NOTE 7 – INCOME TAXES A roll-forward of unrecognized tax benefits and associated accrued interest and penalties is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Unrecognized
Tax Benefits |
|
|
Interest and
Penalties |
|
|
Total |
|
Opening balance at January 1, 2023 |
|
$ |
10.2 |
|
|
$ |
3.2 |
|
|
$ |
13.4 |
|
Net change for tax positions of prior periods |
|
|
0.2 |
|
|
|
0.4 |
|
|
|
0.6 |
|
Closing balance at June 30, 2023 |
|
|
10.4 |
|
|
|
3.6 |
|
|
|
14.0 |
|
Current |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-current |
|
$ |
10.4 |
|
|
$ |
3.6 |
|
|
$ |
14.0 |
|
All of the $14.0 million of unrecognized tax benefits, interest and penalties would impact our effective tax rate if recognized.
In 2021 a non-U.S. subsidiary, Innospec Limited, entered into a review by the U.K. tax authorities under the U.K.’s Profit Diversion Compliance Facility (“PDCF”) in relation to the period 2017 to 2020 inclusive. The Company has determined that additional tax and interest totaling $1.1 million may arise as a result of the ongoing review. This includes an increase for foreign exchange movements of $0.1 million recorded in the six months to June 30, 2023. A non-U.S. subsidiary, Innospec Performance Chemicals Italia Srl, is subject to an ongoing tax audit in relation to the period 2011 to 2014 inclusive. The Company has determined that additional tax, interest and penalties totaling $3.3 million may arise as a consequence of the tax audit. This includes an increase for foreign exchange movements of $0.1 million recorded in the six months to June 30, 2023. As any additional tax arising as a consequence of the tax audit would be reimbursed by the previous owner under the terms of the sale and purchase agreement, an indemnification asset of the same amount is recorded in the financial statements to reflect this arrangement. In 2018 the Company recorded an unrecognized tax benefit in relation to a potential adjustment that could arise as a consequence of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), but for which retrospective adjustment to the filed 2017 U.S. federal income tax returns was not permissible. The Company has determined that additional tax, interest and penalties totaling $9.6 million may arise in relation to this item. This includes an increase in interest accrued of $0.4 million in the six months to June 30, 2023. Aside from certain tax returns that are closed after completion of an Internal Revenue Service ("IRS") audit, the Company and its U.S. subsidiaries remain open to examination by the IRS for certain elements of year 2017 and for years 2019 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including Brazil (2018 onwards), Germany (2018 onwards), and the U.K. (2017 onwards).
|