SunCoke Energy Inc

4. Income Taxes

At the end of each interim period, we make our best estimate of the annual effective tax rate and the impact of discrete items, if any, and adjust the rate as necessary.

Income taxes recorded for the three and six months ended June 30, 2024 reflect discrete items recorded. During the three months ended June 30, 2024, the Company released a valuation allowance established on the deferred tax assets attributable to existing state net operating losses (“NOLs”) carryforwards, resulting in a deferred tax benefit of $2.2 million. The release of the aforementioned valuation allowance was a result of tax planning conducted by the Company, as the state NOLs carried forward from prior years are now expected to be utilized. Income tax expense also reflects the revaluation of certain deferred tax liabilities due to changes in apportioned state tax rates, which resulted in income tax expense of $1.9 million for the three months ended June 30, 2024. Income taxes recorded during the three and six months ended June 30, 2023 included immaterial discrete items.

Before the impact of discrete items described above, the Company's effective tax rate was 20.5 percent and 22.7 percent for the three and six months ended June 30, 2024, respectively, and 27.4 percent and 27.6 percent for the three and six months ended June 30, 2023, respectively. The difference between the Company's effective tax rates and federal statutory rate of 21.0 percent during all periods presented reflect the impact of state taxes, earnings attributable to its noncontrolling ownership interests in a partnership and compensation deduction limitations under Section 162(m) of the Internal Revenue Code. The three and six months ended June 30, 2024 also reflects the impact of a valuation allowance established for a portion of foreign tax credits projected for the current period as a result of tax legislation enacted in Brazil during the third quarter of 2023 as well as a valuation allowance released for a portion of state NOLs’ utilization projected for the current period as a result of tax planning. The three and six months ended June 30, 2023 reflects the impact of foreign taxes as a result of regulations impacting foreign tax credit utilization published by the U.S. Treasury in 2022.