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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | We have been organized and have operated as a REIT effective beginning with our taxable year that ended on December 31, 2014. As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic taxable REIT subsidiaries ("TRSs"), which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in other jurisdictions in which we have business operations or a taxable presence, regardless of whether assets are held or operations are conducted through subsidiaries disregarded for federal income tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized on the sale or disposition of any asset previously owned by a C corporation during a five-year period after the date we first owned the asset as a REIT asset that are attributable to "built-in gains" with respect to that asset on that date. We will also be subject to a built-in gains tax on our depreciation recapture recognized into income as a result of accounting method changes in connection with our acquisition activities. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate income tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all. On December 22, 2017, legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Legislation”) was enacted into law in the United States. The Tax Reform Legislation amended the Internal Revenue Code of 1986, as amended (the “Code”), to reduce tax rates and modify policies, credits and deductions for businesses and individuals. The following summarizes certain components of the Tax Reform Legislation and the impact such components of the Tax Reform Legislation. One of the primary components of the Tax Reform Legislation was a reduction in the United States corporate federal income tax rate from 35% to 21% for taxable years beginning after December 31, 2017. a.Deemed Repatriation Transition Tax The Tax Reform Legislation imposed a transition tax (the “Deemed Repatriation Transition Tax”) on a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits not previously subject to United States tax as of November 2, 2017 or December 31, 2017, whichever was greater (the “Undistributed E&P”) as of the last taxable year beginning before January 1, 2018. The Deemed Repatriation Transition Tax varied depending on whether the Undistributed E&P was held in liquid (as defined in the Tax Reform Legislation) or non-liquid assets. A participation deduction against the deemed repatriation resulted in a Deemed Repatriation Transition Tax on Undistributed E&P of 15.5% if held in cash and liquid assets and 8.0% if held in non-liquid assets. The Deemed Repatriation Transition Tax applied regardless of whether or not an entity had cash in its foreign subsidiaries and regardless of whether the entity actually repatriated the Undistributed E&P back to the United States. We have completed our analysis and determined that the amount of Undistributed E&P deemed repatriated under the Tax Reform Legislation in our taxable year ending December 31, 2017 was $160,000. We opted to include the full amount of Undistributed E&P in our 2017 taxable income, rather than spread it over eight years (as permitted by the Tax Reform Legislation). After applying the participation deduction, included in our REIT taxable income for 2017 was approximately $70,900 related to the deemed repatriation of Undistributed E&P. b. Global Intangible Low-Taxed Income For taxable years beginning after December 31, 2017, the Tax Reform Legislation introduced new provisions intended to prevent the erosion of the United States federal income tax base through the taxation of certain global intangible low-taxed income (“GILTI”). The GILTI provisions created a new requirement that certain income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC’s United States tax resident shareholder. Generally, GILTI is the excess of the United States shareholder’s pro rata portion of the income of its foreign subsidiaries over the net deemed tangible income return of such subsidiaries. The GILTI provisions also provide for certain deductions against the inclusion of GILTI in taxable income; however, REITs are not eligible for such deductions. Therefore, 100% of our GILTI is included in our taxable income and will increase the required minimum distribution to our stockholders. There was no GILTI included in our taxable income for the year ended December 31, 2019 and the amount included in our REIT taxable income for the year ended December 31, 2018 was $41,944. We have adopted an accounting policy such that we will recognize no deferred taxes related to basis differences resulting from GILTI. c. Interest Deduction Limitation The Tax Reform Legislation also limits, for certain entities, the deduction for net interest expense to the sum of business interest income plus 30% of adjusted taxable income (the “Interest Deduction Limitation”). Adjusted taxable income is defined in the Tax Reform Legislation similar to earnings before interest, taxes, depreciation and amortization for taxable years beginning after December 31, 2017 and before January 1, 2022, and is defined similar to earnings before interest and taxes for taxable years beginning after December 31, 2021. The Interest Deduction Limitation does not apply to taxpayers that qualify, and make an election, to be treated as an “electing real property trade or business”. As a REIT, IMI, including all of our qualified REIT subsidiaries ("QRSs"), made an election to be treated as an "electing real property trade or business" beginning in our taxable year ended December 31, 2018. As such, the interest deduction limitation does not apply to IMI or our QRSs; however, IMI will be required to utilize the alternative depreciation system for its real property. This election does not have a material impact on our consolidated financial statements. We do not generally believe our TRSs are eligible for treatment as "electing real property trades or businesses". The significant components of our deferred tax assets and deferred tax liabilities are presented below:
| December 31,
| 2019 |  | 2018
Deferred Tax Assets: |  |  |  |  |
Accrued liabilities and other adjustments(1) | $ | 53,197 |  |  | $ | 59,477 |
Net operating loss carryforwards | 99,240 |  |  | 92,952 |
Federal benefit of unrecognized tax benefits | 3,039 |  |  | 2,925 |
Valuation allowance | (60,003 | ) |  | (55,666 | )
| 95,473 |  |  | 99,688 |
Deferred Tax Liabilities: |  |  |  |  |
Other assets, principally due to differences in amortization | (177,645 | ) |  | (166,469 | )
Plant and equipment, principally due to differences in depreciation | (67,515 | ) |  | (74,147 | )
Other | (21,903 | ) |  | (26,260 | )
| (267,063 | ) |  | (266,876 | )
Net deferred tax liability | $ | (171,590 | ) |  | $ | (167,188 | )
______________________________________________________________________________
(1) | Amounts as of December 31, 2018 has been restated to reflect the impact of the Netherlands VAT liability (as discussed in Note 2.y.) which resulted in an increase in accrued liabilities and other adjustments of $4,971.
The deferred tax assets and deferred tax liabilities are presented below:
| December 31,
| 2019 |  | 2018
Noncurrent deferred tax assets (Included in Other, a component of Other assets, net) | $ | 16,538 |  |  | $ | 16,648 |
Deferred income taxes | (188,128 | ) |  | (183,836 | )
At December 31, 2019, we have federal net operating loss carryforwards of $152,743 available to reduce future federal taxable income, the majority of which expire from 2024 through 2037. Of the $152,743, we expect to utilize $39,156 and realize a federal tax benefit of $8,223. We can carry forward these net operating losses to the extent we do not utilize them in any given available year. We have state net operating loss carryforwards, which expire from 2020 through 2039, of which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $90,811, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 64%. Rollforward of the valuation allowance is as follows:
Year Ended December 31, |  | Balance at Beginning of the Year |  | Charged (Credited) to Expense |  | Other Increases/(Decreases)(1) |  | Balance at End of the Year
2019 |  | $ | 55,666 |  |  | $ | 6,211 |  |  | $ | (1,874 | ) |  | $ | 60,003 |
2018 |  | 61,756 |  |  | 3,568 |  |  | (9,658 | ) |  | 55,666 |
2017 |  | 71,359 |  |  | (4,317 | ) |  | (5,286 | ) |  | 61,756 |
_______________________________________________________________________________
(1) | Other increases and decreases in valuation allowances are primarily related to changes in foreign currency exchange rates and disposal of certain foreign subsidiaries.
The components of income (loss) from continuing operations before provision (benefit) for income taxes are:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
United States | $ | 203,225 |  |  | $ | 203,078 |  |  | $ | 162,763 |
Canada | 48,326 |  |  | 53,779 |  |  | 50,019 |
Other Foreign | 76,591 |  |  | 153,454 |  |  | (11,805 | )
| $ | 328,142 |  |  | $ | 410,311 |  |  | $ | 200,977 |
The provision (benefit) for income taxes consists of the following components:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Federal—current | $ | 7,262 |  |  | $ | 703 |  |  | $ | 16,345 |
Federal—deferred | (3,356 | ) |  | (4,162 | ) |  | (12,655 | )
State—current | 3,943 |  |  | 918 |  |  | 3,440 |
State—deferred | (1,126 | ) |  | 627 |  |  | (1,276 | )
Foreign—current | 49,350 |  |  | 45,371 |  |  | 42,532 |
Foreign—deferred | 3,858 |  |  | (704 | ) |  | (25,424 | )
Provision (Benefit) for Income Taxes | $ | 59,931 |  |  | $ | 42,753 |  |  | $ | 22,962 |
A reconciliation of total income tax expense and the amount computed by applying the current federal statutory tax rate of 21.0% to income from continuing operations before provision (benefit) for income taxes for the years ended December 31, 2019 and 2018 and the former federal statutory tax rate of 35.0% to income from continuing operations before provision (benefit) for income taxes for the year ended December 31, 2017 is as follows:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Computed "expected" tax provision | $ | 68,910 |  |  | $ | 86,165 |  |  | $ | 70,342 |
Changes in income taxes resulting from: |  |  |  |  |  |  |  |
Tax adjustment relating to REIT | (40,577 | ) |  | (35,165 | ) |  | (78,873 | )
State taxes (net of federal tax benefit) | 2,115 |  |  | 1,599 |  |  | 2,692 |
Increase (decrease) in valuation allowance (net operating losses) | 6,211 |  |  | 3,568 |  |  | (4,317 | )
Foreign repatriation | — |  |  | — |  |  | 29,476 |
U.S. Federal Rate Reduction | — |  |  | — |  |  | (4,685 | )
Reserve (reversal) accrual and audit settlements (net of federal tax benefit) | 514 |  |  | (13,985 | ) |  | (9,103 | )
Foreign tax rate differential | 8,562 |  |  | 1,031 |  |  | (9,639 | )
Disallowed foreign interest, Subpart F income, and other foreign taxes | 14,241 |  |  | 903 |  |  | 29,325 |
Other, net | (45 | ) |  | (1,363 | ) |  | (2,256 | )
Provision (Benefit) for Income Taxes | $ | 59,931 |  |  | $ | 42,753 |  |  | $ | 22,962 |
Our effective tax rates for the years ended December 31, 2019, 2018 and 2017 were 18.3%, 10.4% and 11.4%, respectively. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries and our TRSs, as well as among the jurisdictions in which we operate; (2) tax law changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize net operating losses that we generate. The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate for the year ended December 31, 2019 were the benefit derived from the dividends paid deduction of $40,577 and the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of $8,562. The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate for the year ended December 31, 2018 were the benefit derived from the dividends paid deduction of $35,165, the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of $1,031 and a discrete tax benefit of approximately $14,000 associated with the resolution of a tax matter (which was included as a component of Accrued expenses in our Consolidated Balance Sheet as of December 31, 2017). The primary reconciling items between the former federal statutory tax rate of 35.0% and our overall effective tax rate for the year ended December 31, 2017 were the benefit derived from the dividends paid deduction of $78,873, the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax benefit of $9,639, and a release of valuation allowances on certain of our foreign net operating losses of $4,317 as a result of the merger of certain of our foreign subsidiaries, partially offset by the impact of the Tax Reform Legislation of $24,791 (reflecting the impact of the Deemed Repatriation Transition Tax, partially offset by the impact of the U.S. Federal Tax Rate Reduction). As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs. Following our conversion to a REIT in 2014, we concluded that it was not our intent to reinvest our current and future undistributed earnings of our foreign subsidiaries indefinitely outside the United States. As of December 31, 2016, we concluded that it is our intent to indefinitely reinvest our current and future undistributed earnings of certain of our unconverted foreign TRSs outside the United States. We no longer provide incremental foreign withholding taxes on the retained book earnings of these unconverted foreign TRSs, which was approximately $279,700 as of December 31, 2019. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level. We continue, however, to provide for incremental foreign withholding taxes on net book over outside basis differences related to the earnings of our foreign QRSs and certain other foreign TRSs (excluding unconverted foreign TRSs). The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying Consolidated Statements of Operations. We recorded an increase of $1,780, $1,961 and $289 for gross interest and penalties for the years ended December 31, 2019, 2018 and 2017, respectively. We had $9,282 and $7,557 accrued for the payment of interest and penalties as of December 31, 2019 and 2018, respectively. A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Years |  | Tax Jurisdiction
See Below |  | United States—Federal and State
2015 to present |  | United Kingdom
2012 to present |  | Canada
The normal statute of limitations for United States federal tax purposes is three years from the date the tax return is filed; however, the statute of limitations may remain open for periods longer than three years in instances where a federal tax examination is in progress. The 2018, 2017 and 2016 tax years remain subject to examination for United States federal tax purposes as well as net operating loss carryforwards utilized in these years. We utilized net operating losses from 2002 through 2003 and 2010 through 2015 in our federal income tax returns for these tax years. The normal statute of limitations for state purposes is between three to five years. However, certain of our state statute of limitations remain open for periods longer than this when audits are in progress. We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 2019, we had $35,068 of reserves related to uncertain tax positions, of which $31,992 and $3,076 is included in other long-term liabilities and deferred income taxes, respectively, in the accompanying Consolidated Balance Sheet. As of December 31, 2018, we had $35,320 of reserves related to uncertain tax positions, of which $32,144 and $3,176 is included in other long-term liabilities and deferred income taxes, respectively, in the accompanying Consolidated Balance Sheet. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates. A rollforward of unrecognized tax benefits is as follows:
Gross tax contingencies—December 31, 2016 | $ | 59,466 |
Gross additions based on tax positions related to the current year | 4,067 |
Gross additions for tax positions of prior years | 3,368 |
Gross reductions for tax positions of prior years(1) | (2,789 | )
Lapses of statutes | (2,629 | )
Settlements | (22,950 | )
Gross tax contingencies—December 31, 2017 | 38,533 |
Gross additions based on tax positions related to the current year | 3,147 |
Gross additions for tax positions of prior years | 981 |
Gross reductions for tax positions of prior years | (2,865 | )
Lapses of statutes | (4,462 | )
Settlements | (14 | )
Gross tax contingencies—December 31, 2018 | 35,320 |
Gross additions based on tax positions related to the current year | 2,914 |
Gross additions for tax positions of prior years | 1,271 |
Gross reductions for tax positions of prior years | (299 | )
Lapses of statutes | (4,034 | )
Settlements | (104 | )
Gross tax contingencies—December 31, 2019 | $ | 35,068 |
_______________________________________________________________________________
(1) | This amount includes gross additions related to the Recall Transaction.
The reversal of these reserves of $35,068 ($32,311 net of federal tax benefit) as of December 31, 2019 will be recorded as a reduction of our income tax provision, if sustained. We believe that it is reasonably possible that an amount up to approximately $7,400 ($4,587 net of federal tax benefit) of our unrecognized tax positions may be recognized by the end of 2020 as a result of a lapse of statute of limitations or upon closing and settling significant audits in various worldwide jurisdictions.

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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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