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Note 22 - Income Tax
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

22.

Income tax

 

Income tax differs from the amounts that would be obtained by applying the combined statutory corporate income tax rate of Ontario, Canada to the respective year’s earnings before income tax. Differences result from the following items:

 

  

Year ended December 31,

 
  

2021

  

2020

 
         

Income tax expense using a combined statutory rate of 26.5% (2020 - 26.5%)

 $(40,292) $36,181 

Settlement of long-term incentive arrangement

  125,061   - 

Permanent differences

  2,592   2,400 

Tax effect of flow through entities

  (8,660)  (6,214)

Adjustments to tax liabilities for prior periods

  869   (246)

Effect of changes in enacted tax rate in other jurisdictions

  (76)  428 

Changes in liability for unrecognized tax benefits

  (111)  821 

Stock-based compensation

  2,891   2,085 

Foreign, state, and provincial tax rate differential

  (3,532)  (3,075)

Change in valuation allowance

  2,407   5,233 

Acquisition related costs and contingent consideration

  1,970   2,173 

Withholding taxes and other

  2,391   2,260 

Income tax expense

 $85,510  $42,046 

 

Earnings (loss) before income tax by jurisdiction comprise the following:

 

   

Year ended December 31,

  
   

2021

    

2020

  
                 

Canada

   $ (472,611 )   $ 8,257  

United States

     158,448       53,111  

Foreign

     162,116       75,167  

Total

   $ (152,047 )   $ 136,535  

 

Income tax expense (recovery) comprises the following: 

 

   

Year ended December 31,

  
   

2021

    

2020

  
                 

Current

                

Canada

   $ 3,832     $ 3,309  

United States

     63,212       19,577  

Foreign

     56,003       32,344  
      123,047       55,230  
                 

Deferred

                

Canada

     912       2,154  

United States

     (31,291 )     (9,765 )

Foreign

     (7,158 )     (5,573 )
      (37,537 )     (13,184 )
                 

Total

   $ 85,510     $ 42,046  

 

The significant components of deferred tax assets and liabilities are as follows: 

 

   

As at December 31,

  
   

2021

    

2020

  
                 
Loss carryforwards and other credits   $ 19,143     $ 18,314  

Expenses not currently deductible

     44,012       33,442  

Revenue not currently taxable

     (6,223 )     (14,076 )

Stock-based compensation

     543       526  

Investments

     21,782       10,696  

Provision for doubtful accounts

     9,078       8,308  

Financing fees

     (267 )     (325 )

Net unrealized foreign exchange losses

     442       560  

Depreciation and amortization

     (58,793 )     (57,746 )

Operating leases

     11,695       8,110  

Less: valuation allowance

     (15,281 )     (13,324 )

Net deferred tax (liabilities) assets

   $ 26,131     $ (5,515 )

 

As at December 31, 2021, the Company believes that it is more likely than not that its deferred tax assets of $68,502 will be realized based upon future income, consideration of net operating loss (“NOL”) limitations, earnings trends, and tax planning strategies. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future income are reduced.

 

The Company has pre-tax NOL carryforward balances as follows:

 

   

Pre-tax loss carryforward

    

Pre-tax losses not recognized

    

Pre-tax losses recognized

  
   

2021

    

2020

    

2021

    

2020

    

2021

    

2020

  
                                                 

Canada

   $ 4,664     $ 5,632     $ 104     $ 65     $ 4,560     $ 5,567  

United States

     1,395       3,059       926       924       469       2,135  

Foreign

     60,891       53,997       43,003       32,091       17,888       21,906  

 

The Company has pre-tax capital loss carryforwards as follows:

 

   

Pre-tax loss carryforward

    

Pre-tax losses not recognized

    

Pre-tax losses recognized

  
   

2021

    

2020

    

2021

    

2020

    

2021

    

2020

  
                                                 

Canada

   $ 1,796     $ 1,922     $ 1,796     $ 1,922     $ -     $ -  

United States

     -       1,698       -       1,698       -       -  

Foreign

     6,483       6,876       6,483       6,876       -       -  

 

These amounts above are available to reduce future, federal, state, and provincial income taxes in their respective jurisdictions. NOL carryforward balances attributable to Canada begin to expire in 2035. NOL carryforward balances attributable to the United States begin to expire in 2028. Foreign NOL carryforward balances begin to expire in 2022. The utilization of NOLs may be subject to certain limitations under federal, provincial, state or foreign tax laws.

 

Cumulative unremitted foreign earnings of US subsidiaries are $10,963 (2020 - nil). Cumulative unremitted foreign earnings of international subsidiaries (other than the US) approximated $106,830 as at December 31, 2021 (2020 - $117,897). The Company has not provided a deferred tax liability on the unremitted foreign earnings as it is management’s intent to permanently reinvest such earnings outside of Canada. In addition, any repatriation of such earnings would not be subject to significant Canadian or foreign taxes.

 

A reconciliation of the beginning and ending amounts of the liability for unrecognized tax benefits is as follows:

 

   

2021

    

2020

  

Balance, January 1

   $ 2,344     $ 1,468  

Gross increases for tax positions of prior periods

     151       908  

Amount recognized on acquisitions

     1,826       -  

Reduction for lapses in applicable statutes of limitations

     (262 )     (87 )

Foreign currency translation

     (11 )     55  

Balance, December 31

   $ 4,048     $ 2,344  

 

Of the $4,048 (2020 - $2,344) in gross unrecognized tax benefits, $4,048 (2020 - $2,344) would affect the Company’s effective tax rate if recognized. For the year-ended December 31, 2021, additional interest and penalties of $201 related to uncertain tax positions was accrued (2020 - $224). The Company reversed $69 of accrued interest and penalties related to positions lapsed in applicable statute of limitations in 2021 (2020 - $44). As of December 31, 2021, the Company had accrued $494 (2020 - $362) for potential income tax related interest and penalties.

 

Within the next twelve months, the Company believes it is reasonably possible that $43 of unrecognized tax benefits associated with uncertain tax positions may be reduced due to lapses in statutes of limitations.

 

The Company files tax returns in Canada and multiple foreign jurisdictions. The number of years with open tax audits varies depending on the tax jurisdiction. Generally, income tax returns filed with the Canada Revenue Agency and related provinces are open for four to seven years and income tax returns filed with the United States Internal Revenue Service and related states are open for three to five years. Tax returns for significant other jurisdictions in which the Company conducts business are generally open for four years. 

 

The Company does not currently expect any other material impact on earnings to result from the resolution of matters related to open taxation years, other than noted above. Actual settlements may differ from the amounts accrued. The Company has, as part of its analysis, made its current estimates based on facts and circumstances known to date and cannot predict changes in facts and circumstances that may affect its current estimates.