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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into U.S. law. The Tax Act makes broad and complex changes to the U.S. tax code that affects 2017 and later years. On December 22, 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. In accordance with SAB 118, the Company has recorded a $15.0 million provisional tax charge amount for the year ended December 31, 2017 resulting from remeasuring of its net deferred tax assets and liabilities. The Company has also recorded a $20.9 million provisional tax charge amount for the year ended December 31, 2017 related to a one-time transition tax on certain unremitted foreign earnings as required by the Tax Act. These provisional tax charges resulting from the Tax Act are calculated using the Company’s best estimates based upon the information currently available. These estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, and state tax conformity to federal tax changes. In addition, further regulatory guidance related to the Tax Act is expected to be issued in 2018 which may result in changes to the Company’s current estimates. Any revisions to the estimated impacts of the Tax Act will be recorded quarterly until the computations are complete which is expected no later than the fourth quarter of 2018. Other aspects of the Tax Act, including the “Global Intangible Low-Taxed Income” tax, “Foreign Derived Intangible Income” deduction, and “Base Erosion and Anti-Abuse” tax are effective beginning January 1, 2018. The Company has not yet determined its policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the Global Intangible Low-Taxed Income tax provisions in future years, or in the period in which that tax was incurred. For financial reporting purposes, income before income taxes includes the following components (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
United States |  | $ | (42,863 | ) |  | $ | 134,740 |  |  | $ | 52,563 |
Foreign |  |  | 86,435 |  |  |  | 50,841 |  |  |  | 60,810 |
Total |  | $ | 43,572 |  |  | $ | 185,581 |  |  | $ | 113,373 |
The expense (benefit) for income taxes consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 2,586 |  |  | $ | 14,108 |  |  | $ | (6,889 | )
Deferred |  |  | 19,212 |  |  |  | 19,034 |  |  |  | 18,024 |
Total |  |  | 21,798 |  |  |  | 33,142 |  |  |  | 11,135 |
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (1,857 | ) |  |  | 12,565 |  |  |  | 379 |
Deferred |  |  | (1,324 | ) |  |  | (2,502 | ) |  |  | (4,096 | )
Total |  |  | (3,181 | ) |  |  | 10,063 |  |  |  | (3,717 | )
Foreign |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 16,048 |  |  |  | 11,671 |  |  |  | 15,117 |
Deferred |  |  | 3,772 |  |  |  | 1,170 |  |  |  | 5,402 |
Total |  |  | 19,820 |  |  |  | 12,841 |  |  |  | 20,519 |
Total |  | $ | 38,437 |  |  | $ | 56,046 |  |  | $ | 27,937 |
Differences between the income tax expense computed at the statutory federal income tax rate and per the consolidated statements of operations are summarized as follows (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Tax expense at federal rate of 35% |  | $ | 15,250 |  |  | $ | 64,953 |  |  | $ | 39,680 |
State income taxes, net of federal benefit |  |  | (2,238 | ) |  |  | 7,060 |  |  |  | (2,462 | )
Change in valuation allowance |  |  | (1,884 | ) |  |  | (8,524 | ) |  |  | (9,066 | )
Foreign tax rate differential |  |  | (15,622 | ) |  |  | (11,830 | ) |  |  | (5,710 | )
Unrecognized tax benefit increase |  |  | 3,007 |  |  |  | 1,045 |  |  |  | 2,977 |
Tax effect of foreign operations |  |  | 5,532 |  |  |  | 5,988 |  |  |  | 261 |
Acquisition costs |  |  | — |  |  |  | 28 |  |  |  | — |
Tax benefit of research & development |  |  | (1,904 | ) |  |  | (1,088 | ) |  |  | (871 | )
Transition tax |  |  | 20,867 |  |  |  | — |  |  |  | — |
Revaluation of deferred tax balances |  |  | 14,953 |  |  |  | — |  |  |  | — |
Performance based compensation |  |  | 2,081 |  |  |  | — |  |  |  | — |
Domestic production activities deduction |  |  | (3,793 | ) |  |  | (700 | ) |  |  | — |
Other |  |  | 2,188 |  |  |  | (886 | ) |  |  | 3,128 |
Income tax provision |  | $ | 38,437 |  |  | $ | 56,046 |  |  | $ | 27,937 |
The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” for the year-ended December 31, 2017 are Ireland, Luxembourg and the United Kingdom. The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” for the year-ended December 31, 2016 are Ireland, South Africa, and the United Kingdom. The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” for the year-ended December 31, 2015 are Ireland, Netherlands, South Africa, and the United Kingdom. The deferred tax assets and liabilities result from differences in the timing of the recognition of certain income and expense items for tax and financial accounting purposes. The sources of these differences at each balance sheet date are as follows (in thousands):
|  | December 31, |
|  | 2017 |  |  | 2016 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 38,419 |  |  | $ | 65,351 |
Tax credits |  |  | 37,305 |  |  |  | 25,173 |
Compensation |  |  | 18,124 |  |  |  | 39,340 |
Deferred revenue |  |  | 22,248 |  |  |  | 27,303 |
Other |  |  | 9,055 |  |  |  | 6,279 |
Gross deferred income tax assets |  |  | 125,151 |  |  |  | 163,446 |
Less: valuation allowance |  |  | (7,808 | ) |  |  | (9,659 | )
Net deferred income tax assets |  | $ | 117,343 |  |  | $ | 153,787 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  | $ | (67,504 | ) |  | $ | (102,657 | )
Total deferred income tax liabilities |  |  | (67,504 | ) |  |  | (102,657 | )
Net deferred income taxes |  | $ | 49,839 |  |  | $ | 51,130 |
Deferred income taxes / liabilities included in the balance sheet are: |  |  |  |  |  |  |  |
Deferred income tax asset - noncurrent |  | $ | 66,749 |  |  | $ | 77,479 |
Deferred income tax liability - noncurrent |  |  | (16,910 | ) |  |  | (26,349 | )
Net deferred income taxes |  | $ | 49,839 |  |  | $ | 51,130 |
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income, carryback opportunities, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowances recorded. During the year-ended December 31, 2017, the Company decreased its valuation allowance by $1.9 million which relates primarily to a reduction in valuation allowance on U.S. state net operating losses. At December 31, 2017, the Company had domestic federal tax net operating losses (“NOLs”) of $104.6 million which will begin to expire in 2018. The Company had deferred tax assets equal to $6.2 million related to domestic state tax NOLs which will begin to expire in 2018. The Company does not have any valuation allowance against the federal tax NOLs, but has provided a $4.7 million valuation allowance against the deferred tax asset associated with the state NOLs. The Company had foreign tax NOLs of $39.8 million, of which $39.1 million may be utilized over an indefinite life, with the remainder expiring over the next 9 years. The Company has provided a $1.0 million valuation allowance against the deferred tax asset associated with the foreign NOLs. The Company had U.S. foreign tax credit carryforwards at December 31, 2017 of $26.1 million. No valuation allowance has been established against these credits. The U.S. foreign tax credits will begin to expire in 2022. The Company had foreign tax credit carryforwards in other foreign jurisdictions at December 31, 2017 of $1.9 million, of which $1.6 million may be utilized over an indefinite life, with the remainder expiring over the next 7 years. The Company has provided a $1.6 million valuation allowance against the tax benefit associated with these foreign credits. The Company had domestic federal alternative minimum tax credit carryforwards at December 31, 2017 of $3.1 million, which have an indefinite life. The Company also had domestic federal and state general business credit carryforwards at December 31, 2017 of $11.0 million and $0.7 million, respectively, which will begin to expire in 2019 and 2022, respectively. The unrecognized tax benefit at December 31, 2017 and 2016 was $27.2 million and $24.3 million, respectively, of which $21.5 million and $17.6 million, respectively, are included in other noncurrent liabilities in the consolidated balance sheet. Of the total unrecognized tax benefit amounts at December 31, 2017 and 2016, $25.9 million and $23.2 million, respectively, represent the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate in respective years. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance of unrecognized tax benefits at beginning of year |  | $ | 24,278 |  |  | $ | 21,079 |  |  | $ | 14,780 |
Increases for tax positions of prior years |  |  | 2,478 |  |  |  | 58 |  |  |  | 1,449 |
Decreases for tax positions of prior years |  |  | (114 | ) |  |  | (361 | ) |  |  | (47 | )
Increases for tax positions established for the current period |  |  | 1,677 |  |  |  | 5,185 |  |  |  | 9,866 |
Decreases for settlements with taxing authorities |  |  | (154 | ) |  |  | (167 | ) |  |  | (594 | )
Reductions resulting from lapse of applicable statute of limitation |  |  | (1,155 | ) |  |  | (1,310 | ) |  |  | (4,218 | )
Adjustment resulting from foreign currency translation |  |  | 227 |  |  |  | (206 | ) |  |  | (157 | )
Balance of unrecognized tax benefits at end of year |  | $ | 27,237 |  |  | $ | 24,278 |  |  | $ | 21,079 |
The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions. The United States, Australia, Canada, India, Ireland, Luxembourg, South Africa, and United Kingdom are the main taxing jurisdictions in which the Company operates. The years open for audit vary depending on the tax jurisdiction. In the United States, the Company’s tax returns for years following 2013 are open for audit. In the foreign jurisdictions, the tax returns open for audit generally vary by jurisdiction between 2005 and 2016. The Company’s Indian income tax returns covering fiscal years 2005 and 2010 through 2014 are under audit by the Indian tax authority. Other foreign subsidiaries could face challenges from various foreign tax authorities. It is not certain that the local authorities will accept the Company’s tax positions. The Company believes its tax positions comply with applicable tax law and intends to vigorously defend its positions. However, differing positions on certain issues could be upheld by tax authorities, which could adversely affect the Company’s financial condition and results of operations. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $0.1 million due to the settlement of various audits and the expiration of statutes of limitations. The Company accrues interest related to uncertain tax positions in interest expense or interest income and recognizes penalties related to uncertain tax positions in other income or other expense. As of December 31, 2017 and 2016, $1.2 million and $1.9 million, respectively is accrued for the payment of interest and penalties related to income tax liabilities. The aggregate amount of interest and penalties expense (benefit) recorded in the statements of operations for the years ended December 31, 2017, 2016, and 2015 is $(0.8) million, $(0.2) million, and $(0.1) million, respectively. The Company previously considered all of the earnings in its non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes related to the unremitted earnings. An immediate transition tax established by the Tax Act subjected $355.0 million of the Company’s undistributed foreign earnings to U.S taxation during the year-ended December 31, 2017, resulting in a provisional tax charge amount of $20.9 million. However, the Company is currently evaluating the potential foreign and U.S. state tax liabilities that would result from future repatriations, if any, and how the Tax Act will affect the Company’s existing accounting position with regard to the indefinite reinvestment of undistributed foreign earnings. The Company expects to complete this evaluation and determine the impact which the Tax Act may have on its indefinite reinvestment assertion within the measurement period provided by SAB 118.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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