Income Taxes

12 Months Ended

Dec. 31, 2019

On December 22, 2017, the 2017 U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law. The 2017 Tax Act included a number of changes to the U.S. Internal Revenue Code, including a reduction of the U.S. corporate income tax

rate from 35% to 21% for tax years beginning after December 31, 2017, and a one-time transition tax on certain unrepatriated foreign earnings (the “Transition Tax”). Prospective changes from the 2017 Tax Act that began in 2018 include imposed limitations on the deductibility of executive compensation and interest, a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, and a new provision designed to tax global intangible low-taxed income ("GILTI"). The Company has made an accounting policy election to account for the tax effects of the GILTI provision as a period cost.

The table below summarizes significant components of deferred tax assets and liabilities.



	Year Ended December 31,
	2019			2018
Deferred tax assets
Allowance for doubtful accounts	$	13,041		$	11,792
Accrued vacation and bonus	27,438			23,545
Deferred rent	—			9,016
Share-based compensation	12,647			11,837
Notes receivable from employees	12,187			12,993
State net operating loss carryforward	2,066			3,510
Foreign net operating loss carryforward	9,388			9,857
Federal tax credit and capital loss carryforward	7,336			9,470
Deferred compensation	2,117			1,801
Operating lease assets	43,397			—
Employee benefits obligations	1,191			943
Other, net	1,898			186
Total deferred tax assets	132,706			94,950
Deferred tax liabilities
Revenue recognition	(6,732		)	(5,087		)
Operating lease liabilities	(29,671		)	—
Property and equipment, net	(3,797		)	(6,652		)
Equity debt discount	(8,890		)	(11,014		)
Goodwill and other intangible assets	(209,250		)	(199,964		)
Total deferred tax liabilities	(258,340		)	(222,717		)
Foreign withholding tax	(1,195		)	(413		)
Valuation allowance	(19,865		)	(21,929		)
Net deferred tax liabilities	$	(146,694	)	$	(150,109	)

As of December 31, 2019 and 2018, the Company recorded certain deferred tax assets related to foreign tax credits, capital losses and foreign net operating loss carryforwards, which can be carried forward for periods ranging from 10 years to indefinite. Based on forward-looking financial information, the Company believes it is not more likely than not that the attributes will be utilized. Therefore, valuation allowances of $19.9 million and $21.9 million are recorded against the Company’s deferred tax assets as of December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company has not recorded a $22.9 million deferred tax liability related to the basis difference in the investment in our foreign subsidiaries, as the investment is considered permanent in nature.

The table below summarizes the components of income before income tax provision (benefit) from continuing operations.



	Year Ended December 31,
	2019		2018		2017
Domestic	$	150,860	$	96,543	$	30,013
Foreign	137,590		111,249		57,092
Total	$	288,450	$	207,792	$	87,105

The table below summarizes the components of income tax provision (benefit) from continuing operations.



	Year Ended December 31,
	2019			2018		2017
Current
Federal	$	30,651		$	10,847	$	15,164
State	7,702			4,447		742
Foreign	37,083			21,056		14,816
	75,436			36,350		30,722
Deferred
Federal	(1,767		)	14,538		(47,820		)
State	785			503		(152		)
Foreign	(2,730		)	5,790		(3,607		)
	(3,712		)	20,831		(51,579		)
Income tax provision (benefit)	$	71,724		$	57,181	$	(20,857	)

Our income tax provision (benefit) from continuing operations resulted in effective tax rates that varied from the statutory federal income tax rate as summarized below.



	Year Ended December 31,
	2019			2018			2017
Income tax expense at federal statutory rate	$	60,575		$	43,636		$	30,487
State income taxes, net of federal benefit	8,430			4,950			781
Detriment (benefit) from foreign tax rates	3,425			3,655			(8,500		)
Valuation allowance on foreign net operating loss carryforward	260			(450		)	253
Other expenses not deductible for tax purposes	4,362			3,543			2,466
Adjustment to reserve for uncertain tax positions	2,504			(132		)	456
Impact of 2017 U.S. tax reform — deferred tax	—			(706		)	(63,525		)
Impact of 2017 U.S. tax reform — Transition Tax	(1,088		)	50			18,655
Sale of Ringtail business	(2,097		)	3,798			—
Equity-based compensation	(4,447		)	(1,371		)	809
Other adjustments, net	(200		)	208			(2,739		)
Income tax provision (benefit)	$	71,724		$	57,181		$	(20,857	)

The income tax expense for the years ended December 31, 2019 and 2018 was $71.7 million and $57.2 million, respectively. The increase in expense is primarily attributable to higher pre-tax income in 2019 as compared with 2018.

We file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many city, state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years prior to 2015. We are also no longer subject to state and local or foreign tax examinations by tax authorities for years prior to 2013.

Our liability for uncertain tax positions was $11.1 million and $3.7 million as of December 31, 2019 and 2018, respectively. The Company does not expect any of the uncertain tax positions to settle within the next 12 months. As of December 31, 2019, our accrual for the payment of tax-related interest and penalties was not significant.