Income Taxes

12 Months Ended

Dec. 31, 2020

In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted. The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and deferral of employer payroll taxes. We recorded a discrete benefit of $125 million due to utilization of a 2019 net operating loss in the carryback period. Prior to the CARES Act, this loss could only be carried forward and was offset by a valuation allowance. Through December 31, 2020, we have deferred payroll taxes of $41 million under the CARES Act, with approximately half of the deferral payable in 2021 and and the remainder payable in 2022.

The income tax expense (benefit) components recognized in continuing operations follow:


	Year Ended December 31,
(in thousands)	2020		2019		2018
Current:
Federal	$	(121,411)	$	(36,591)	$	(19,199)
Foreign	140,551		163,141		115,281
State and local	5,343		4,295		12,377
Total current	24,483		130,845		108,459
Deferred:
Federal	17,451		325,351		16,800
Foreign	(23,342)		9,593		55,208
State and local	—		19,441		(7,136)
Total deferred	(5,891)		354,385		64,872
Total income tax expense	$	18,592	$	485,230	$	173,331

A reconciliation of U.S. statutory federal income tax expense (benefit) to income tax expense (benefit) from continuing operations follows:


	Year Ended December 31,
(in thousands)	2020		2019		2018
U.S. statutory federal tax expense (benefit)	$	(43,481)	$	(225,014)	$	81,007
Increase (decrease) in taxes resulting from:
State and local income taxes	(10,614)		(11,135)		(13,668)

U.S. tax on GILTI	—		—		10,649

NCI	(9,466)		11,565		(7,200)
Foreign tax differential, net	38,667		13,479		1,460
Valuation allowance, net	148,783		730,787		79,168
Other changes to uncertain tax positions	7,484		4,098		7,753
Stranded tax effects from AOCI	—		(35,619)		—
Impact of tax reform	—		—		(1,373)
CARES Act Benefit	(124,753)		—		—
Other, net	11,972		(2,931)		15,535
Total income tax expense	$	18,592	$	485,230	$	173,331

Deferred taxes reflect the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recorded for income tax purposes. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows:


	December 31,
(in thousands)	2020		2019
Deferred tax assets:
Accrued liabilities not currently deductible:
Employee compensation and benefits	$	104,305	$	116,162
Project and non-project reserves	71,999		60,768
Net operating loss carryforward	326,402		357,803
Tax basis of investment in excess of book basis	118,915		88,255
U.S. foreign tax credit carryforward	414,348		226,845
AOCI	62,681		67,258
Other	103,955		85,059
Total deferred tax assets	1,202,605		1,002,150
Valuation allowance	(1,080,752)		(910,336)
Deferred tax assets, net	$	121,853	$	91,814
Deferred tax liabilities:
Book basis of property and equipment in excess of tax basis	(43,475)		(29,846)

Dividend withholding on unremitted non-U.S. earnings	(57,859)		(49,663)
Other	(23,349)		(32,912)
Total deferred tax liabilities	(124,683)		(112,421)
Deferred tax assets, net of deferred tax liabilities	$	(2,830)	$	(20,607)

As of December 31, 2020, we are indefinitely reinvested only with respect to unremitted earnings required to meet our working capital and long-term investment needs in the foreign jurisdictions within which we operate. Beyond those limits, we expect current earnings to be available for distribution. Deferred tax liabilities of approximately $28 million have not been recorded with respect to unremitted earnings that are considered indefinitely reinvested, again primarily associated with

foreign withholding and income taxes that would be due upon remittance. We have no intention of initiating any actions that would lead to taxation of the earnings deemed indefinitely reinvested.

We have U.S federal and state net operating loss carryforwards of $159 million and $908 million, respectively. The federal net operating loss carryforwards can be carried forward indefinitely. If not used, the state net operating loss carryforwards will begin to expire in 2021. Approximately $117 million of the state net operating loss carryforwards will expire in 2021. We also have non-U.S. net operating loss carryforwards related to various jurisdictions of approximately $1.2 billion. Non-U.S. net operating losses include $599 million in the United Kingdom and $345 million in the Netherlands as of December 31, 2020. Of the total non-U.S. losses, $800 million can be carried forward indefinitely. The majority of the remaining $296 million net operating losses, if unused, will expire between 2023 and 2028.

We had U.S. foreign tax credits of approximately $414 million as of December 31, 2020, which will begin to expire in 2028, but which are fully reserved for in our valuation allowance

During 2020 and 2019, we were in a three-year cumulative loss on a consolidated, jurisdictional basis in Australia, the Netherlands, the U.K. and the U.S. Such cumulative loss constitutes significant negative evidence (with regards to future taxable income) for assessing likelihood of realization. We also considered positive evidence but concluded it did not outweigh this significant negative evidence of a three-year cumulative loss. Accordingly, we recognized non-cash charges to tax expense of $142 million and $602 million to record a valuation allowance against net U.S. deferred tax assets and $28 million and $129 million against certain net foreign deferred tax assets during 2020 and 2019, respectively.

In the normal course of business, we are subject to examination by taxing authorities worldwide, including such major jurisdictions as Australia, Canada, the Netherlands, South Africa, the United Kingdom, and the United States. Although we believe our reserves for our tax positions are reasonable, the outcome of tax audits could be materially different, both favorably and unfavorably. With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012.

A summary of unrecognized tax benefits follows:


(in thousands)	2020		2019
Balance at beginning of year	$	42,394	$	55,476
Change in tax positions of prior years	8,166		6,359
Change in tax positions of current year	—		—
Reduction in tax positions for statute expirations	(1,510)		(16,894)
Reduction in tax positions for audit settlements	(637)		(2,547)
Balance at end of year	$	48,413	$	42,394

If recognized, the total amount of unrecognized tax benefits as of December 31, 2020 and 2019, would favorably impact the effective tax rates by $30 million and $22 million, respectively. We had $11 million and $10 million of accrued interest and penalties as of December 31, 2020 and 2019, respectively. We do not anticipate any significant changes to the unrecognized tax benefits within the next twelve months.

U.S. and foreign earnings (loss) from continuing operations before taxes are as follows:


	Year Ended December 31,
(in thousands)	2020		2019		2018
United States	$	(265,682)	$	(968,280)	$	(252,376)
Foreign	58,630		(103,215)		638,125
Total	$	(207,052)	$	(1,071,495)	$	385,749

- 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.

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