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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 10 — INCOME TAXES The Company recognizes deferred income tax assets, net of applicable reserves, related to net operating losses, tax credit carryforwards and certain temporary differences. The Company recognizes future tax benefits to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. Income (loss) before income taxes for domestic and foreign operations consisted of the following:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (In thousands) |
Domestic operations |  | $ | 2,717,756 |  |  | $ | 660,832 |  |  | $ | 747,090 |
Foreign operations |  |  | 128,969 |  |  |  | (26,826 | ) |  |  | 213,700 |
|  | $ | 2,846,725 |  |  | $ | 634,006 |  |  | $ | 960,790 |
The benefit (provision) for income taxes attributable to income (loss) before income taxes is as follows:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Federal: |  | (In thousands) |
Current |  | $ | (4,928 | ) |  | $ | 11,991 |  |  | $ | (120,980 | )
Deferred (excluding separate components) |  |  | (537,993 | ) |  |  | (143,468 | ) |  |  | 204,713 |
Deferred – change in enacted rates |  |  | — |  |  |  | — |  |  |  | 987,942 |
Deferred – valuation allowance |  |  | (20,175 | ) |  |  | (19,753 | ) |  |  | 101,443 |
Other noncurrent |  |  | (5,745 | ) |  |  | 576 |  |  |  | 1,356 |
Benefit (provision) for federal income taxes |  |  | (568,841 | ) |  |  | (150,654 | ) |  |  | 1,174,474 |
State: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (22,685 | ) |  |  | (12,564 | ) |  |  | (6,798 | )
Deferred (excluding separate components) |  |  | (32,793 | ) |  |  | (12,731 | ) |  |  | (25,233 | )
Deferred – operating loss carryforward |  |  | (5,241 | ) |  |  | (29,490 | ) |  |  | 44,242 |
Deferred – valuation allowance |  |  | (191 | ) |  |  | 41,068 |  |  |  | (40,078 | )
Other noncurrent |  |  | (1,401 | ) |  |  | (1,334 | ) |  |  | (3,876 | )
Provision for state income taxes |  |  | (62,311 | ) |  |  | (15,051 | ) |  |  | (31,743 | )
Foreign: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (2,454 | ) |  |  | (2,037 | ) |  |  | (470 | )
Deferred (excluding separate components) |  |  | 44,374 |  |  |  | 63,827 |  |  |  | (40,653 | )
Deferred – operating loss carryforward |  |  | 32,915 |  |  |  | 30,574 |  |  |  | 4,688 |
Deferred – valuation allowance |  |  | (76,028 | ) |  |  | 23,229 |  |  |  | 21,098 |
Benefit (provision) for foreign income taxes |  |  | (1,193 | ) |  |  | 115,593 |  |  |  | (15,337 | )
|  | $ | (632,345 | ) |  | $ | (50,112 | ) |  | $ | 1,127,394 |
A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate is as follows:
| Year Ended December 31, |
| 2019 |  |  | 2018 |  |  | 2017 |
Federal income tax statutory rate |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
Change in enacted rates |  | — |  |  |  | — |  |  |  | (102.7 | )
Non-controlling interest |  | (0.8 | ) |  |  | (2.4 | ) |  |  | (1.5 | )
Foreign jurisdiction income/losses taxed at other than U.S. statutory rate |  | (0.5 | ) |  |  | (9.5 | ) |  |  | (9.2 | )
Repatriation of foreign earnings |  | — |  |  |  | — |  |  |  | 35.4 |
Foreign tax credit |  | — |  |  |  | — |  |  |  | (70.3 | )
Federal valuation allowance |  | 0.7 |  |  |  | 3.1 |  |  |  | (10.6 | )
Macau dividend tax |  | — |  |  |  | (6.4 | ) |  |  | 4.2 |
State taxes, net |  | 1.7 |  |  |  | 1.9 |  |  |  | 2.4 |
General business credits |  | (0.5 | ) |  |  | (2.9 | ) |  |  | (1.0 | )
Stock-based compensation |  | (0.1 | ) |  |  | (1.2 | ) |  |  | (2.1 | )
Non-deductible employee dining facility costs |  | 0.2 |  |  |  | 1.4 |  |  |  | — |
Permanent and other items |  | 0.5 |  |  |  | 2.9 |  |  |  | 3.1 |
|  | 22.2 | % |  |  | 7.9 | % |  |  | (117.3 | )%
The tax-effected components of the Company’s net deferred tax liability are as follows:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets – federal and state: |  | (In thousands) |
Bad debt reserve |  | $ | 25,085 |  |  | $ | 23,497 |
Deferred compensation |  |  | 7,918 |  |  |  | 5,950 |
Net operating loss carryforward |  |  | 19,265 |  |  |  | 23,406 |
Accruals, reserves and other |  |  | 97,590 |  |  |  | 88,139 |
Investments in unconsolidated affiliates |  |  | — |  |  |  | 83,130 |
Stock-based compensation |  |  | 18,882 |  |  |  | 20,581 |
Lease liabilities |  |  | 1,020,171 |  |  |  | — |
Long-term debt |  |  | 2,022 |  |  |  | — |
Tax credits |  |  | 2,600,142 |  |  |  | 2,926,996 |
|  |  | 3,791,075 |  |  |  | 3,171,699 |
Less: Valuation allowance |  |  | (2,469,907 | ) |  |  | (2,449,582 | )
|  |  | 1,321,168 |  |  |  | 722,117 |
Deferred tax assets – foreign: |  |  |  |  |  |  |  |
Bad debt reserve |  |  | 1,682 |  |  |  | 1,372 |
Net operating loss carryforward |  |  | 140,223 |  |  |  | 107,308 |
Accruals, reserves and other |  |  | 13,112 |  |  |  | 18,603 |
Property and equipment |  |  | 10,125 |  |  |  | 998 |
Stock-based compensation |  |  | 6,487 |  |  |  | 5,409 |
Lease liabilities |  |  | 1,213 |  |  |  | — |
|  |  | 172,842 |  |  |  | 133,690 |
Less: Valuation allowance |  |  | (104,149 | ) |  |  | (28,121 | )
|  |  | 68,693 |  |  |  | 105,569 |
Total deferred tax assets |  | $ | 1,389,861 |  |  | $ | 827,686 |
Deferred tax liabilities – federal and state: |  |  |  |  |  |  |  |
Property and equipment |  | $ | (1,599,948 | ) |  | $ | (1,729,786 | )
Investments in unconsolidated affiliates |  |  | (496,501 | ) |  |  | — |
ROU assets |  |  | (977,870 | ) |  |  | — |
Long-term debt |  |  | — |  |  |  | (3,141 | )
Intangibles |  |  | (112,380 | ) |  |  | (90,758 | )
|  |  | (3,186,699 | ) |  |  | (1,823,685 | )
Deferred tax liabilities – foreign: |  |  |  |  |  |  |  |
Intangibles |  |  | (307,728 | ) |  |  | (346,539 | )
ROU Assets |  |  | (1,940 | ) |  |  | — |
|  |  | (309,668 | ) |  |  | (346,539 | )
Total deferred tax liability |  | $ | (3,496,367 | ) |  | $ | (2,170,224 | )
Net deferred tax liability |  | $ | (2,106,506 | ) |  | $ | (1,342,538 | )
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that are generally applicable to tax years beginning after December 31, 2017. The Company’s accounting for certain elements of the Tax Act was incomplete as of December 31, 2017. Consequently, the Company recorded non-cash income tax expense totaling $20 million during the measurement period in 2018, as it adjusted its valuation allowance on its foreign tax credit (FTC) carryovers to account for guidance clarifying the treatment of FTCs resulting from Global Intangible Low-Taxed Income (GILTI) and other provisions impacting FTC utilization. These measurement period adjustments increased the Company’s effective tax rate by 3% during the year ended December 31, 2018. In addition, the Company finalized its accounting for the tax treatment of indirect costs of providing certain employee fringe benefits subject to limitation under the Tax Act. This measurement period adjustment had an immaterial impact on the effective tax rate for the year ended December 31, 2018. The Company’s accounting for the impact of the Tax Act is complete. The Company has made an accounting policy decision to treat taxes due, if any, on future inclusions in U.S. taxable income under the GILTI provisions as a current period expense when incurred. Accordingly, the Company has not provided a deferred tax liability for any GILTI taxes that may result in future periods. The Company has recorded a valuation allowance of $2.47 billion on its FTC carryover of $2.6 billion as of December 31, 2019, resulting in an FTC net deferred tax asset of $133 million. The FTCs are attributable to the Macau Special Gaming Tax, which is 35% of gross gaming revenue in Macau. Because MGM Grand Paradise is presently exempt from the Macau 12% complementary tax on gaming profits, the Company believes that payment of the Macau Special Gaming Tax qualifies as a tax paid in lieu of an income tax that is creditable against U.S. taxes. While the Company generally does not expect to generate new FTC carryovers under the Tax Act, it will be able to utilize its existing FTC carryovers to the extent that it has active foreign source income during the 10-year FTC carryforward period. Such foreign source income includes the recapture, to the extent of U.S. taxable income, of overall domestic losses that totaled $87 million at December 31, 2019. The Company relies on future U.S. source operating income in assessing utilization of the overall domestic losses and, by extension, future FTC realization during the 10-year FTC carryover period. The FTC carryovers will expire if not utilized as follows: $319 million in 2022; $976 million in 2023; $773 million in 2024; $333 million in 2025; and $199 million in 2027. The Company’s assessment of the realization of its FTC deferred tax asset is based on available evidence, including assumptions concerning future U.S. operating profits and foreign source income. As a result, significant judgment is required in assessing the possible need for a valuation allowance and changes to such assumptions could result in a material change in the valuation allowance with a corresponding impact on the provision for income taxes in the period including such change. MGM Grand Paradise has been granted an exemption from the Macau 12% complementary tax on gaming profits through March 31, 2020. Absent this exemption, “Net income attributable to MGM Resorts International” would have decreased by $54 million and $43 million in 2019 and 2018, respectively, and diluted earnings per share would have decreased by $0.10 and $0.08 in 2019 and 2018, respectively. Given the Extension Agreement entered into during the first quarter, MGM Grand Paradise has applied for an extension of the gaming profits complementary tax exemption to June 26, 2022 to run concurrent with its extended sub-concession. Competitors of MGM Grand Paradise have received additional extensions of their complementary tax exemptions through June 26, 2022, which runs concurrent with the end of the term of their gaming concessions. The Company believes MGM Grand Paradise should also be entitled to such extension in order to ensure non-discriminatory treatment among gaming concessionaires and sub-concessionaires, a requirement under Macanese law. Based upon these developments, the Company during the first quarter re-measured the net deferred tax liability of MGM Grand Paradise assuming that it will receive an additional extension of its complementary tax exemption through June 26, 2022. This change in assumption resulted in a net increase in deferred tax liabilities in the amount of $35 million, due to an increase in the valuation allowance on certain net operating loss deferred tax assets partially offset by a reduction in certain intangible deferred tax liabilities, and a corresponding increase in the provision for income taxes for the year ended December 31, 2019. The Company has assumed that MGM Grand Paradise will pay the Macau 12% complementary tax on gaming profits for all periods beyond June 26, 2022 and has factored that assumption into the measurement of Macau deferred tax assets and liabilities. Non-gaming operations remain subject to the Macau complementary tax. MGM Grand Paradise had at December 31, 2019 a complementary tax net operating loss carryforward of $1.15 billion resulting from non-gaming operations that will expire if not utilized against non-gaming income in years 2020 through 2022. MGM Grand Paradise’s exemption from the 12% complementary tax on gaming profits does not apply to dividend distributions of such profits to MGM China. However, MGM Grand Paradise has had an agreement with the Macau government to settle the 12% complementary tax that would otherwise be due by its shareholder, MGM China, on distributions of its gaming profits by paying a flat annual payment (“annual fee arrangement”) regardless of the amount of distributable dividends. On March 15, 2018, MGM Grand Paradise executed an extension of the annual fee arrangement, which covers the distributions of gaming profits earned for the period of January 1, 2017 through March 31, 2020. It requires annual payments of approximately $1 million for 2017 through 2019 and a payment of approximately $300,000 for the first quarter 2020. The Company reversed, during 2018, $41 million of deferred taxes previously recorded on 2017 earnings that were not covered by an annual fee arrangement prior to the extension, resulting in a reduction in provision for income taxes for the year ended December 31, 2018, partially offset by the 2017 annual payment amount. MGM Grand Paradise has applied for an extension of the annual fee arrangement to cover distributions of gaming profits to be earned through June 26, 2022. The Company has net operating losses in certain of the states in which it operates that total $291 million as of December 31, 2019, which equates to deferred tax assets of $19 million after federal tax effect and before valuation allowance. These net operating loss carryforwards will expire if not utilized by 2030 through 2037. The Company has provided a valuation allowance of $3 million on certain of its state deferred tax assets, including the net operating losses described above. In addition, there is a valuation allowance of $102 million on certain Macau deferred tax assets, and a valuation allowance of $3 million on Hong Kong net operating losses because the Company believes these assets do not meet the “more likely than not” criteria for recognition. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows:
| Year Ended December 31, |
| (In thousands) |
Gross unrecognized tax benefits at January 1 | $ | 24,464 |  |  | $ | 18,588 |  |  | $ | 14,026 |
Gross increases - prior period tax positions |  | 8,960 |  |  |  | 5,345 |  |  |  | — |
Gross decreases - prior period tax positions |  | (1,006 | ) |  |  | (957 | ) |  |  | (2,280 | )
Gross increases - current period tax positions |  | 880 |  |  |  | 1,488 |  |  |  | 6,842 |
Gross unrecognized tax benefits at December 31 | $ | 33,298 |  |  | $ | 24,464 |  |  | $ | 18,588 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $9 million and $13 million at December 31, 2019 and 2018, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense, which were not material as of December 31, 2019, 2018 or 2017. The Company does not anticipate that the total amounts of unrecognized tax benefits at December 31, 2019 will change materially within the next twelve months. The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the income taxes paid in foreign jurisdictions are not material. As of December 31, 2019, the IRS can no longer assess tax with respect to years ended prior to 2014; however, the IRS may adjust NOLs generated in such years that were utilized in 2014. The Company’s 2014 U.S. consolidated federal income tax return is currently under examination by the IRS. As of December 31, 2019, other than adjustments resulting from the federal income tax audits discussed above, the various state and local tax jurisdictions in which the Company files tax returns can no longer assess tax with respect to years ended prior to 2014. However, such jurisdictions may adjust NOLs generated in such years that are utilized in subsequent years. The Company’s state income tax returns filed in Michigan for the tax years 2014 through 2017 are currently under examination and the Company was recently notified that the 2018 tax year will be included in the examination as well. In addition, the State of New Jersey recently opened an audit of one of the Company’s subsidiaries, Marina District Development Company, LLC, for the tax years 2015 through 2018. The examinations of the Company’s state income tax returns filed in Mississippi and New Jersey for the tax years 2014 through 2016 were completed during 2019 resulting in no material audit adjustments. No other state or local income tax returns are currently under examination.

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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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