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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES |
(8) | INCOME TAXES
We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Losses before income taxes derived from United States and non-U.S. operations are as follows:
|  | Successor |  |  |  | Predecessor |
|  |  |  |  |  | Period from |  |  |  | Period from |  |  |  |  |
|  | Twelve Months |  |  | August 1, 2017 |  |  |  | April 1, 2017 |  |  | Twelve Months |
|  | Ended |  |  | through |  |  |  | through |  |  | Ended |
(In thousands) |  | December 31, 2018 |  |  | December 31, 2017 |  |  |  | July 31, 2017 |  |  | March 31, 2017 |
Non-U.S. | $ |  | (99,607 | ) |  |  | (5,137 | ) |  |  |  | (1,603,788 | ) |  |  | (498,931 | )
United States |  |  | (53,912 | ) |  |  | (31,550 | ) |  |  |  | (44,355 | ) |  |  | (144,683 | )
| $ |  | (153,519 | ) |  |  | (36,687 | ) |  |  |  | (1,648,143 | ) |  |  | (643,614 | )
Income tax expense (benefit) consists of the following:
|  | U.S. |  |  |  |  |  |  |  |  |
(In thousands) |  | Federal |  |  | State |  |  | International |  |  | Total |
Year Ended March 31, 2017 (Predecessor) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | (842 | ) |  |  | 17 |  |  |  | 9,422 |  |  |  | 8,597 |
Deferred |  |  | (2,200 | ) |  |  | — |  |  |  | — |  |  |  | (2,200 | )
|  | $ | (3,042 | ) |  |  | 17 |  |  |  | 9,422 |  |  |  | 6,397 |
Period from April 1, 2017 through July 31, 2017 (Predecessor) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | (822 | ) |  |  | 3 |  |  |  | 5,128 |  |  |  | 4,309 |
Deferred |  |  | (5,543 | ) |  |  | — |  |  |  | — |  |  |  | (5,543 | )
|  | $ | (6,365 | ) |  |  | 3 |  |  |  | 5,128 |  |  |  | (1,234 | )
Period from August 1, 2017 through December 31, 2017 (Successor) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 11 |  |  |  | — |  |  |  | 2,028 |  |  |  | 2,039 |
Deferred |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | 11 |  |  |  | — |  |  |  | 2,028 |  |  |  | 2,039 |
Year Ended December 31, 2018 (Successor) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 962 |  |  |  | — |  |  |  | 16,718 |  |  |  | 17,680 |
Deferred |  |  | 531 |  |  |  | 250 |  |  |  | (209 | ) |  |  | 572 |
|  | $ | 1,493 |  |  |  | 250 |  |  |  | 16,509 |  |  |  | 18,252 |
The actual income tax expense above differs from the amounts computed by applying the U.S. federal statutory tax rate of 21% for periods beginning January 1, 2018 and 35% for periods ending prior to January 1, 2018 to pre-tax earnings as a result of the following:
|  | Successor |  |  |  | Predecessor |
|  |  |  |  |  | Period from |  |  |  | Period from |
|  | Twelve Months |  |  | August 1, 2017 |  |  |  | April 1, 2017 |
|  | Ended |  |  | through |  |  |  | through |
(In thousands) |  | December 31, 2018 |  |  | December 31, 2017 |  |  |  | July 31, 2017 |
Computed “expected” tax benefit |  | $ | (32,239 | ) |  |  | (12,840 | ) |  |  |  | (576,850 | )
Increase (reduction) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign income taxed at different rates |  |  | 20,917 |  |  |  | 1,767 |  |  |  |  | 448,805 |
Uncertain tax positions |  |  | 2,264 |  |  |  | (3,219 | ) |  |  |  | 4,674 |
Chapter 11 reorganization |  |  | — |  |  |  | — |  |  |  |  | 50,428 |
Nondeductible transaction costs |  |  | 1,091 |  |  |  | — |  |  |  |  | 2,628 |
Transition tax |  |  | — |  |  |  | 15,120 |  |  |  |  | — |
Valuation allowance – deferred tax assets |  |  | 38,778 |  |  |  | (28,387 | ) |  |  |  | 69,278 |
Amortization of deferrals associated with intercompany sales to foreign tax jurisdictions |  |  | — |  |  |  | 11 |  |  |  |  | (822 | )
Foreign taxes |  |  | 13,012 |  |  |  | 845 |  |  |  |  | (1,342 | )
State taxes |  |  | 246 |  |  |  | — |  |  |  |  | 3 |
Return to accrual |  |  | (28,176 | ) |  |  | 835 |  |  |  |  | 668 |
162(m) - Executive compensation |  |  | 2,818 |  |  |  | — |  |  |  |  | — |
Other, net |  |  | (459 | ) |  |  | 646 |  |  |  |  | 1,296 |
Remeasurement of deferred taxes |  |  | — |  |  |  | 27,261 |  |  |  |  | — |
|  | $ | 18,252 |  |  |  | 2,039 |  |  |  |  | (1,234 | )
ASU 2016-06, which was effective January 1, 2018, removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. Income taxes resulting from intercompany vessel sales, as well as the tax effect of any reversing temporary differences resulting from the sales, were deferred and amortized on a straight-line basis over the remaining useful lives of the vessels as of March 31, 2017. Due to our Chapter 11 reorganization, the remaining unamortized balances associated with previous vessel transfers were reduced to zero as of December 31, 2017. Because any remaining U.S. vessels were pledged as collateral in accordance with our current debt agreements, we do not intend to execute intercompany vessel transfers in the near future. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
|  | Successor |
|  | December 31, |  |  |  | December 31, |
(In thousands) |  | 2018 |  |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |  |
Accrued employee benefit plan costs |  | $ | 7,607 |  |  |  |  | 5,838 |
Stock based compensation |  |  | 786 |  |  |  |  | 230 |
Net operating loss and tax credit carryforwards |  |  | 102,190 |  |  |  |  | 3,941 |
Restructuring fees not currently deductible for tax purposes |  |  | 3,113 |  |  |  |  | 3,982 |
Depreciation and amortization |  |  | — |  |  |  |  | 29,160 |
Other |  |  | 8,826 |  |  |  |  | 3,070 |
Gross deferred tax assets |  |  | 122,522 |  |  |  |  | 46,221 |
Less valuation allowance |  |  | (106,447 | ) |  |  |  | (43,218 | )
Net deferred tax assets |  |  | 16,075 |  |  |  |  | 3,003 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | (11,149 | ) |  |  |  | — |
Section 1245 recapture |  |  | (2,891 | ) |  |  |  | (2,131 | )
Other |  |  | (3,553 | ) |  |  |  | (872 | )
Gross deferred tax liabilities |  |  | (17,593 | ) |  |  |  | (3,003 | )
Net deferred tax assets (liabilities) |  | $ | (1,518 | ) |  |  |  | — |
On November 15, 2018 we completed a series of mergers through which all of the shares of GulfMark Offshore, Inc. were acquired. The merger transactions qualified as tax free reorganization under IRC Sec. 368(a), resulting in a carryover of tax basis in the assets and liabilities of GulfMark. Tidewater recorded net deferred liabilities of $1 million in the opening balance sheet of GulfMark. In July 2017 we reorganized under Chapter 11 of the U.S. bankruptcy code, in a transaction treated as a tax free reorganization under IRC Sec. 368(a)(1)(E). Approximately $853 million of cancellation of indebtedness (COD) income was realized for tax purposes. Under exceptions applying to COD income resulting from a bankruptcy reorganization, we were not required to recognize this COD income currently as taxable income. Instead, our tax attribute carryforwards, including net operating losses, tax basis of vessels and other depreciable assets, and the stock of foreign corporate subsidiaries was reduced under the operative tax statute and applicable regulations, affecting the balance of deferred taxes where appropriate. The total amount of reduction of tax attributes under these rules after finalization of the U.S. income tax return for the year ending December 31, 2017, was approximately $718 million, of which $358 million impacted depreciable assets. Approximately $330 million of attribute reduction reduced the tax basis of stock of foreign subsidiaries, which did not give rise to deferred taxes (as more fully discussed below). The remaining $136 million of excess COD income is attributed under the applicable tax regulations to domestic subsidiaries with insufficient tax attributes to absorb the required reduction; this can result in the recognition of future tax gain. Approximately $122 million of this was attributable to a subsidiary with no current built in gain, and therefore no deferred taxes were recognized on this portion of the excess COD income. Deferred taxes were recognized on the remaining $14 million of excess COD income. The actual reduction in tax attributes did not occur until the first day of our tax year subsequent to the date of emergence, or January 1, 2018. After the filing of the U.S. federal income tax return for the year ending December 31, 2017, we had no remaining U.S. federal net operating loss carryforwards at December 31, 2017 but has $225 million of U.S. federal net operating losses as of December 31, 2018 which begin to expire in 2037, but mostly indefinite lived. We have foreign tax credits in the amount of $2 million and $13 million as of December 31, 2017 and 2018, respectively. We expect our foreign tax credits will expire from 2022 to 2027. We have foreign net operating loss carryforwards of $124 million that will expire beginning in 2025 with many having indefinite carryforward periods. IRC Sections 382 and 383 provide an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses, against future U.S. taxable income in the event of a change in ownership. Our emergence from Chapter 11 bankruptcy proceedings is considered a change in ownership for purposes of IRC Section 382. The limitation under the IRC is based on our value as of the emergence date. The ownership changes and resulting annual limitation will result in no expiration of U.S. tax attributes generated prior to the emergence date. In addition, the merger with GulfMark resulted in a change in ownership of GulfMark for purposes of IRC Section 382. The ownership changes and resulting annual limitation on GulfMark’s tax attributes will result in no expiration of net operating losses and other tax attributes generated prior to the merger. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated were the cumulative losses for financial reporting purposes that were incurred over the three-year periods ended December 31, 2018. Such objective negative evidence limits the ability to consider other subjective evidence, such as our projections for future growth and tax planning strategies. On the basis of this evaluation, for the period ended December 31, 2018, a valuation allowance of $106.4 million was recorded against our net deferred tax asset. For the period ended December 31, 2017, a valuation allowance of $43.2 million was recorded against our net deferred tax asset. The increase in the valuation allowance was primarily attributable to the net operating losses and other deferred tax assets recorded in the current period. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future U.S. taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth and/or tax planning strategies. We have not recognized a U.S. deferred tax liability associated with temporary differences related to investments in foreign subsidiaries. The differences relate primarily to stock basis differences attributable to factors other than earnings, given that any untaxed cumulative earnings were subject to taxation in the U.S. in 2017 in accordance with the Tax Cuts and Jobs Act, and that post-2017 earnings of these subsidiaries will either be taxed currently for U.S. purposes or will be permanently exempt from U.S. taxation. For the periods ended December 31, 2018 and 2017, there is an unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries estimated to be approximately $5 and $4 million, respectively. We maintain that our investment in foreign subsidiaries and associated reinvestment of their cumulative earnings is permanent in duration. Our balance sheet reflects the following in accordance with ASC 740, Income Taxes:
|  | Successor |
|  | December 31, |  |  |  | December 31, |
(In thousands) |  | 2018 |  |  |  | 2017 |
Tax liabilities for uncertain tax positions |  | $ | 43,790 |  |  |  |  | 31,694 |
Income tax payable |  |  | 9,387 |  |  |  |  | 12,492 |
Income tax (receivable) |  |  | (9,245 | ) |  |  |  | (8,442 | )
Included in the liability balances for uncertain tax positions above for the periods ending December 31, 2018 and 2017, are $21.6 million and $9.8 million of penalties and interest, respectively. Penalties and interest related to income tax liabilities are included in income tax expense. Income tax payable is included in other current liabilities. A reconciliation of the beginning and ending amount of all unrecognized tax benefits, including the unrecognized tax benefit related to state tax issues and the liability for uncertain tax positions (but excluding related penalties and interest) are as follows:
(In thousands) |  |  |  |
Balance at April 1, 2016 (Predecessor) |  | $ | 401,375 |
Additions based on tax positions related to the current year |  |  | 551 |
Settlement and lapse of statute of limitations |  |  | (1,108 | )
Balance at March 31, 2017 (Predecessor) |  | $ | 400,818 |
Additions based on tax positions related to the current year |  |  | 2,050 |
Settlement and lapse of statute of limitations |  |  | — |
Balance at July 31, 2017 (Predecessor) |  | $ | 402,868 |
(In thousands) |  |  |  |
Balance at August 1, 2017 (Successor) |  | $ | 402,868 |
Additions based on tax positions related to the current year |  |  | 170 |
Additions based on tax positions related to a prior year |  |  | 2,578 |
Settlement and lapse of statute of limitations |  |  | (1,045 | )
Reductions based on tax positions related to a prior year |  |  | — |
Balance at December 31, 2017 (Successor) |  | $ | 404,571 |
Additions from GulfMark business combination |  |  | 8,857 |
Additions based on tax positions related to the current year |  |  | — |
Additions based on tax positions related to a prior year |  |  | 6,903 |
Settlement and lapse of statute of limitations |  |  | (2,953 | )
Reductions based on tax positions related to a prior year |  |  | (18,086 | )
Balance at December 31, 2018 (Successor) (A) |  | $ | 399,292 |
| (A) | The gross balance reported as uncertain tax positions is largely offset by $374 million of foreign tax credits and other tax attributes.
Subsequent to the issuance of our Consolidated Financial Statements for the year ended December 31, 2017, we identified an immaterial error related to income inclusions in the U.S. under Subpart F of the Internal Revenue Code. As a result of the cumulative impact of the error, which dates back to 2010, we have recorded a prior period adjustment in the amount of $13.4 million to the April 1, 2016 (Predecessor) beginning retained earnings. The “Other liabilities and deferred credits” and “Net properties and equipment” accounts within the Consolidated Balance Sheet for the year ended December 31, 2017 were also restated from the amount previously reported to reflect the uncertain tax position of $13.4 million. The beginning balance of uncertain tax benefits in the preceding table has also been restated for the correction of this error. We have assessed this error and determined it is immaterial to all prior periods impacted. The Consolidated Financial Statements and corresponding footnotes for the prior periods, including the impact to fresh start accounting, have been restated from the amounts previously reported to reflect the correction of this error. With limited exceptions, we are no longer subject to tax audits by United States (U.S.) federal, state, local or foreign taxing authorities for fiscal years prior to March 2013. We have ongoing examinations by various state and foreign tax authorities and do not believe that the results of these examinations will have a material adverse effect on our financial position or results of operations. SAB 118 measurement period On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted. The Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering corporate income tax rates, implementing the territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. In 2017 and the first nine months of 2018, we recorded provisional amounts for certain enactment-date effects of the Tax Act by applying the guidance in SAB 118 because we had not yet completed our enactment-date accounting for these effects. Because of the existence of a full valuation allowance against deferred tax assets, there was no net impact to net income during 2017 and the first nine months of 2018 as a result of the Tax Act. We applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Act in 2017 and throughout 2018. At December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the Tax Act under ASC 740, Income Taxes, for the following aspects: remeasurement of deferred tax assets and liabilities, one-time transition tax, tax on global intangible low-taxed income (“GILTI”), and the base erosion anti-abuse tax (“BEAT”). At December 31, 2018, we have now completed our accounting for all of the enactment-date income tax effects of the Tax Act. One-time transition tax The one-time transition tax is based on our total post-1986 earnings and profits (“E&P”), the tax on which we previously deferred from US income taxes under US law. We recorded a provisional amount for our one-time transition tax liability for each of our foreign subsidiaries, resulting in a deemed dividend inclusion of $43.2 million in the US current taxable income calculation at December 31, 2017. Upon further analyses of the Tax Act and Notices and regulations issued and proposed by the US Department of the Treasury and the Internal Revenue Service, we finalized our calculations of the transition tax liability during 2018 and determined that we had no remaining E&P to recognize as a one-time transition tax. Deferred tax assets and liabilities As of December 31, 2017, we remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional amount of $27.3 million. Upon further analysis of certain aspects of the Tax Act and refinement of our calculations during the 12 months ended December 31, 2018, there was no material adjustment to the provisional amounts recorded. Global intangible low-taxed income (GILTI) The Tax Act subjects a US shareholder to tax on GILTI earned by certain foreign subsidiaries. We have made an accounting policy election to account for GILTI in the year the tax is incurred. Due to current year losses, no GILTI was recognized for the year ending December 31, 2018. Base Erosion Anti-Abuse Tax (BEAT) The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations beginning in 2018, and impose a minimum tax if greater than regular tax. The BEAT did not have a material impact on our provision for income tax.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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