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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
1 4. | 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 was not 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 jurisdictions 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 Internal Revenue Code. The termination of the “S” Corporation status was treated as a change in tax status for Accounting Standards Codification 740, Income Taxes. These rules require that the deferred tax effects of a change in tax status to be recorded to income from continuing operations on the date the “S” Corporation status terminates. 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 December 31, 2019 consolidated financial statements. Income tax expense decreased in fiscal 2019 primarily due to a tax benefit recorded for the revaluation of our deferred tax assets and liabilities as a result of our conversion from “S” Corporation to a “C” Corporation. Going forward, the effective tax rate will increase, and net income will decrease 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. 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 The TCJA also repealed the deduction for domestic production activities, limited the deductibility of certain executive compensation, and implemented a modified territorial tax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, did 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 December 31, 2019. 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 following table presents the components of our income from continuing operations before income taxes (in thousands):
|  | 2017 |  |  | 2018 |  |  | 2019 |
United States earnings |  | $ | 85,913 |  |  | $ | 205,418 |  |  | $ | 6,762 |
Foreign earnings |  |  | 47,088 |  |  |  | 54,385 |  |  |  | 60,480 |
|  | $ | 133,001 |  |  | $ | 259,803 |  |  | $ | 67,242 |
The income tax expense (benefit) attributable to income from continuing operations for the years ended December 29, 2017, December 31, 2018 and December 31, 2019 consists of the following (in thousands):
|  | 2017 |  |  | 2018 |  |  | 2019 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |  |  | $ | 22,865 |
State |  |  | 1,579 |  |  |  | 1,536 |  |  | $ | 10,428 |
Foreign |  |  | 14,482 |  |  |  | 20,253 |  |  |  | 20,159 |
Total current income tax expense |  |  | 16,061 |  |  |  | 21,789 |  |  |  | 53,452 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |  |  |  | (97,299 | )
State |  |  | (569 | ) |  |  | 2,329 |  |  |  | (27,432 | )
Foreign |  |  | 5,972 |  |  |  | (3,751 | ) |  |  | 1,393 |
Total deferred tax expense (benefit) |  |  | 5,403 |  |  |  | (1,422 | ) |  |  | (123,338 | )
Total income tax expense (benefit) |  | $ | 21,464 |  |  | $ | 20,367 |  |  | $ | (69,886 | )
Income tax expense (benefit) was different from the amount computed by applying the United States federal statutory rate to pre-tax income from continuing operations as a result of the following (in thousands):
|  | 2017 |  |  | 2018 |  |  | 2019 |
Income before income tax expense (benefit) |  | $ | 133,001 |  |  |  |  |  |  | $ | 259,803 |  |  |  |  |  |  | $ | 67,242 |  |  |  |  |
Tax at federal statutory tax rate |  |  | 46,550 |  |  |  | 35 | % |  |  | 54,559 |  |  |  | 21 | % |  |  | 14,121 |  |  |  | 21 | %
S- corporation exclusion |  |  | (25,109 | ) |  |  | (19 | )% |  |  | (39,539 | ) |  |  | (15 | )% |  |  | (4,875 | ) |  |  | (7 | )%
State taxes, net of federal tax benefit |  |  | 1,010 |  |  |  | 1 | % |  |  | 3,865 |  |  |  | 1 | % |  |  | 3,223 |  |  |  | 5 | %
Change in tax status |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (93,878 | ) |  |  | (140 | )%
Change in valuation allowance |  |  | 1,438 |  |  |  | 1 | % |  |  | (2,215 | ) |  |  | (1 | )% |  |  | 4,502 |  |  |  | 7 | %
Change in uncertain tax positions |  |  | (34 | ) |  |  | 0 | % |  |  | 629 |  |  |  | 0 | % |  |  | 4,118 |  |  |  | 6 | %
Foreign tax rate differential |  |  | (907 | ) |  |  | (1 | )% |  |  | 4,168 |  |  |  | 2 | % |  |  | 4,886 |  |  |  | 7 | %
Foreign tax credits |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,313 | ) |  |  | (2 | )%
Transaction costs |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,052 |  |  |  | 1 | %
Other permanent items, net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,182 |  |  |  | 2 | %
Noncontrolling interests |  |  | (4,960 | ) |  |  | (4 | )% |  |  | (3,599 | ) |  |  | (1 | )% |  |  | (2,282 | ) |  |  | (3 | )%
Other, net |  |  | 3,476 |  |  |  | 3 | % |  |  | 2,499 |  |  |  | 1 | % |  |  | (622 | ) |  |  | (1 | )%
Total income tax expense (benefit) |  | $ | 21,464 |  |  |  | 16 | % |  | $ | 20,367 |  |  |  | 8 | % |  | $ | (69,886 | ) |  |  | (104 | )%
The effective tax rate in 2019 decreased to (104%) from 8% in 2018. During fiscal 2019, the Company recorded $93.9 million of deferred tax benefit related to the remeasurement of its U.S. deferred tax assets and liabilities due to the change in tax status from an S Corporation to a C Corporation. This is subject to change based upon additional analysis performed with the filing of the return. The $93.9 million was recorded net of a $6.3 million charge for a valuation allowance primarily related to foreign tax credits. This tax benefit was partially offset by the impact in the percentage of pre-tax earnings subject to taxation as a result of our conversion from “S” Corporation to a “C” Corporation. The effective tax rate for the year ended December 31, 2019 differs from the federal statutory tax rate primarily due to the impact of the change in tax status from “S” Corporation to “C” Corporation, change in uncertain tax positions, jurisdictional mix of income, and change in valuation allowance. The effective tax rate for 2017 and 2018 differs from the federal statutory rate primarily as a result of the “S” Corporation status. The components of deferred tax assets and liabilities consists of the following at December 31, 2018 and December 31, 2019 (in thousands):
|  | 2018 |  |  | 2019 |
Deferred tax assets |  |  |  |  |  |  |  |
Project and non-project reserves |  | $ | 2,326 |  |  | $ | 34,225 |
Employee compensation and benefits |  |  | 1,609 |  |  |  | 59,624 |
Revenue and cost recognition |  |  | — |  |  |  | 33,588 |
Insurance accruals |  |  | 962 |  |  |  | 19,204 |
Net operating losses |  |  | 14,855 |  |  |  | 16,400 |
Lease liabilities |  |  | 205 |  |  |  | 68,447 |
Tax credit carryforwards |  |  | 377 |  |  |  | 8,969 |
Other |  |  | 2,240 |  |  |  | 3,318 |
Valuation allowance |  |  | (6,668 | ) |  |  | (17,358 | )
Total deferred tax assets |  |  | 15,906 |  |  |  | 226,417 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Intangible assets |  |  | (2,529 | ) |  |  | (29,543 | )
Right of use assets |  |  | — |  |  |  | (63,032 | )
Revenue and cost recognition |  |  | (10,570 | ) |  |  | — |
Other |  |  | (3,367 | ) |  |  | (13,063 | )
Total deferred tax liabilities |  |  | (16,466 | ) |  |  | (105,638 | )
Net deferred tax (liability) asset |  | $ | (560 | ) |  | $ | 120,779 |
The Company assesses the realizability of its deferred tax assets each reporting period through an analysis of potential sources of taxable income, including prior year taxable income available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine if valuation allowance against deferred tax assets are required. A valuation allowance is recorded against deferred tax assets to reflect the amount of deferred tax assets that is determined to be more-likely-than-not to be realized. The tax cost, net of applicable credits, have been provided on the undistributed earnings of the Company’s foreign subsidiaries. The Company does not assert any earnings to be permanently reinvested. As of December 31, 2018, and December 31, 2019, the Company’s valuation allowance against deferred tax assets is $6.7 million and $17.4 million, respectively. This valuation allowance represents the portion of deferred tax assets primarily related to foreign net operating loss carryforwards, foreign tax credit carryforwards and capital loss carryforwards for which the Company has determined are not more-likely-than-not to be realized. From December 31, 2018 to December 31, 2019, the Company’s valuation allowance increased by $10.7 million. Of this increase, $8.1 million relates to deferred tax assets recorded for foreign tax credit carryforwards. Due to the change in tax status, the Company determined it was more beneficial to claim foreign tax credits than foreign tax deductions. However, the valuation allowance is generated because the Company does not and will not have sufficient foreign source income to support the foreign tax credit carryforwards. As of December 31, 2019, the Company had net operating loss carryforwards (“NOLs”) of $29.7 million, $28.2 million, and $41.5 million for U.S. Federal, U.S. states, and foreign jurisdictions, respectively. The utilization of the U.S. federal and U.S. state NOLs are subject to certain annual limitations. Of these amounts, $29.7 million, $26.6 million and $35.5 million in U.S. federal, U.S. states and foreign jurisdictions, respectively, do not expire. The remaining amounts of NOLs in U.S. states and in foreign jurisdictions will expire if not used between 2020 and 2040. As of December 31, 2019, the Company has foreign tax credit carryforwards of $8.5 million. The Company has provided a valuation allowance of $8.5 million as the Company considers that these credits will not be realized. These foreign tax credits start expiring in the year 2029. The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. The Company is subject to examination by tax authorities in several jurisdictions, including major jurisdictions such as Canada, Mexico, Qatar, Saudi Arabia and the United States. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands):
|  | 2017 |  |  | 2018 |  |  | 2019 |
Beginning of year |  | $ | 7,827 |  |  | $ | 7,137 |  |  | $ | 7,845 |
Increases—current year tax positions |  |  | 1,134 |  |  |  | 1,094 |  |  |  | 7,531 |
Increases—prior year tax positions |  |  | 319 |  |  |  | 1,301 |  |  |  | 1,379 |
Decreases—prior year tax positions |  |  | (1,629 | ) |  |  | (1,656 | ) |  |  | (991 | )
Settlements |  |  | (361 | ) |  |  | — |  |  |  | (124 | )
Lapse of statute of limitations |  |  | (153 | ) |  |  | (31 | ) |  |  | (114 | )
End of year |  | $ | 7,137 |  |  | $ | 7,845 |  |  | $ | 15,526 |
At December 31, 2018, and December 31, 2019, there are $9.9 million and $13.9 million of unrecognized tax benefits that if recognized would affect the effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as part of its income tax expense. During the years ended December 31, 2018 and December 31, 2019, the Company recognized approximately $0.1 million and $1.3 million, respectively, in interest and penalties. The amount of interest and penalties accrued was $1.9 million, $2.0 million, and $3.4 million for 2017, 2018, and 2019, respectively. As of December 31, 2019, the Company’s U.S. federal income tax returns for tax years 2016 and forward remain subject to examination. U.S. states and foreign income tax returns remain subject to examination based on varying local statutes of limitations. The Company does not anticipate a material change within twelve months as a result of concluding various tax audits and closing tax years. Although the Company believes its reserves for its tax positions are reasonable, the final outcome of tax examination could be materially different, both favorably and unfavorably. It is reasonably possible that these examinations may conclude in the next 12 months and that the unrecognized tax benefits the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. However, it is not currently possible to estimate the amount, if any, of such change.

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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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