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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income taxes are determined using the liability method of accounting for income taxes, under which deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. If, based upon all available evidence, both positive and negative, it is more likely than not that such DTAs will not be realized, a valuation allowance is recorded. Management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing DTAs in each taxpaying jurisdiction. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2020. Such strong objective evidence puts less emphasis on other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2020, a valuation allowance of $328 million has been recorded to recognize only the portion of the DTAs that are more likely than not to be realized; however, the amount of the DTAs considered realizable could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth. As discussed in Note 1, the COVID-19 disruptions significantly impacted certain segments of our business during 2020. We considered the COVID-19 disruptions in our ability to realize deferred tax assets in the future and determined that such conditions did not change our overall valuation allowance positions. The U.S. signed into law on March 27, 2020 the CARES Act, which includes various income tax provisions to help stabilize U.S. businesses, including a provision to ease the limitation on deductible interest expense in 2019 and 2020, which will reduce our interest limitation for these years, preserving U.S. net operating losses. We continue to monitor and evaluate the tax implications resulting from the CARES Act and any new legislation passed in response to COVID-19 in the federal, state, and foreign jurisdictions where we have an income tax presence. We apply a recognition threshold and measurement attribute related to uncertain tax positions taken or expected to be taken on our tax returns. We recognize a tax benefit for financial reporting of an uncertain income tax position when it has a greater than 50% likelihood of being sustained upon examination by the taxing authorities. We measure the tax benefit of an uncertain tax position based on the largest benefit that has a greater than 50% likelihood of being ultimately realized including evaluation of settlements. The components of net loss from continuing operations before income taxes are as follows:
|  | Year Ended December 31,
|  | 2020 |  | 2019 |  | 2018
United States |  | $ | (420) |  |  | $ | (158) |  |  | $ | (356) |
Foreign |  | (124) |  |  | 50 |  |  | 17 |
Net loss before income tax expense |  | $ | (544) |  |  | $ | (108) |  |  | $ | (339) |
The components of income tax expense are as follows:
|  | Year Ended December 31,
|  | 2020 |  | 2019 |  | 2018
Current |  |  |  |  |  |
U.S. Federal |  | $ | 6 |  |  | $ | (5) |  |  | $ | 19 |
U.S. State |  | (1) |  |  | 1 |  |  | 4 |
Foreign |  | 20 |  |  | 32 |  |  | 22 |
Total |  | 25 |  |  | 28 |  |  | 45 |
Deferred |  |  |  |  |  |
U.S. Federal |  | (4) |  |  | (3) |  |  | (10) |
U.S. State |  | (4) |  |  | (3) |  |  | (7) |
Foreign |  | (13) |  |  | (12) |  |  | (15) |
Total |  | (21) |  |  | (18) |  |  | (32) |
Total income tax expense |  | $ | 4 |  |  | $ | 10 |  |  | $ | 13 |
The reconciliation of the U.S. federal statutory tax rate to the actual tax rate is as follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Statutory U.S. federal income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Foreign earnings at rates different than U.S. federal rate | (0.2) | % |  | (3.7) | % |  | (1.5) | %
Valuation allowance adjustments | (16.7) | % |  | (31.0) | % |  | (16.8) | %
Impact of U.S. Tax Reform | — | % |  | — | % |  | (3.1) | %
Permanent items | (1.9) | % |  | (3.6) | % |  | (2.5) | %
Reduction of UTBs | 0.3 | % |  | 6.2 | % |  | — | %
Goodwill impairments | (2.2) | % |  | — | % |  | — | %
Other | (1.0) | % |  | 1.9 | % |  | (1.0) | %
Effective income tax rate | (0.7) | % |  | (9.2) | % |  | (3.9) | %
Our 2020 and 2019 effective tax rates were impacted by changes in global valuation allowances totaling $119 million and $36 million, respectively, against net DTAs in various jurisdictions. Additionally, our 2019 rate was impacted by a decrease in the UTBs of $7 million due to settlements and statute closures. In 2020, we recorded a $54 million goodwill impairment for our legacy U.K. Gaming reporting unit, which resulted in a (2.2)% decrease in our effective tax rate. Deferred income taxes reflect the net tax effects of temporary differences between the carrying values of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred income tax balances are established using the enacted statutory tax rates and are adjusted for changes in such rates in the period of change.
| As of December 31, |
| 2020 |  | 2019 |
Deferred tax assets: |  |  |  |
Reserves and other accrued expenses | $ | 89 |  |  | $ | 78 |  |
Net operating loss carry forwards | 478 |  |  | 296 |  |
Tax credit carry forwards | 42 |  |  | 40 |  |
Interest limitation carryforwards | 22 |  |  | 157 |  |
Differences in financial reporting and tax basis for: |  |  |  |
Other | 60 |  |  | 51 |  |
Valuation allowance | (328) |  |  | (209) |  |
Realizable deferred tax assets | 363 |  |  | 413 |  |
Deferred tax liabilities: |  |  |  |
Differences in financial reporting and tax basis for: |  |  |  |
Identifiable intangible assets | (253) |  |  | (312) |  |
Property and equipment | (51) |  |  | (47) |  |
Other | (14) |  |  | (25) |  |
Total deferred tax liabilities | (318) |  |  | (384) |  |
Net deferred tax asset on balance sheet | $ | 45 |  |  | $ | 29 |  |
At December 31, 2020, we had the following NOL, interest limitation, R&D credit, and state tax credit carry forwards:
| December 31, 2020
| Federal |  | State |  | Foreign
NOL carry forwards | $ | 1,609 |  |  | $ | 1,488 |  |  | $ | 274 |
Interest limitation carry forwards | 78 |  |  | 118 |  |  | 14 |
R&D and state credit carry forwards | 44 |  |  | — |  |  | — |
The federal, state and foreign NOL carryforwards can be carried forward for periods that vary from five years to indefinitely. R&D tax credit carryforwards will expire through 2040, and state tax credits expire through 2023. The interest limitation carryforwards can be carried forward indefinitely in all jurisdictions in which we have them available. Certain of our U.S. federal, state, and foreign tax attributes may be subject to annual limitations under Section 382 (or comparable provisions of state or foreign law) in the event that certain changes in ownership were to occur. Tax attributes that exceed the Section 382 limitation in any year continue to be allowed as carry forwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. Given the Company’s significant U.S. tax attributes, we continuously monitor potential ownership changes under Section 382. In the fourth quarter of 2020, we experienced an ownership change, triggering the application of Section 382. We do not expect any resulting Section 382 limitations to have a significant impact on the use of our tax attributes. At December 31, 2020 and 2019, we had the following valuation allowances:
|  | December 31,
|  | 2020 |  | 2019
Federal |  | $ | 220 |  |  | $ | 128 |
State |  | 52 |  |  | 40 |
Foreign |  | 56 |  |  | 41 |
Undistributed earnings of subsidiaries are accounted for as a temporary difference, except that DTLs are not recorded for undistributed earnings of foreign subsidiaries that are deemed to be indefinitely reinvested in foreign jurisdictions. The Tax Act required the Company to compute a tax on previously undistributed earnings and profits of its foreign subsidiaries upon transition from a worldwide tax system to a territorial tax system during the year ended December 31, 2017. The repatriation of such amounts in the future should generally be exempt from income taxes in the U.S. (as a result of the Tax Act) and in those jurisdictions that have a similar territorial system of taxation. Substantially all of our current year foreign cash flows are not intended to be indefinitely reinvested offshore, and therefore the tax effects of repatriation (including applicable withholding taxes) of such cash flows are provided for in our financial reporting. Unrecognized Tax Benefits The total amount of unrecognized tax benefits (“UTBs”) as of December 31, 2020 was $30 million. Of this amount, $30 million, if recognized, would be included in our Consolidated Statements of Operations and Comprehensive Loss and have an impact on our effective tax rate. We do not expect any material changes in unrecognized tax benefits before December 31, 2021. We recognize interest and penalties for unrecognized tax benefits in income tax expense. The amounts recognized for interest and penalties during the years ended December 31, 2020, 2019 and 2018 were not material. We file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. We are generally not subject to examination for periods prior to December 31, 2016; however as we utilize our net operating losses, prior periods can be subject to examination. There are no ongoing material U.S. federal, state, local or non-U.S. examinations by tax authorities. The Company had the following activity for unrecognized tax benefits:
|  | Year Ended December 31,
|  | 2020 |  | 2019 |  | 2018
Balance at beginning of period |  | $ | 28 |  |  | $ | 34 |  |  | $ | 22 |
Tax positions related to current year additions |  | 1 |  |  | 1 |  |  | 11 |
Additions for tax positions of prior years |  | 2 |  |  | — |  |  | 2 |
Reductions due to lapse of statute of limitations on tax positions |  | (1) |  |  | (7) |  |  | (1) |
Balance at end of period |  | $ | 30 |  |  | $ | 28 |  |  | $ | 34 |

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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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