Income Taxes

12 Months Ended

Dec. 31, 2019

The components of earnings (loss) from continuing operations before income taxes and the provision for (benefit from) income taxes from continuing operations were as follows:



	Years ended December 31,
	2019			2018			2017
	(In thousands)
Earnings (loss) from continuing operations before income taxes:
United States	$	(44,668	)	$	371,925		$	273,033
Foreign	2,397			17,544			23,403
Total	$	(42,271	)	$	389,469		$	296,436

Provision for (benefit from) income taxes from continuing operations:
Current tax expense (benefit) from continuing operations:
Federal ⁽¹⁾	$	(1,065	)	$	(23,333	)	$	6,752
State	9,187			6,862			9,360
Foreign	5,210			10,123			6,442
	13,332			(6,348		)	22,554
Deferred tax expense (benefit) from continuing operations:
Federal	(8,228		)	113,764			(455,021		)
State	(18,790		)	1,250			7,008
Foreign	(5,313		)	(6,119		)	1,794
	(32,331		)	108,895			(446,219		)
Total	$	(18,999	)	$	102,547		$	(423,665	)

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(1) The current federal tax benefit in 2018 includes the anticipated $22 million alternative minimum tax refunds generated by the 2017 Tax Cuts and Jobs Act.

A reconciliation of the federal statutory tax rate with the effective tax rate from continuing operations follows:



	Years ended December 31,
	2019		2018		2017
	(Percentage of pre-tax earnings)
Federal statutory tax rate	21.0	%	21.0	%	35.0	%
Impact of one-time deemed repatriation	—	%	6.2	%	11.3	%
Impact on deferred taxes for changes in tax rates	20.5	%	(3.3	)%	(188.5	)%
Additional deferred tax adjustments	—	%	(1.5	)%	—	%
State income taxes, net of federal income tax benefit	(19.2	)%	3.7	%	3.3	%
Foreign rates varying from federal statutory tax rate	3.1	%	0.1	%	(4.2	)%
Tax contingencies	15.7	%	(0.9	)%	0.1	%
Tax credits	11.3	%	0.2	%	(0.1	)%
Other permanent book-tax differences	(8.6	)%	0.8	%	0.2	%
Other, net	1.1	%	—	%	—	%
Effective tax rate	44.9	%	26.3	%	(142.9	)%

Tax Reform Impact

On December 22, 2017, the 2017 Tax Cuts and Jobs Act of 2017 (2017 Tax Reform) was signed into law. The 2017 Tax Reform made broad and complex changes to the U.S. tax code which have had a significant impact on our earnings. During 2017, we recorded a $619 million benefit for the re-measurement of our net deferred tax liability and a $33 million expense for the one-time transition tax as provisional estimates. During 2018, we completed our analyses and recorded an additional $10 million benefit for the re-measurement of our net deferred tax liability and an additional $24 million expense for the transition tax.

Deferred Income Taxes

The components of the net deferred income tax liability were as follows:



	December 31,
	2019			2018
	(In thousands)
Deferred income tax assets:
Self-insurance accruals	$	94,690		$	82,118
Net operating loss carryforwards	619,314			414,144
Accrued compensation and benefits	31,402			31,627
Federal benefit on state tax positions	9,115			11,027
Pension benefits	78,004			94,433
Deferred revenue	146,383			146,831
Other accruals	21,635			19,068
	1,000,543			799,248
Valuation allowance	(17,577		)	(16,186		)
	982,966			783,062
Deferred income tax liabilities:
Property and equipment basis differences	(2,121,842		)	(1,937,009		)
Other	(5,386		)	(7,907		)
	(2,127,228		)	(1,944,916		)
Net deferred income tax liability ⁽¹⁾	$	(1,144,262	)	$	(1,161,854	)

______________


(1)	Deferred tax assets of $17 million and $18 million have been included in "Sales-type leases and other assets" as of December 31, 2019 and 2018, respectively.

As of December 31, 2019, we have undistributed earnings of foreign subsidiaries of $826 million. We have historically reinvested such earnings overseas indefinitely and will continue to reinvest future foreign earnings overseas indefinitely. With respect to the undistributed earnings as of December 31, 2019, $635 million was included in the transition tax. The determination of the amount of any additional unrecognized deferred tax liability is not practicable because of the complexities associated with the hypothetical calculations used in evaluating whether we will maintain the indefinite reinvestment assertion.

As of December 31, 2019, we had U.S. federal tax effected net operating loss carryforwards, before unrecognized tax benefits, of $547 million, of which $137 million is expected to expire beginning 2033; the remaining $410 million has an indefinite carryforward period. Various U.S. subsidiaries had state tax effected net operating loss carryforwards, before unrecognized tax benefits and valuation allowances, of $89 million that will begin to expire as follows: $7 million in 2020, $4 million in 2021, and $73 million in 2022 and thereafter; the remaining $5 million has an indefinite carryforward period. To the extent that we do not generate sufficient state taxable income within the statutory carryforward periods to utilize the loss carryforwards in these states, the loss carryforwards will expire unused. We also had foreign tax effected net operating loss carryforwards of $19 million that are available to reduce future income tax payments in several countries, subject to varying expiration rules. We assess the realizability of our deferred tax assets and record a valuation allowance to the extent it is determined that they are not more-likely-than-not to be realized. Due to our assessment of future sources of taxable income in various states and foreign jurisdictions as of December 31, 2019 and the near-term expiration of certain net operating carryforwards, we recorded a valuation allowance of $18 million against our deferred tax assets. The valuation allowance is subject to change in future years based on the availability of future sources of taxable income to offset the net operating loss carryforwards.

During 2018, we determined that certain deferred tax assets had been undervalued in prior periods. As the amounts were not material to our consolidated financial statements in any individual period, and the cumulative amount is not material to 2018 results, we recognized a one-time $6 million benefit in our provision for income taxes related to the correction of this error.

Uncertain Tax Positions

In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes these open tax years by jurisdiction:




Jurisdiction		Open Tax Year

United States (Federal)		2009 - 2011, 2013 - 2019
Canada		2012 - 2019
Mexico		2014 - 2019
United Kingdom		2018 - 2019
Brazil (in discontinued operations)		2014 - 2019

The following table summarizes the activity related to unrecognized tax benefits (excluding the federal benefit received from state positions):



	December 31,
	2019			2018			2017
	(In thousands)
Balance at January 1	$	58,819		$	62,288		$	61,649
Additions based on tax positions related to the current year	1,422			3,885			3,971
Reductions due to lapse of applicable statutes of limitation	(11,323		)	(7,354		)	(3,332		)
Gross balance at December 31	48,918			58,819			62,288
Interest and penalties	4,772			4,594			5,860
Balance at December 31	$	53,690		$	63,413		$	68,148

Of the total unrecognized tax benefits as of December 31, 2019, $45 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. The total includes $4 million of interest and penalties, as of both December 31, 2019 and 2018, net of the federal benefit on state interest. Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $8 million by December 31, 2020, if audits are completed or tax years close during 2020.

During 2018, we determined that reserves for certain uncertain tax positions should have been reversed in prior periods when the statutes of limitations expired. As the amounts were not material to our consolidated financial statements in any individual period, and the cumulative amount is not material to 2018 results, we recognized a one-time $4 million benefit in our provision for income taxes related to the correction of this error.