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Income Taxes | 9 Months Ended
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Sep. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
1 2. | Income Taxes
Historically, the Company had elected to be taxed under the provisions of Subchapter “S” of the Internal Revenue Code for federal tax purposes. As a result, income had not been subject to U.S. federal income taxes or state income taxes in those states where the “S” Corporation status is recognized. Therefore, previously, no provision or liability for federal or state income tax had been provided in the consolidated financial statements except for those states where the “S” Corporation status was not recognized, or where states imposed a tax on “S” Corporations. The provision for income tax in the historical periods prior to the IPO consists of these state taxes and taxes from certain foreign taxes where the Company is subject to tax. In connection with the Company’s IPO on May 8, 2019, the “S” Corporation status was terminated, and the Company is now treated as a “C” Corporation under the Code. The termination of the “S” Corporation election has had a material impact on the Company’s results of operations, financial condition, and cash flows as reflected in the June 30 and September 30, 2019 consolidated financial statements. The effective income tax rate has increased and net income has decreased as compared to the Company’s “S” Corporation tax years, since the Company is now subject to both U.S. federal and state corporate income taxes on its earnings. For US corporate income tax purposes, the Company will apportion its 2019 taxable income ratably between the “S” Corporation and “C” Corporation periods, as allowed by law. This allocation of income will effectively result in a blended income tax rate for the 2019 year, as only the C corporation earnings will be subject to both U.S. federal and state corporate income tax while the “S” Corporation earnings will be subject to tax in those states that tax “S” Corporations or do not recognize “S” Corporation status. The Company has estimated our 2019 effective tax benefit rate to be (69.69)%. The most significant item contributing to the difference between the effective rate and the statutory U.S. Federal income tax rate of 21.0% for the quarter ended September 30, 2019 is the tax impact of updating the revaluation of deferred tax assets and liabilities, resulting from the conversion from an “S” to a “C” Corporation. The termination for the “S” Corporation status has been treated as a change in tax status under Accounting Standards Codification 740, “Income Taxes”. These rules require that the deferred tax effects of a change in tax status be recorded to income from continuing operations on the date the “S” Corporation status terminates. During the quarter ended June 30, 2019 the Company recorded a discrete deferred tax benefit of $56 million for the estimated effect of the change in tax status, relating to the recognition of net deferred tax assets for temporary differences in existence on the date of conversion to a “C” Corporation. During the quarter ended September 30, 2019, the Company has updated the estimate to $85 million, representing an increase in expected benefit of $29 million. The update primarily relates to a change in the forecasted temporary differences as of the conversion, changes in deferred tax assets resulting from 2018 tax return-to-provision adjustments, and changes in tax accounting methods that were made with the 2018 tax return during the third quarter. This amount is subject to additional revision based upon actual results for the current year. The $29 million increase was recorded as a discrete tax benefit in the three months ended September 30, 2019. The US government enacted comprehensive tax legislation on December 22, 2017, which is commonly referred to as the Tax Cuts and Jobs Act ("TCJA"). The TCJA significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The TCJA also repealed the deduction for domestic production activities, limited the deductibility of certain executive compensation, and implemented a modified territorial tax system with the introduction of the Global Intangible Low-Taxed Income (“GILTI”) tax rules. The TCJA also imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries. As a Subchapter “S” corporation the TCJA had a limited effect on the Company’s 2018 effective tax rate. The Company calculated that as a “C” corporation in 2019, the provisions of TCJA, except for the statutory rate, will not have a material impact on the income tax provision. Under GAAP, the Company is allowed to make an accounting policy election of either: (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost ” method); or (ii) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred” method). For taxable income inclusions due to the GILTI tax rules, the Company has elected the period cost method and has included the impact in the estimated annual effective tax rate as of September 30, 2019. As of September 30, 2019, the Company’s deferred tax assets included a valuation allowance of $18.1 million primarily related to foreign net operating loss carryforwards, foreign tax credit carryforwards, and capital losses that the Company determined are not more likely than not to be realized. The factors used to assess the likelihood of realization were the past performance of the related entities, forecasts of future taxable income, future reversals of existing taxable temporary differences, and available tax planning strategies that could be implemented to realize the deferred tax assets. The ability or failure to achieve the forecasted taxable income in these entities could affect the ultimate realization of deferred tax assets. As of December 31,2018 and September 30, 2019, the liability for income taxes associated with uncertain tax positions was $9.9 million and $14.6 million, respectively. Management believes it is unlikely that the liability for unrecognized tax benefits related to existing matters would increase or decrease within the next 12 months by a material amount. The Company is routinely subject to tax audit in several jurisdictions. Although adjustments could result from these audits, the Company is not aware of any issue that would materially change the liability for uncertain tax positions.

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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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