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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into U.S. Law. As of December 31, 2018, the Company had completed its accounting for the tax effects related to the enactment of the Tax Act. The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. During the year ended December 31, 2017, the Company remeasured certain deferred tax assets and liabilities and recorded a $15.0 million provisional tax charge. During the year ended December 31, 2018, the Company reduced the initial provisional tax charge by recording a $4.9 million benefit related to accelerated tax deductions claimed on the 2018 U.S. Federal Income Tax Return. The Tax Act required U.S. companies to pay a one-time transition tax on certain unremitted foreign earnings. During the year ended December 31, 2017, the Company recorded a $20.9 million provisional tax charge based on post-1986 earnings and profits of foreign subsidiaries that were previously deferred from U.S. income taxes. Upon further analysis, the Company reduced the initial provisional tax charge by recording an $8.1 million benefit during the year ended December 31, 2018. During the year ended December 31, 2018, the Company recorded a $15.5 million valuation allowance on its deferred tax asset related to U.S. foreign tax credits based upon business conditions and tax laws in effect at that time. During the year ended December 31, 2019, following the acquisition of Speedpay, the Company determined it will more likely than not be able to utilize foreign tax credits in future years due to additional income generated by Speedpay; therefore, the Company released the $15.5 million valuation allowance that had been established on this deferred tax asset. The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The Company has elected to account for GILTI in the year the tax is incurred. Prior to 2018, the Company considered all earnings in foreign subsidiaries to be indefinitely reinvested, and accordingly, recorded no deferred income taxes related to unremitted earnings. As of December 31, 2019 and 2018, the Company considered only the earnings in its Indian subsidiaries to be indefinitely reinvested. The earnings of all other foreign subsidiaries are no longer considered indefinitely reinvested. The Company is also permanently reinvested for outside book/tax basis differences related to foreign subsidiaries. For financial reporting purposes, income before income taxes includes the following components (in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
United States | $ | (16,317 | ) |  | $ | 16,312 |  |  | $ | (42,863 | )
Foreign | 88,527 |  |  | 75,487 |  |  | 86,435 |
Total | $ | 72,210 |  |  | $ | 91,799 |  |  | $ | 43,572 |
The expense (benefit) for income taxes consists of the following (in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Federal |  |  |  |  |
Current | $ | 3,738 |  |  | $ | 6,545 |  |  | $ | 2,586 |
Deferred | (25,150 | ) |  | (6,587 | ) |  | 19,212 |
Total | (21,412 | ) |  | (42 | ) |  | 21,798 |
State |  |  |  |  |
Current | 590 |  |  | 4,441 |  |  | (1,857 | )
Deferred | 342 |  |  | (2,649 | ) |  | (1,324 | )
Total | 932 |  |  | 1,792 |  |  | (3,181 | )
Foreign |  |  |  |  |
Current | 22,960 |  |  | 17,626 |  |  | 16,048 |
Deferred | 2,668 |  |  | 3,502 |  |  | 3,772 |
Total | 25,628 |  |  | 21,128 |  |  | 19,820 |
Total | $ | 5,148 |  |  | $ | 22,878 |  |  | $ | 38,437 |
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,
| 2019 |  | 2018 |  | 2017
Tax expense at federal rate of 21% (35% pre-2018) | $ | 15,164 |  |  | $ | 19,278 |  |  | $ | 15,250 |
State income taxes, net of federal benefit | 1,227 |  |  | 5,246 |  |  | (2,238 | )
Change in valuation allowance | (12,760 | ) |  | 12,657 |  |  | (1,884 | )
Foreign tax rate differential | (2,535 | ) |  | (4,796 | ) |  | (15,622 | )
Unrecognized tax benefit increase | 898 |  |  | 1,262 |  |  | 3,007 |
Tax effect of foreign operations | 6,698 |  |  | 8,546 |  |  | 5,532 |
Tax benefit of research & development | (2,506 | ) |  | (2,557 | ) |  | (1,904 | )
Transition tax | — |  |  | (8,112 | ) |  | 20,867 |
Revaluation of deferred tax balances | — |  |  | (4,937 | ) |  | 14,953 |
Performance-based compensation | (560 | ) |  | (4,541 | ) |  | 2,081 |
Domestic production activities | — |  |  | — |  |  | (3,793 | )
Other | (478 | ) |  | 832 |  |  | 2,188 |
Income tax provision | $ | 5,148 |  |  | $ | 22,878 |  |  | $ | 38,437 |
The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” are Ireland, Luxembourg, and the United Kingdom for the year ended December 31, 2019; Ireland and Luxembourg for the year ended December 31, 2018; and Ireland, Luxembourg, and the United Kingdom for the year ended December 31, 2017. 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,
| 2019 |  | 2018
Deferred income tax assets: |  |  |
Net operating loss carryforwards | $ | 23,030 |  |  | $ | 25,745 |
Tax credits | 52,902 |  |  | 43,838 |
Compensation | 18,791 |  |  | 15,934 |
Deferred revenue | 25,599 |  |  | 27,587 |
Research and development expense deferral | — |  |  | 12,631 |
Other | 4,065 |  |  | 5,393 |
Gross deferred income tax assets | 124,387 |  |  | 131,128 |
Less: valuation allowance | (7,653 | ) |  | (20,415 | )
Net deferred income tax assets | $ | 116,734 |  |  | $ | 110,713 |
Deferred income tax liabilities: |  |  |
Depreciation and amortization | $ | (52,978 | ) |  | $ | (60,872 | )
Deferred revenue | (44,198 | ) |  | (54,508 | )
Total deferred income tax liabilities | (97,176 | ) |  | (115,380 | )
Net deferred income taxes | $ | 19,558 |  |  | $ | (4,667 | )
Deferred income taxes / liabilities included in the balance sheet are: |  |  |
Deferred income tax asset – noncurrent | $ | 51,611 |  |  | $ | 27,048 |
Deferred income tax liability – noncurrent | (32,053 | ) |  | (31,715 | )
Net deferred income taxes | $ | 19,558 |  |  | $ | (4,667 | )
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, 2019, the Company decreased its valuation allowance by $12.8 million which relates to a reduction in the valuation allowance on U.S. foreign tax credits offset by an increase in valuation allowance on foreign net operating losses. At December 31, 2019, the Company had domestic federal tax net operating losses (“NOLs”) of $65.9 million, which will begin to expire in 2020. The Company had deferred tax assets equal to $1.4 million related to domestic state tax NOLs which will begin to expire in 2020. The Company does not have any valuation allowance against the federal tax NOLs but has provided a $1.2 million valuation allowance against the deferred tax asset associated with the state NOLs. The Company had foreign tax NOLs of $30.4 million, of which $28.1 million may be utilized over an indefinite life, with the remainder expiring over the next 17 years. The Company has provided a $0.7 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, 2019, of $40.7 million, for which an $1.2 million valuation allowance has been provided. 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, 2019, of $1.9 million, of which $1.3 million may be utilized over an indefinite life, with the remainder expiring over the next seven years. The Company has provided a $1.2 million valuation allowance against the tax benefit associated with these foreign credits. The Company also has domestic federal and state general business tax credit carryforwards at December 31, 2019, of $15.7 million and $0.8 million, respectively, which will begin to expire in 2020 and 2022, respectively. The unrecognized tax benefit at December 31, 2019 and 2018, was $29.0 million and $28.4 million, respectively, of which $22.4 million and $22.6 million, respectively, are included in other noncurrent liabilities in the consolidated balance sheets. Of the total unrecognized tax benefit amounts at December 31, 2019 and 2018, $28.2 million and $27.5 million, respectively, represent the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate in the 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):
| 2019 |  | 2018 |  | 2017
Balance of unrecognized tax benefits at beginning of year | $ | 28,406 |  |  | $ | 27,237 |  |  | $ | 24,278 |
Increases for tax positions of prior years | 2,784 |  |  | 315 |  |  | 2,478 |
Decreases for tax positions of prior years | (96 | ) |  | (61 | ) |  | (114 | )
Increases for tax positions established for the current period | 2,542 |  |  | 1,185 |  |  | 1,677 |
Decreases for settlements with taxing authorities | (220 | ) |  | — |  |  | (154 | )
Reductions resulting from lapse of applicable statute of limitation | (4,462 | ) |  | (115 | ) |  | (1,155 | )
Adjustment resulting from foreign currency translation | 46 |  |  | (155 | ) |  | 227 |
Balance of unrecognized tax benefits at end of year | $ | 29,000 |  |  | $ | 28,406 |  |  | $ | 27,237 |
The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions. The United States, Germany, India, Ireland, Luxembourg, Mexico, the United Kingdom, and Uruguay 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 2015 are open for audit. In the foreign jurisdictions, the tax returns open for audit generally vary by jurisdiction between 2003 and 2018. The Company’s Indian income tax returns covering fiscal years 2003, 2005, 2010 through 2013, and 2016 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 $11.7 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, 2019 and 2018, $1.2 million 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, 2019, 2018, and 2017, is $0.2 million, $0.0 million, and $(0.8) million, respectively.

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