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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Overview We are subject to U.S. federal, state and foreign income taxes with respect to our allocable share of any taxable income or loss of Desert Newco, as well as any stand-alone income or loss we generate. Desert Newco is treated as a partnership for U.S. income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions. Instead, Desert Newco's taxable income or loss is passed through to its members, including us. Despite its partnership treatment, Desert Newco is liable for income taxes in certain foreign jurisdictions in which it operates, in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities. We have acquired the outstanding stock of various domestic and foreign entities taxed as corporations, which are now wholly-owned by us or our subsidiaries. Where required or allowed, these subsidiaries also file and pay tax as a consolidated group for U.S. federal and state income tax purposes and internationally, primarily within the U.K., Germany and India. We anticipate this structure to remain in existence for the foreseeable future. Benefit for Income Taxes Our benefit for income taxes includes U.S. federal, state and foreign income taxes. The domestic and foreign components of our income (loss) before income taxes were as follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
U.S. | $ | (423.4) |  |  | $ | 176.4 |  |  | $ | 138.9 |
Foreign | (72.0) |  |  | (50.0) |  |  | (65.9) |
Income (loss) before income taxes | $ | (495.4) |  |  | $ | 126.4 |  |  | $ | 73.0 |
Our benefit for income taxes was as follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | (3.4) |  |  | $ | (0.7) |  |  | $ | (1.3) |
State | (1.1) |  |  | (0.6) |  |  | (0.7) |
Foreign | (19.3) |  |  | (7.8) |  |  | (10.3) |
| (23.8) |  |  | (9.1) |  |  | (12.3) |
Deferred: |  |  |  |  |
Federal | 2.9 |  |  | 4.4 |  |  | 1.4 |
State | 1.5 |  |  | 0.4 |  |  | 1.0 |
Foreign | 20.7 |  |  | 16.3 |  |  | 18.9 |
| 25.1 |  |  | 21.1 |  |  | 21.3 |
Benefit for income taxes | $ | 1.3 |  |  | $ | 12.0 |  |  | $ | 9.0 |
A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate was as follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Expected provision at U.S. federal statutory tax rate | $ | 104.0 |  |  | $ | (26.5) |  |  | $ | (15.3) |
Research and development credits | 75.0 |  |  | — |  |  | — |
State taxes, net of federal benefit | 44.9 |  |  | (1.2) |  |  | 2.1 |
Effect of investment in Desert Newco | 10.4 |  |  | 7.1 |  |  | 13.1 |
TRA liability adjustment | (5.3) |  |  | 1.7 |  |  | 0.3 |
Foreign earnings | (5.4) |  |  | 2.1 |  |  | 3.1 |
Uncertain tax positions | (5.6) |  |  | — |  |  | — |
Other | 0.9 |  |  | (4.3) |  |  | 0.9 |
Effect of changes in valuation allowances | (217.6) |  |  | 33.1 |  |  | 4.8 |
Benefit for income taxes | $ | 1.3 |  |  | $ | 12.0 |  |  | $ | 9.0 |
Our effective tax rate is driven by changes in valuation allowances based on current year earnings and the impact of foreign earnings primarily related to the U.K., Germany and India jurisdictions. Deferred Taxes The components of our deferred taxes were as follows:
| December 31,
| 2020 |  | 2019
DTAs: |  |  |
Investment in Desert Newco | $ | 1,099.5 |  |  | $ | 968.0 |
NOLs | 558.1 |  |  | 476.1 |
Credit and incentives | 77.1 |  |  | 3.0 |
Deferred interest | 26.4 |  |  | 34.1 |
Operating lease liabilities | 22.7 |  |  | 25.7 |
TRA liability | — |  |  | 24.4 |
Other | 4.7 |  |  | 5.9 |
Valuation allowance | (1,761.0) |  |  | (1,497.0) |
Total DTAs | 27.5 |  |  | 40.2 |
DTLs: |  |  |
Identified intangible assets | (101.8) |  |  | (112.8) |
Operating lease assets | (12.5) |  |  | (22.7) |
Total DTLs | (114.3) |  |  | (135.5) |
Net DTLs | $ | (86.8) |  |  | $ | (95.3) |
As a result of the organizational transactions completed prior to our initial public offering (IPO), we acquired LLC Units and recognized a DTA for the difference between the financial reporting and tax basis of our investment in Desert Newco. During 2019, the DTAs associated with our investment increased $113.7 million due to exchanges of LLC Units and stock option exercises, and we recorded additional DTAs of $94.4 million as a result of our portion of Desert Newco's tax losses. During 2020, the DTAs associated with our investment increased $130.5 million due to exchanges of LLC Units and stock option exercises, and we recorded additional DTAs of $70.0 million as a result of our portion of Desert Newco's tax losses. On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) and on December 21, 2020 enacted the Consolidated Appropriations Act, 2021, neither of which had a material impact on our benefit for income taxes. During 2020, we completed a research and development (R&D) tax credit study for the 2017, 2018 and 2019 tax years, which resulted in a total tax credit of $79.6 million. However, we do not have sufficient tax liability to utilize the majority of these tax credits; therefore, we have established tax credit carryforwards of $77.8 million. We generated additional R&D tax credits in 2020 and expect to do so on a go forward basis. In determining the need for a valuation allowance, we prepare quarterly estimates using historical and forecasted future operating results, based upon approved business plans, including a review of the eligible carryforward periods and tax planning strategies. Based primarily on the negative evidence outweighing the positive evidence as of December 31, 2020, including our three year cumulative GAAP loss, our historical tax losses and the difficulty in forecasting excess tax benefits related to equity-based compensation, we believe there is uncertainty as to when we will be able to utilize certain of our NOLs, credit carryforwards and other DTAs. Therefore, we have recorded a valuation allowance against the DTAs for which we have concluded it is more-likely-than-not they will not be realized. Should our operating results continue to improve and projections show utilization of the tax attributes, we would consider that as significant positive evidence and our future reassessment would likely result in the determination that a valuation allowance is no longer required. We believe sufficient positive evidence may arise in 2021 such that we would release substantially all of the federal and state valuation allowance. If this were to occur, it would result in a reversal of substantially all of the valuation allowance with a corresponding non-cash income tax benefit, thereby increasing the total DTAs. As of December 31, 2020, we had U.S. federal, state and foreign gross NOLs, credits and incentives, a portion of which will begin to expire in 2030, as follows:
| Gross NOLs, Credits and Incentives |  | Portion Subject to a Valuation Allowance
Federal NOLs and credits | $ | 2,112.3 |  |  | $ | 2,112.3 |
State NOLs, credits and incentives | 2,586.4 |  |  | 2,586.4 |
Foreign NOLs | 36.0 |  |  | 23.9 |
Total NOLs, credits and incentives | $ | 4,734.7 |  |  | $ | 4,722.6 |
As of December 31, 2020, we have provided income taxes on the earnings of foreign subsidiaries, except to the extent such earnings are considered indefinitely reinvested. We have determined the amount of unrecognized DTL related to these temporary differences to be immaterial. Uncertain Tax Positions Our liability for unrecognized tax benefits was as follows:
| December 31,
| 2020 |  | 2019
Balance at beginning of period | $ | 9.3 |  |  | $ | 2.1 |
Gross increases - tax positions in prior period | 24.2 |  |  | 4.5 |
Gross increases - tax positions in current period | 13.0 |  |  | 2.7 |
Current year acquisitions | 20.2 |  |  | — |
Balance at end of period | $ | 66.7 |  |  | $ | 9.3 |
The total amount of gross unrecognized tax benefits was $66.7 million as of December 31, 2020, of which $35.3 million, if fully recognized, would decrease our effective tax rate. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. No material amounts were recognized during any of the periods presented. We do not expect a significant decrease in our liability for unrecognized tax benefits in the next 12 months. We have filed all income tax returns for years through 2019, other than for Germany and the Netherlands. These returns are subject to examination by the taxing authorities in the respective jurisdictions, generally for three or four years after they were filed. Although we believe the amounts reflected in our tax returns substantially comply with applicable U.S. federal, state and foreign tax regulations, the respective taxing authorities may take contrary positions based on their interpretation of the law. A tax position successfully challenged by a taxing authority could result in an adjustment to our benefit for income taxes in the period in which a final determination is made.

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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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