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Income Taxes

12 Months Ended

Dec. 31, 2020

17. Income Taxes

On December 22, 2017, the President of the United States signed into law P.L. 115-97, commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Act”). The Act modified several provisions of the Internal Revenue Code related to corporations, including a permanent corporate income tax rate reduction from 35% to 21%, effective January 1, 2018. The Act also significantly changed U.S. international tax laws for tax years beginning after December 31, 2017, and requires a one-time mandatory deemed repatriation of all cumulative post-1986 foreign earnings & profits (“E&P”) of a U.S. Shareholder’s foreign subsidiaries, effective during 2017.

We have considered and analyzed the applicability of the global intangible low-taxed income (“GILTI”) provisions, including the GILTI high-tax exclusion final regulations issued during 2020 and its effect on our annualized effective tax rate for 2020. The effect of the GILTI inclusion on the 2020 annualized effective tax rate is not material. We have adopted the method of accounting for GILTI inclusions as a period expense and therefore have not accrued any deferred taxes in relation to this provision in the 2020 consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, includes various income and payroll tax provisions, modifications to federal net operating loss rules, business interest deduction limitations, and bonus depreciation eligibility for qualified improvement property. As a result of net operating loss carryback provision of the CARES Act and various other U.S. and foreign tax legislation changes, we recorded an income tax benefit of $11.4 million for the year ended December 31, 2020. Additionally, we received payroll tax deferrals and benefits from the employee retention tax credit.

Income from continuing operations before income taxes by geographic region was as follows:


	Year Ended December 31,
	2020		2019		2018
U.S.	$	512.4	$	427.8	$	390.3
Non-U.S.		195.2		163.7		213.8
Income from continuing operations before income taxes	$	707.6	$	591.5	$	604.1

Income taxes relating to income from continuing operations consisted of the following:


	Year Ended December 31,
	2020		2019		2018
Current:
Federal	$	(78.1)	$	23.6	$	(15.6)
State and local		7.3		4.3		(2.9)
Non-U.S.		39.2		36.8		46.9
Total current	$	(31.6)	$	64.7	$	28.4
Deferred:
Federal		165.4		67.6		85.9
State and local		22.5		24.0		20.0
Non-U.S.		6.4		0.4		—
Total deferred	$	194.3	$	92.0	$	105.9
Income taxes	$	162.7	$	156.7	$	134.3

Income taxes relating to income from continuing operations varied from the U.S. federal statutory income tax rate due to the following:


	Year Ended December 31,
	2020		2019		2018
Income taxes at federal statutory rate	$	148.6	$	124.2	$	126.9
State and local income taxes, net of federal taxes		21.9		23.6		13.8
Non-U.S. income taxed at other rates		4.6		2.8		1.9
Rate differential from NOL carryback		(21.6)		—		—
Foreign tax credit revaluation		12.3		—		—
SAB 118 benefit		—		—		(11.6)
Other		(3.1)		6.1		3.3
Income taxes	$	162.7	$	156.7	$	134.3

The components of deferred tax assets and liabilities as of December 31, 2020, and 2019 were as follows:


	December 31,
	2020		2019
Deferred Tax Assets
Accrued liabilities	$	64.6	$	49.7
Net operating loss and credit carryforwards		102.6		72.8
Leasing liabilities		596.9		577.8
Other		31.5		27.6
Total deferred tax assets		795.6		727.9
Valuation allowance		(64.2)		(45.7)
Net deferred tax assets	$	731.4	$	682.2
Deferred Tax Liabilities
Depreciation and amortization		(242.9)		(206.9)
Partnership investments		(757.4)		(569.0)
Leasing assets		(596.9)		(577.8)
Other		(7.3)		(6.4)
Total deferred tax liabilities		(1,604.5)		(1,360.1)
Net deferred tax liabilities	$	(873.1)	$	(677.9)

We are not permanently reinvested in a portion of our previously taxed unremitted foreign earnings, which may be distributed in the future. At December 31, 2020, we have accrued the appropriate amount of U.S. state income taxes and foreign withholding taxes for the unremitted foreign earnings that are not permanently reinvested. We have not provided any U.S. taxes on a total temporary difference of $308.0 million related to the excess of financial reporting basis over tax basis in our non-U.S. subsidiaries as it is our position that we are permanently reinvested for this basis difference.

At December 31, 2020, we have $484.5 million of state net operating loss carryforwards in the U.S. that expire at various dates beginning in 2021 through 2040, U.S. federal and state credit carryforwards of $4.9 million that will not expire, a U.S. foreign tax credit carryforward of $53.2 million that will expire beginning in 2027, U.K. capital loss carryforwards of $2.7 million that will not expire, Germany net operating loss carryforwards of $54.4 million that will not expire, New Zealand net operating loss carryforwards of $4.6 million that will not expire, and Italy net operating loss carryforwards of $0.1 million that will not expire. The Company used $157.4 million of state net operating loss carryforwards in the U.S. in 2020.

A valuation allowance of $0.8 million has been recorded against the state net operating loss carryforwards in the U.S., a valuation allowance of $0.4 million has been recorded against the state credit carryforwards in the U.S., and a valuation allowance of $30.2 million has been recorded against the U.S. foreign tax credit carryforward as of December 31, 2020. A valuation allowance of $18.0 million has been recorded against German net operating losses and other deferred tax assets. A valuation allowance of $14.9 million has been recorded against U.K. deferred tax assets related to buildings as of December 31, 2020.

Generally accepted accounting principles relating to uncertain income tax positions prescribe a minimum recognition threshold a tax position is required to meet before being recognized and provides guidance on the derecognition, measurement, classification, and disclosure relating to income taxes. The movement in uncertain tax positions for the years ended December 31, 2020, 2019, and 2018 were as follows:


	Year Ended December 31,
	2020		2019		2018
Uncertain tax positions — January 1	$	0.1	$	0.1	$	3.5
Gross increase — tax position in prior periods		—		—		—
Gross decrease — tax position in prior periods		—		—		(3.4)
Gross increase — current period tax position		—		—		—
Settlements		—		—		—
Lapse in statute of limitations		—		—		—
Foreign exchange		—		—		—
Uncertain tax positions — December 31	$	0.1	$	0.1	$	0.1

We have elected to include interest and penalties in our income tax expense. The total interest and penalties included within uncertain tax positions at December 31, 2020, were $0. We do not expect a significant change to the amount of uncertain tax positions within the next twelve months. Our U.S. federal returns remain open to examination for 2017 through 2019 and various U.S. state jurisdictions are open for periods ranging from 2015 through 2019. The portion of the total amount of uncertain tax positions as of December 31, 2020, that would, if recognized, impact the effective tax rate was $0.1 million.

We have classified our tax reserves as a long-term obligation on the basis that management does not expect to make payments relating to those reserves within the next twelve months.

- 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.

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