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Income Taxes | 12 Months Ended
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Dec. 31, 2020
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 under 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, 2020 and December 31, 2019 consolidated financial statements. Income tax expense decreased in 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. The effective 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. 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, permits Net Operating Loss (“NOL“) carryovers to offset 100% of taxable income for tax years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding tax years to generate a refund of previously paid income taxes. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. The CARES Act also accelerates the refund of alternative minimum tax (“AMT”) credits that were previously accumulated. The Company does not expect that the modifications on the limitation of business interest or AMT credits would have any impact to the Company. Under the NOL carryback provision, the Company carried back some of its NOLs claiming a tax refund of $3.9 million relating to certain amounts associated with the acquisition of OGSystems which are subject to certain shareholders’ claims. On July 9, 2020, the U.S. Treasury Department issued final tax regulations related to the foreign-derived intangible income (“FDII”) and global intangible low-taxed income (“GILTI”) provisions. Also, on July 20, 2020 the U.S. Treasury Department released final tax regulations permitting a taxpayer to elect to exclude from its GILTI inclusion items of income subject to a high effective rate of foreign tax. Additionally, on August 21, 2020, the U.S. Treasury Department finalized anti-abuse regulations limiting deductions of foreign-source dividends. Separately, on September 2, 2020, the U.S. Treasury Department finalized regulations on the base erosion anti-abuse tax under IRC Section 59A. The U.S. Treasury Department also finalized a second set of regulations on the allowance for the additional first-year depreciation deduction under IRC Section 168(k) on September 16, 2020, as amended by the Tax Cuts and Jobs Act (“TCJA”), for qualified property acquired and placed in service after September 27, 2017. Further, on September 29, 2020, the U.S. Treasury Department issued final tax regulations addressing various aspects of the foreign tax credit regime. Lastly, on December 21, 2020, the U.S. Treasury Department released final regulations addressing the timing of income recognition for accrual method taxpayers under IRC Sections 451(b) and 451(c), as amended by the 2017 TCJA. The Company is currently assessing the impact of the new regulations to its consolidated financial statements but does not expect a material change of its income tax expense due to the new regulations. The following table presents the components of our income from continuing operations before income taxes (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
United States earnings |  | $ | 64,810 |  |  | $ | 6,762 |  |  | $ | 205,418 |
Foreign earnings |  |  | 96,603 |  |  |  | 60,480 |  |  |  | 54,385 |
|  | $ | 161,413 |  |  | $ | 67,242 |  |  | $ | 259,803 |
The income tax expense (benefit) attributable to income from continuing operations for the years ended December 31, 2020, December 31, 2019 and December 31, 2018 consists of the following (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 15,663 |  |  | $ | 22,865 |  |  | $ | - |
State |  |  | 9,024 |  |  |  | 10,428 |  |  |  | 1,536 |
Foreign |  |  | 16,534 |  |  |  | 20,159 |  |  |  | 20,253 |
Total current income tax expense |  |  | 41,221 |  |  |  | 53,452 |  |  |  | 21,789 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (186 | ) |  |  | (97,299 | ) |  |  | — |
State |  |  | (1,785 | ) |  |  | (27,432 | ) |  |  | 2,329 |
Foreign |  |  | 3,242 |  |  |  | 1,393 |  |  |  | (3,751 | )
Total deferred tax expense (benefit) |  |  | 1,271 |  |  |  | (123,338 | ) |  |  | (1,422 | )
Total income tax expense (benefit) |  | $ | 42,492 |  |  | $ | (69,886 | ) |  | $ | 20,367 |
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):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Income before income tax expense (benefit) |  | $ | 161,413 |  |  |  |  |  |  | $ | 67,242 |  |  |  |  |  |  | $ | 259,803 |  |  |  |  |
Tax at federal statutory tax rate |  |  | 33,897 |  |  |  | 21.0 | % |  |  | 14,121 |  |  |  | 21 | % |  |  | 54,559 |  |  |  | 21 | %
S- corporation exclusion |  |  | — |  |  |  | 0.0 | % |  |  | (4,875 | ) |  |  | (7 | )% |  |  | (39,539 | ) |  |  | (15 | )%
State taxes, net of federal tax benefit |  |  | 4,838 |  |  |  | 3.0 | % |  |  | 3,223 |  |  |  | 5 | % |  |  | 3,865 |  |  |  | 1 | %
Change in tax status |  |  | 3,897 |  |  |  | 2.4 | % |  |  | (93,878 | ) |  |  | (140 | )% |  |  | — |  |  |  | — |
Change in valuation allowance |  |  | 6,850 |  |  |  | 4.2 | % |  |  | 4,502 |  |  |  | 7 | % |  |  | (2,215 | ) |  |  | (1 | )%
Change in uncertain tax positions |  |  | 883 |  |  |  | 0.6 | % |  |  | 4,118 |  |  |  | 6 | % |  |  | 629 |  |  |  | 0 | %
Foreign tax rate differential |  |  | (128 | ) |  |  | -0.1 | % |  |  | 4,886 |  |  |  | 7 | % |  |  | 4,168 |  |  |  | 2 | %
Foreign tax credits |  |  | (47 | ) |  |  | 0.0 | % |  |  | (1,313 | ) |  |  | (2 | )% |  |  | — |  |  |  | — |
Transaction costs |  |  | 61 |  |  |  | 0.0 | % |  |  | 1,052 |  |  |  | 1 | % |  |  | — |  |  |  | — |
Noncontrolling interests |  |  | (4,280 | ) |  |  | -2.6 | % |  |  | (2,282 | ) |  |  | (3 | )% |  |  | (3,599 | ) |  |  | (1 | )%
Federal research credits |  |  | (2,206 | ) |  |  | -1.4 | % |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other, net |  |  | (1,273 | ) |  |  | -0.8 | % |  |  | 560 |  |  |  | 1 | % |  |  | 2,499 |  |  |  | 1 | %
Total income tax expense (benefit) |  | $ | 42,492 |  |  |  | 26.3 | % |  | $ | (69,886 | ) |  |  | (104 | )% |  | $ | 20,367 |  |  |  | 8 | %
The effective tax rate in 2020 increased to 26.3% from (103.9%) in 2019. The change in the effective tax rate was due primarily to the nonrecurring tax benefit items included in 2019 for 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. The effective tax rate for the year ended December 31, 2020 differs from the federal statutory tax rate primarily due to state income taxes and a recorded valuation allowance on foreign tax credits, partially offset by benefits related to income attributable to noncontrolling interest and federal research tax credits. The components of deferred tax assets and liabilities consists of the following at December 31, 2020 and December 31, 2019 (in thousands):
|  | 2020 |  |  | 2019 |
Deferred tax assets |  |  |  |  |  |  |  |
Project and non-project reserves |  | $ | 33,824 |  |  | $ | 34,225 |
Employee compensation and benefits |  |  | 61,260 |  |  |  | 59,624 |
Revenue and cost recognition |  |  | 25,312 |  |  |  | 33,588 |
Insurance accruals |  |  | 17,724 |  |  |  | 19,204 |
Net operating losses |  |  | 9,674 |  |  |  | 16,400 |
Lease liabilities |  |  | 62,994 |  |  |  | 68,447 |
Tax credit carryforwards |  |  | 15,566 |  |  |  | 8,969 |
Other |  |  | 3,296 |  |  |  | 3,318 |
Valuation allowance |  |  | (23,878 | ) |  |  | (17,358 | )
Total deferred tax assets |  |  | 205,772 |  |  |  | 226,417 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Intangible assets |  |  | (15,620 | ) |  |  | (29,543 | )
Right of use assets |  |  | (56,099 | ) |  |  | (63,032 | )
Other |  |  | (16,138 | ) |  |  | (13,063 | )
Total deferred tax liabilities |  |  | (87,857 | ) |  |  | (105,638 | )
Net deferred tax asset |  | $ | 117,915 |  |  | $ | 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 a valuation allowance against deferred tax assets is 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, has 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, 2020, and December 31, 2019, the Company’s valuation allowance against deferred tax assets is $23.9 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, 2019 to December 31, 2020, the Company’s valuation allowance increased by $6.5 million. Of this increase, $6.9 million relates to deferred tax assets recorded for foreign tax credit carryforwards offset in part by decrease in valuation allowance related to net operating loss carryforwards. 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, 2020, the Company has NOLs of $32.8 million, and $36.7 million for U.S. states and foreign jurisdictions, respectively. The utilization of the U.S. state NOLs are subject to certain annual limitations. Of these amounts, $27.0 million and $33.9 million in 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 2021 and 2041. As of December 31, 2020, the Company has foreign tax credit carryforwards of $15.5 million. The Company has provided a valuation allowance of $15.5 million as the Company considers that these credits will not be realized. These foreign tax credits start expiring in the year 2029. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Beginning of year |  | $ | 15,526 |  |  | $ | 7,845 |  |  | $ | 7,137 |
Increases—current year tax positions |  |  | 950 |  |  |  | 7,531 |  |  |  | 1,094 |
Increases—prior year tax positions |  |  | 1,951 |  |  |  | 1,379 |  |  |  | 1,301 |
Decreases—prior year tax positions |  |  | (1,366 | ) |  |  | (991 | ) |  |  | (1,656 | )
Settlements |  |  | (666 | ) |  |  | (124 | ) |  |  | — |
Lapse of statute of limitations |  |  | — |  |  |  | (114 | ) |  |  | (31 | )
End of year |  | $ | 16,395 |  |  | $ | 15,526 |  |  | $ | 7,845 |
At December 31, 2020, and December 31, 2019, there are $15.8 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, 2020, December 31, 2019, and December 31, 2018, the Company recognized approximately $1.1 million, $1.3 million, and $0.0 million in interest and penalties, respectively for each year, in the Consolidated Statements of Income. The total amount of interest and penalties accrued in the Consolidated Balance Sheets was $4.4 million, $3.4 million, and $2.0 million at December 31, 2020, December 31, 2019, and December 31, 2018, respectively. 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. As of December 31, 2020, the Company’s U.S. federal income tax returns for tax years 2017 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 estimates that, within 12 months, it may decrease its uncertain tax positions by approximately $0.3 million 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 audits could be significantly different, both favorably and unfavorably. It is reasonably possible that these audits 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://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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