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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES: U.S. federal and state and foreign income tax laws and regulations are voluminous and often ambiguous. As such, Quanta is required to make many subjective assumptions and judgments regarding its tax positions that could materially affect amounts recognized in its future consolidated balance sheets, statements of operations and statements of comprehensive income. For example, the Tax Act significantly revised the U.S. corporate tax regime, which, among other things, resulted in a reduction of Quanta’s effective tax rate and a remeasurement of its deferred tax assets and liabilities. Quanta completed its analysis of the Tax Act, and the adjustments determined during the measurement period were included within “Net income” as an adjustment to “Provision for income taxes” on Quanta’s consolidated statements of operations and are described in further detail below. The Tax Act lowered the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries, limited and eliminated certain tax deductions and created new taxes on certain foreign-sourced earnings. Consequently, for the year ended December 31, 2017, Quanta recorded one-time net tax benefits that were Quanta’s provisional estimate, utilizing the information that was available at the time. During the year ended December 31, 2018, Quanta recorded $6.3 million of additional benefit related to the remeasurement of U.S. federal deferred tax assets and liabilities, as the estimate of such amount was revised in connection with the preparation and filing of Quanta’s 2017 income tax returns, and decreased the estimated benefit associated with entity restructuring and recapitalization transactions by $1.8 million based on actual 2017 earnings and profit balances. Additionally, as a result of subsequent regulations, Quanta also recorded a valuation allowance of $43.5 million against foreign tax credits during 2018. As of December 31, 2018, Quanta completed its accounting for the tax effects of the enactment of the Tax Act; however, additional regulations could have a material impact on Quanta’s effective tax rate in future periods. Further, to the extent there are settlements of certain foreign unrecognized tax benefits in future periods, changes to the estimates associated with the transition tax may be required. The Tax Act also imposed a tax on global intangible low-taxed income (GILTI). Quanta analyzed the impacts of GILTI and made an accounting policy election in the fourth quarter of 2018, whereby it determined that such income will be recognized in the period earned and deferred taxes for basis differences that may reverse as GILTI will not be recognized in future years. The components of income before income taxes were as follows (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Income before income taxes: |  |  |  |  |
Domestic | $ | 632,791 |  |  | $ | 550,676 |  |  | $ | 318,635 |
Foreign | (61,445) |  |  | 21,611 |  |  | 139,031 |
Total | $ | 571,346 |  |  | $ | 572,287 |  |  | $ | 457,666 |
The components of the provision for income taxes were as follows (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | 134,538 |  |  | $ | 121,214 |  |  | $ | 50,306 |
State | 45,610 |  |  | 35,329 |  |  | 26,170 |
Foreign | (745) |  |  | 16,848 |  |  | 23,209 |
Total current tax provision | 179,403 |  |  | 173,391 |  |  | 99,685 |
Deferred: |  |  |  |  |
Federal | (46,251) |  |  | 7,379 |  |  | 62,482 |
State | (3,850) |  |  | (1,776) |  |  | (4,152) |
Foreign | (9,915) |  |  | (13,522) |  |  | 3,644 |
Total deferred tax provision (benefit) | (60,016) |  |  | (7,919) |  |  | 61,974 |
Total provision for income taxes | $ | 119,387 |  |  | $ | 165,472 |  |  | $ | 161,659 |
The actual income tax provision differed from the income tax provision computed by applying the U.S. federal statutory corporate rate to income before provision for income taxes as follows (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Provision at the statutory rate | $ | 119,983 |  |  | $ | 120,180 |  |  | $ | 96,110 |
Increases (decreases) resulting from — |  |  |  |  |
State taxes | 31,791 |  |  | 23,399 |  |  | 18,504 |
Employee per diems, meals and entertainment | 10,680 |  |  | 13,817 |  |  | 11,949 |
Valuation allowance on deferred tax assets | (31,138) |  |  | 35,761 |  |  | 48,862 |
Foreign taxes | (9,641) |  |  | (21,565) |  |  | (2,621) |
Stock-based compensation | (3,109) |  |  | (1,863) |  |  | (1,449) |
Contingency reserves, net | (2,125) |  |  | (3,173) |  |  | (2,619) |
Taxes on unincorporated joint ventures | (1,093) |  |  | (930) |  |  | (578) |
Tax Cuts and Jobs Act | — |  |  | — |  |  | (6,295) |
Entity restructuring and recapitalization efforts | — |  |  | — |  |  | (4,424) |
Other | 4,039 |  |  | (154) |  |  | 4,220 |
Total provision for income taxes | $ | 119,387 |  |  | $ | 165,472 |  |  | $ | 161,659 |
Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and tax purposes. The tax effects of these temporary differences, representing deferred tax assets and liabilities, result principally from the following (in thousands):
| December 31,
| 2020 |  | 2019
Deferred income tax liabilities: |  |  |
Property and equipment | $ | (236,256) |  |  | $ | (208,751) |
Goodwill | (85,467) |  |  | (72,244) |
Leased assets | (77,344) |  |  | (73,861) |
Customer holdbacks | (30,457) |  |  | (11,882) |
Other intangibles | (4,438) |  |  | (11,384) |
Other book/tax accounting method differences | — |  |  | (1,801) |
Total deferred income tax liabilities | (433,962) |  |  | (379,923) |
Deferred income tax assets: |  |  |
Net operating loss carryforwards | 82,817 |  |  | 78,310 |
Lease liabilities | 76,826 |  |  | 74,044 |
Accruals and reserves | 70,335 |  |  | 36,372 |
Tax credits | 42,202 |  |  | 46,621 |
Stock and incentive compensation | 36,590 |  |  | 26,045 |
Deferred tax benefits on unrecognized tax positions | 10,108 |  |  | 16,542 |
Other | 9,617 |  |  | 3,933 |
Subtotal | 328,495 |  |  | 281,867 |
Valuation allowance | (43,255) |  |  | (104,178) |
Total deferred income tax assets | 285,240 |  |  | 177,689 |
Total net deferred income tax liabilities | $ | (148,722) |  |  | $ | (202,234) |
The net deferred income tax assets and liabilities were comprised of the following in the accompanying consolidated balance sheets (in thousands):
| December 31,
| 2020 |  | 2019
Deferred income taxes: |  |  |
Assets | $ | 17,685 |  |  | $ | 12,545 |
Liabilities | $ | (166,407) |  |  | (214,779) |
Total net deferred income tax liabilities | $ | (148,722) |  |  | $ | (202,234) |
The valuation allowances for deferred income tax assets at December 31, 2020, 2019 and 2018 were $43.3 million, $104.2 million and $67.6 million. These valuation allowances relate to state and foreign net operating loss carryforwards and foreign tax credits. The net changes in the total valuation allowance for each of the years ended December 31, 2020, 2019 and 2018 were a decrease of $60.9 million, an increase of $36.6 million and an increase of $48.3 million. The valuation allowances were established primarily as a result of uncertainty in Quanta’s outlook as to the amount and character of future taxable income in particular tax jurisdictions. Quanta believes it is more likely than not that it will realize the benefit of its deferred tax assets net of existing valuation allowances. At December 31, 2020, Quanta had state and foreign net operating loss carryforwards, the tax effect of which was $88.1 million. These carryforwards will expire as follows: 2021, $0.5 million; 2022, $0.2 million; 2023, $3.2 million; 2024, $1.0 million; 2025, $7.4 million; and $75.8 million thereafter. A valuation allowance of $42.3 million has been recorded against certain foreign and state net operating loss carryforwards. Quanta generally does not provide for taxes related to undistributed earnings of its foreign subsidiaries because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. Quanta could also be subject to additional foreign withholding taxes if it were to repatriate cash that is indefinitely reinvested outside the United States, but it does not expect such amount to be material. A reconciliation of unrecognized tax benefit balances is as follows (in thousands):
| December 31,
| 2020 |  | 2019 |  | 2018
Balance at beginning of year | $ | 40,878 |  |  | $ | 41,110 |  |  | $ | 36,229 |
Additions based on tax positions related to the current year | 4,398 |  |  | 7,708 |  |  | 6,231 |
Additions for tax positions of prior years | — |  |  | 1,200 |  |  | 9,377 |
Reductions for tax positions of prior years | (2,410) |  |  | — |  |  | (2,870) |
Reductions for audit settlements | (930) |  |  | (3,205) |  |  | — |
Reductions resulting from a lapse of the applicable statute of limitations periods | (8,717) |  |  | (5,935) |  |  | (7,857) |
Balance at end of year | $ | 33,219 |  |  | $ | 40,878 |  |  | $ | 41,110 |
For the year ended December 31, 2020, the $12.1 million of aggregate reductions were primarily due to the favorable settlement of U.S. and Canadian tax audits and the expiration of U.S. federal and state statutes of limitations. For the year ended December 31, 2019, the $9.1 million of aggregate reductions were primarily due to the favorable settlement of certain non-U.S. income tax obligations of an acquired business and the expiration of U.S. state income tax statutes of limitations. For the year ended December 31, 2018, the $7.9 million reduction was primarily due to the expiration of certain federal and state statutes of limitations. The balances of unrecognized tax benefits, the amount of related interest and penalties and what Quanta believes to be the range of reasonably possible changes in the next 12 months are as follows (in thousands):
| December 31,
| 2020 |  | 2019 |  | 2018
Unrecognized tax benefits | $ | 33,219 |  |  | $ | 40,878 |  |  | $ | 41,110 |
Portion that, if recognized, would reduce tax expense and effective tax rate | 30,868 |  |  | 40,695 |  |  | 40,977 |
Accrued interest on unrecognized tax benefits | 5,204 |  |  | 6,240 |  |  | 5,459 |
Accrued penalties on unrecognized tax benefits | 14 |  |  | 14 |  |  | 631 |
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months | $0 to $11,859 |  | $0 to $6,268 |  | $0 to $9,541
Portion that, if recognized, would reduce tax expense and effective tax rate | $0 to $10,217 |  | $0 to $5,693 |  | $0 to $8,224
Quanta classifies interest and penalties within the provision for income taxes. Quanta recognized interest income of $0.7 million, interest expense of $0.8 million and interest expense of $0.1 million in the provision for income taxes for the years ended December 31, 2020, 2019 and 2018. Quanta and certain subsidiaries remain under examination by various U.S. state and Canadian and other foreign tax authorities for multiple periods. Quanta does not consider any state in which it does business to be a major tax jurisdiction.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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