XML 66 R24.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
1 5. | Income Taxes
The components of income before provision for income taxes consisted of the following (dollars in thousands):
|  | Year Ended December 31, |
|  |  | 2019 |  |  |  | 2018 |  |  |  | 2017 |
Domestic |  | $ | 839,899 |  |  | $ | 807,590 |  |  | $ | 575,222 |
Foreign |  |  | 521,446 |  |  |  | 571,416 |  |  |  | 596,111 |
|  | $ | 1,361,345 |  |  | $ | 1,379,006 |  |  | $ | 1,171,333 |
Our tax provision (benefit) consisted of the following (dollars in thousands):
|  | Year Ended December 31, |
|  |  | 2019 |  |  |  | 2018 |  |  |  | 2017 |
Federal: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | (51,980 | ) |  | $ | 166,024 |  |  | $ | 275,475 |
Deferred |  |  | (74,432 | ) |  |  | (7,667 | ) |  |  | 39,045 |
|  |  | (126,412 | ) |  |  | 158,357 |  |  |  | 314,520 |
State: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 52,403 |  |  |  | 43,320 |  |  |  | 21,212 |
Deferred |  |  | (5,760 | ) |  |  | (3,692 | ) |  |  | 5,573 |
|  |  | 46,643 |  |  |  | 39,628 |  |  |  | 26,785 |
Foreign: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 163,833 |  |  |  | 149,194 |  |  |  | 123,840 |
Deferred |  |  | (14,169 | ) |  |  | (34,121 | ) |  |  | 2,612 |
|  |  | 149,664 |  |  |  | 115,073 |  |  |  | 126,452 |
|  | $ | 69,895 |  |  | $ | 313,058 |  |  | $ | 467,757 |
The following is a reconciliation stated as a percentage of pre-tax income of the U.S. statutory federal income tax rate to our effective tax rate:
|  | Year Ended December 31, |
|  |  | 2019 |  |  |  | 2018 |  |  |  | 2017 |
Federal statutory tax rate |  |  | 21 | % |  |  | 21 | % |  |  | 35 | %
Foreign rate differential |  |  | 4 |  |  |  | — |  |  |  | (5 | )
State taxes, net of federal benefit |  |  | 3 |  |  |  | 3 |  |  |  | 2 |
Non-deductible expenses |  |  | 1 |  |  |  | 2 |  |  |  | 2 |
Reserves for uncertain tax positions |  |  | 1 |  |  |  | — |  |  |  | (2 | )
Credits and exemptions |  |  | (4 | ) |  |  | (2 | ) |  |  | (3 | )
Outside basis differences recognized as a result of a legal entity restructuring |  |  | (20 | ) |  |  | — |  |  |  | — |
Tax Reform |  |  | — |  |  |  | 1 |  |  |  | 12 |
Change in valuation allowance |  |  | — |  |  |  | (1 | ) |  |  | (2 | )
Acquisition-related costs |  |  | — |  |  |  | (2 | ) |  |  | — |
Other |  |  | (1 | ) |  |  | 1 |  |  |  | 1 |
Effective tax rate |  |  | 5 | % |  |  | 23 | % |  |  | 40 | %
In the fourth quarter of 2019, we recognized a net tax benefit of approximately $277.2 million attributable to outside basis differences recognized as a result of a legal entity restructuring. The recognition of the outside tax basis differences generated a capital loss that will offset capital gains generated during 2019. In addition, a portion of the capital loss will be carried back to tax years 2016, 2017 and 2018 to offset capital gains in those years. The remaining capital loss will be carried forward and will be available to offset future capital gains. Based on our strong history of capital gains in the prior three years and the nature of our business we expect to generate sufficient capital gains in the five year carry forward period and therefore concluded that it is more likely than not that we will realize the full tax benefit from the capital loss carried forward. Accordingly, we have not provided any valuation allowance against the deferred tax asset for the capital loss carried forward. On December 22, 2017, the Tax Act was signed into law making significant changes to the IRC, including a decrease to the U.S. corporate tax rate from 35% to 21% and a one-time transition tax (i.e. toll charge, or the Transition Tax) on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. We recorded a provisional amount for our one-time Transition Tax liability of $158.0 million for the year ended December 31, 2017, which represented our estimate of the U.S. federal and state tax impact of the Transition Tax, partially offset by a net income tax benefit of $14.6 million related to the re-measurement of U.S. federal deferred tax assets and liabilities. Our provision for income taxes for 2018 included a net expense true-up of $13.3 million associated with the Tax Act. As required, we paid the full state tax liability for the Transition Tax in 2018. We are paying the federal tax liability for the Transition Tax in annual interest-free installments over a period of eight years through 2025 as allowed by the Tax Act. As of December 31, 2019, remaining amounts due for the Transition Tax (including a 2019 true-up of the Transaction Tax liability) include the third installment due in 2020 of $14.2 million, which is included within income taxes payable, and the remaining payable of $93.6 million, which is included within non-current income taxes payable in the accompanying consolidated balance sheets. Cumulative tax effects of temporary differences are shown below at December 31, 2019 and 2018 (dollars in thousands):
|  | December 31, |
|  |  | 2019 |  |  |  | 2018 |
Asset (Liability) |  |  |  |  |  |  |  |
Tax losses and tax credits |  | $ | 330,839 |  |  | $ | 275,574 |
Operating lease liabilities |  |  | 320,261 |  |  |  | — |
Bonus and deferred compensation |  |  | 280,747 |  |  |  | 276,572 |
Bad debt and other reserves |  |  | 66,504 |  |  |  | 57,506 |
Pension obligation |  |  | 24,022 |  |  |  | 22,950 |
Investments |  |  | 5,236 |  |  |  | 5,211 |
Tax effect on revenue items related to Topic 606 adoption |  |  | (25,620 | ) |  |  | (38,510 | )
Property and equipment |  |  | (54,370 | ) |  |  | (49,935 | )
Unconsolidated affiliates and partnerships |  |  | (63,594 | ) |  |  | (64,448 | )
Capitalized costs and intangibles |  |  | (277,246 | ) |  |  | (289,674 | )
Operating lease assets |  |  | (314,433 | ) |  |  | — |
All other |  |  | (1,153 | ) |  |  | (2,457 | )
Net deferred tax assets before valuation allowance |  |  | 291,193 |  |  |  | 192,789 |
Valuation allowance |  |  | (251,922 | ) |  |  | (248,511 | )
Net deferred tax assets (liabilities) |  | $ | 39,271 |  |  | $ | (55,722 | )
In the first quarter of 2019 we adopted new lease accounting guidance (see Note 3). As a result of such adoption, we recorded deferred tax assets of $320.3 million and deferred tax liabilities of $314.4 million for book tax basis differences in the operating lease liabilities and operating lease assets, respectively. As of December 31, 2019, we had a U.S. federal capital loss carryforward, net of related reserves for uncertain tax positions, of approximately $327.9 million, translating to a net deferred tax asset before valuation allowance of $64.9 million, which will expire after the five-year carryforward period. As of December 31, 2019, we had U.S. federal net operating losses (NOLs), net of related reserves for uncertain tax positions, of approximately $32.2 million, translating to a net deferred tax asset before valuation allowance of $6.8 million, which will begin to expire in 2023. As of December 31, 2019, there were also deferred tax assets before valuation allowances of approximately $3.5 million related to state NOLs as well as $255.9 million related to foreign NOLs. The state and foreign NOLs both begin to expire in 2020, but the majority carry forward indefinitely. The utilization of NOLs may be subject to certain limitations under U.S. federal, state and foreign laws. We have recorded a full valuation allowance for NOLs that we believe will not be fully utilized. We determined that as of December 31, 2019, $251.9 million of deferred tax assets do not satisfy the realization criteria set forth in Topic 740. Accordingly, a valuation allowance has been recorded for this amount. If released, the entire amount would result in a benefit to continuing operations. During the year ended December 31, 2019, our valuation allowance increased by approximately $3.4 million. The change in the valuation allowance was driven by an increase in the valuation allowance of $7.9 million associated with NOLs generated by our operations in Luxembourg and Norway and was partially offset by a decrease of $4.5 million due to tax rate changes, currency translation adjustments and utilization of foreign NOLs that had full valuation allowances. We believe it is more likely than not that future operations will generate sufficient taxable income to realize the benefit of the deferred tax assets recorded net of these valuation allowances. Our foreign subsidiaries have accumulated $2.6 billion of undistributed earnings for which we have not recorded a deferred tax liability. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the Transition Tax, in connection with the enactment of the Tax Act, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. While federal and state current income tax expense have been recognized as a result of the Tax Act, we have not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional local taxes. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted is not practicable. The total amount of gross unrecognized tax benefits was approximately $141.2 million and $95.0 million as of December 31, 2019 and 2018, respectively. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $44.5 million ($42.7 million, net of federal benefit received from state positions) and $50.2 million ($49.2 million, net of federal benefit received from state positions) as of December 31, 2019 and 2018, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2019 and 2018 is as follows (dollars in thousands):
|  | Year Ended December 31, |
|  |  | 2019 |  |  |  | 2018 |
Beginning balance, unrecognized tax benefits |  | $ | (94,962 | ) |  | $ | (35,826 | )
Gross increases - tax positions in prior period |  |  | (22,229 | ) |  |  | (49,412 | )
Gross decreases - tax positions in prior period |  |  | 17,390 |  |  |  | — |
Gross increases - current-period tax positions |  |  | (45,262 | ) |  |  | (18,861 | )
Decreases relating to settlements |  |  | 218 |  |  |  | 4,619 |
Reductions as a result of lapse of statute of limitations |  |  | 3,680 |  |  |  | 4,531 |
Foreign exchange movement |  |  | 1 |  |  |  | (13 | )
Ending balance, unrecognized tax benefits |  | $ | (141,164 | ) |  | $ | (94,962 | )
During the year ended December 31, 2019, we released $3.7 million of gross unrecognized tax benefits primarily due to expiration of the U.S. federal statute of limitations related to the 2015 tax year. As a result, we recognized $3.2 million of income tax benefits related to decreases in tax positions and $0.5 million of income tax benefits related to interest and penalties. We believe the amount of gross unrecognized tax benefits that will be settled during the next twelve months due to filing amended returns and settling ongoing exams cannot be reasonably estimated but will not be significant. Our continuing practice is to recognize potential accrued interest and/or penalties related to income tax matters within income tax expense. During the years ended December 31, 2019, 2018 and 2017, we accrued an additional $0.3 million, $0.6 million and $1.0 million, respectively, in interest and penalties associated with uncertain tax positions. As of December 31, 2019 and 2018, we have recognized a liability for interest and penalties of $3.8 million ($3.1 million, net of related federal benefit received from interest expense) and $4.0 million ($3.5 million, net of related federal benefit received from interest expense), respectively. We conduct business globally and, as a result, one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and in multiple state, local and foreign jurisdictions. We are no longer open to assessment by the U.S. Internal Revenue Service for years prior to 2016. With limited exception, our significant state and foreign tax jurisdictions are no longer subject to audit by the various tax authorities for tax years prior to 2011.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration