.4 | 68.6 |
| Tax position taken in prior years | — | 10.4 | (0.1) |
| Decreases: | |||
| Settlements during the year | — | (0.3) | (3.1) |
| Tax position taken in prior years | (78.4) | — | — |
| Lapse of statutes in current year | (1.0) | — | (0.9) |
| Ending balance | $2.4 | $80.9 | $70.4 |
During 2022, we ceased operations in our wholly owned subsidiary, Cellu Tissue Holdings, Inc. and recorded a $68.4 million reserve for an estimated uncertain tax position relating to a worthless stock deduction for our investment which represented a full reserve of the tax effects of that position. During 2023, an additional $10.4 million was recorded as a reserve for uncertain tax positions relating to state income tax effects of the worthless stock deduction. During the year ended December 31, 2023, we filed our U.S. 2022 tax return reflecting this position and requested a tax refund which was generated primarily due to the worthless stock deduction. Prior to December 31, 2023, we received this refund. In 2023, we requested a ruling from the IRS in connection with the worthless stock deduction and expect a determination in 2025.
Due to the sale of our tissue operations during 2024, we have determined that it is more likely than not that we will sustain the value of the worthless stock deduction either as recorded or as a capital gain. We continue discussions with the IRS on this deduction. Based upon this conclusion, we have removed the uncertain tax position and reversed any associated interest with this position.
We have operations in many states within the U.S. and are subject, at times, to tax audits in these jurisdictions. During 2023, we effectively settled federal tax years 2015 through 2019, however such years remain subject to exam until the U.S. federal exam is formally closed. With a few exceptions, we are no longer subject to state and local tax examination for years prior to 2018.
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