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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Significant components of the Income tax (expense) benefit on earnings from continuing operations were as follows:
For the years ended December 31, | 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
United States | $ | 17,822 |  |  | $ | (32,861 | ) |  | $ | 28,091 |
Foreign | (97,722 | ) |  | (90,887 | ) |  | (97,446 | )
State | (329 | ) |  | (262 | ) |  | (400 | )
Total current | (80,229 | ) |  | (124,010 | ) |  | (69,755 | )
Deferred: |  |  |  |  |  |
United States | (6,465 | ) |  | 10,537 |  |  | 124,043 |
Foreign | 5,753 |  |  | (18,137 | ) |  | 27,216 |
State | 285 |  |  | (161 | ) |  | 11,485 |
Total deferred | (427 | ) |  | (7,761 | ) |  | 162,744 |
Total income tax (expense) benefit | $ | (80,656 | ) |  | $ | (131,771 | ) |  | $ | 92,989 |
For the years ended December 31, 2019, 2018 and 2017, foreign income from continuing operations before income taxes was $242,017, $664,298, and $246,303, respectively. For the years ended December 31, 2019, 2018 and 2017, domestic loss from continuing operations before income taxes was $147,619, $543,059, and $323,070, respectively. Significant components of deferred tax assets and liabilities arising from continuing operations were as follows:
December 31, | 2019 |  | 2018
Deferred tax assets: |  |  |
Net operating loss and tax credits carryforwards | $ | 530,647 |  |  | $ | 727,213 |
Depreciation | 57,752 |  |  | 81,194 |
Deferred revenue | 17,544 |  |  | 56,004 |
Allowance for doubtful accounts | 23,515 |  |  | 21,069 |
Deferred compensation | 24,645 |  |  | 30,677 |
Unrealized loss | 75,324 |  |  | 74,982 |
Nondeductible reserves | 42,275 |  |  | 40,584 |
Interest | 16,741 |  |  | 17,652 |
Operating lease asset | 236,084 |  |  | — |
Total deferred tax assets | 1,024,527 |  |  | 1,049,375 |
Deferred tax liabilities: |  |  |
Investment in subsidiaries | 84,880 |  |  | 97,208 |
Amortization of intangible assets | 258,852 |  |  | 253,147 |
Operating lease liability | 230,855 |  |  | — |
Other | 1,260 |  |  | 1,829 |
Total deferred tax liabilities | 575,847 |  |  | 352,184 |
Net deferred tax assets | 448,680 |  |  | 697,191 |
Valuation allowance for net deferred tax assets | (541,641 | ) |  | (778,262 | )
Net deferred tax liabilities | $ | (92,961 | ) |  | $ | (81,071 | )
In the table above, we have updated the prior year balances of the net operating loss and tax credits carryforwards and the valuation allowance for net deferred tax assets, to include certain foreign withholding tax credits that have a full valuation allowance. The valuation allowance rollforward and the rate reconciliation schedule that follow have also been updated to reflect this item. GILTI: Laureate considered the potential impacts of the GILTI provision within the Tax Cuts & Jobs Act (TCJA) on deferred tax assets/liabilities. Laureate elected to account for GILTI as period costs if and when incurred. For the years ended December 31, 2019 and 2018, Laureate included in its taxable income GILTI of $182,000 and $165,000, respectively, for continued operations. Additionally, because there is no incremental cash tax impact of the GILTI inclusion, Laureate is electing to use the incremental cash tax savings approach when determining whether a valuation allowance needs to be recorded against the U.S. NOL due to the GILTI inclusions. Accordingly, the Company has maintained a full valuation allowance on its pre-2017 U.S. NOL. Permanent Reinvestment: Laureate also considered other impacts of the 2017 enactment of the TCJA including, but not limited to, effects on the Company’s indefinite-reinvestment assertion. Laureate previously has not provided deferred taxes on unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. Laureate analyzed the full effects of the TCJA, and maintained its indefinite-reinvestment assertions for the year ending December 31, 2017. As of December 31, 2019, undistributed earnings from foreign subsidiaries totaled $2,014,730. Except as discussed below regarding Peru, all historical earnings are permanently reinvested. A portion of the historical earnings of Peru are no longer needed to be retained in that market. The Company has recorded a deferred tax liability of $2,500 on $50,000 USD of earnings to account for the withholding taxes on this eventual distribution. If the Company were to remove its assertion and distribute the remaining unremitted earnings, we would record approximately $15,900 in additional deferred tax liabilities. The amount of additional deferred tax liabilities recognized could increase if our expectations change based on future developments, including as a result of the announcement on January 27, 2020 to explore strategic alternatives, such that some or all of the undistributed earnings of our foreign subsidiaries are remitted to the United States in the foreseeable future. During 2018, certain entities and jurisdictions were designated as discontinued operations or held for sale. These entities can no longer assert permanent reinvestment. Thus, an analysis was performed to calculate any deferred taxes required to be recorded on the outside basis which will be recovered upon the sales of these entities. In the third quarter of 2018, we estimated global deferred tax liabilities of $3,200. The majority of the basis differences can be recovered tax free due to our efficient investment structure, treaty benefits or tax exempt transactions. In the fourth quarter of 2018, we refined this global estimate to $4,800. During 2019, this deferred tax liability was paid as a result of the sale of India group, for which this liability was previously recorded. As of December 31, 2019, we estimated $0 deferred tax liabilities on the outside basis for remaining entities designated as discontinued operations or held for sale. Approximately 73.97% our worldwide NOLs and tax credits carryforwards as of December 31, 2019 originated in foreign jurisdictions. It includes withholding tax credits that the Company elected to carryforward in the Netherlands. These credits can be carried forward indefinitely, but due to income available to utilize these credits, they are recorded net of a full valuation allowance. The valuation allowance relates to the uncertainty surrounding the realization of tax benefits primarily attributable to NOLs of the parent company and of certain foreign subsidiaries, and future deductible temporary differences that are available only to offset future taxable income of subsidiaries in certain jurisdictions. The Company assesses the realizability of deferred tax assets by examining all available evidence, both positive and negative. A valuation allowance is recorded if negative evidence outweighs positive evidence. A company’s three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable. Accounting guidance restricts the amount of reliance the Company can place on projected taxable income to support the recovery of the deferred tax assets. The reconciliations of the beginning and ending balances of the valuation allowance on deferred tax assets were as follows:
For the years ended December 31, | 2019 |  | 2018 |  | 2017
Balance at beginning of period | $ | 778,262 |  |  | $ | 815,689 |  |  | $ | 1,167,927 |
(Deductions) additions to costs and expenses (a) | 11,611 |  |  | 335 |  |  | 7,175 |
Charges to other accounts |  |  |  |  |
Additions | — |  |  | — |  |  | — |
Deductions (b) | (248,232 | ) |  | (37,762 | ) |  | (359,413 | )
Balance at end of period | $ | 541,641 |  |  | $ | 778,262 |  |  | $ | 815,689 |
(a) (Deductions) additions to costs and expenses include amounts related to withholding tax credits recorded for the Netherlands. (b) Deductions include reclassifications and foreign currency translation, and TCJA-related adjustments described in the section below. The reconciliations of the reported Income tax (expense) benefit to the amount that would result by applying the United States federal statutory tax rate of 21% to income from continuing operations before income taxes were as follows:
For the years ended December 31, | 2019 |  | 2018 |  | 2017
Tax (expense) benefit at the United States statutory rate | $ | (19,824 | ) |  | $ | (25,460 | ) |  | $ | 16,121 |
Permanent differences | (20,543 | ) |  | 20,686 |  |  | (13,216 | )
State income tax benefit, net of federal tax effect | 4,005 |  |  | (335 | ) |  | (1,154 | )
Tax effect of foreign income taxed at lower rate | (23,895 | ) |  | 16,683 |  |  | 34,711 |
Change in valuation allowance | (35,500 | ) |  | (98,414 | ) |  | (139,375 | )
Effect of tax contingencies | 12,966 |  |  | 5,203 |  |  | 11,198 |
Tax credits | 36,981 |  |  | 37,769 |  |  | 47,348 |
Withholding taxes | (6,815 | ) |  | (57,190 | ) |  | 4,678 |
U.S. tax on repatriated earnings | — |  |  | — |  |  | (875 | )
Impairments | — |  |  | (649 | ) |  | — |
Impact of Tax Cuts and Jobs Act: |  |  |  |  |
Transition tax on unremitted earnings | — |  |  | — |  |  | (160,567 | )
Tax effect of rate changes | — |  |  | — |  |  | 82,392 |
Change in valuation allowance | 14,969 |  |  | 9,354 |  |  | 202,758 |
State income tax benefit, net of federal tax effect | (4,104 | ) |  | (5,350 | ) |  | 8,360 |
GILTI | (38,305 | ) |  | (34,650 | ) |  | — |
Other | (591 | ) |  | 582 |  |  | 610 |
Total income tax (expense) benefit | $ | (80,656 | ) |  | $ | (131,771 | ) |  | $ | 92,989 |
We have made certain adjustments to the 2017 rate reconciliation above in connection with the allocation of the effects of the TCJA to entities in discontinued operations. The withholding tax amounts shown in the table above include a benefit for 2017 of approximately $30,000 and expense for 2018 of approximately ($27,000) related to the redesignation of certain intercompany loans to reflect the impact in changes in the Company's business, including divestitures and financing. The tax credits amounts shown in the table above include withholding tax credits that the Company recorded in the Netherlands. They are recorded net of a full valuation allowance. The reconciliations of the beginning and ending amount of unrecognized tax benefits were as follows:
For the years ended December 31, | 2019 |  | 2018 |  | 2017
Beginning of the period | $ | 60,780 |  |  | $ | 81,073 |  |  | $ | 81,325 |
Additions for tax positions related to prior years | 321 |  |  | 4,379 |  |  | 5,691 |
Decreases for tax positions related to prior years | (2,349 | ) |  | (1,541 | ) |  | (10,095 | )
Additions for tax positions related to current year | 9,940 |  |  | 9,725 |  |  | 11,551 |
Decreases for unrecognized tax benefits as a result of a lapse in the statute of limitations | (3,150 | ) |  | (5,282 | ) |  | (7,355 | )
Settlements for tax positions related to prior years | — |  |  | (27,574 | ) |  | (44 | )
End of the period | $ | 65,542 |  |  | $ | 60,780 |  |  | $ | 81,073 |
In addition to the amounts shown in the table above, approximately $3,300 of principal was released during 2019 as a result of the sale of India, which was classified as a discontinued operation prior to the sale. Laureate records interest and penalties related to uncertain tax positions as a component of Income tax expense. During the years ended December 31, 2019, 2018 and 2017, Laureate recognized interest and penalties related to income taxes of $3,428, $4,840, and $5,762, respectively. Laureate had $24,510 and $26,643 of accrued interest and penalties at December 31, 2019 and 2018, respectively. During the years ended December 31, 2019, 2018 and 2017, Laureate derecognized $5,852, $15,563, and $8,584, respectively, of previously accrued interest and penalties. Approximately $19,917 of unrecognized tax benefits, if recognized, will affect the effective income tax rate. It is reasonably possible that Laureate’s unrecognized tax benefits may decrease within the next 12 months by up to approximately $10,569 as a result of the lapse of statutes of limitations and as a result of the final settlement and resolution of outstanding tax matters in various jurisdictions. Laureate and various subsidiaries file income tax returns in the United States federal jurisdiction, and in various states and foreign jurisdictions. With few exceptions, Laureate is no longer subject to United States federal, state and local, or foreign income tax examinations by tax authorities for years before 2009. United States federal and state statutes are generally open back to 2016; however, the Internal Revenue Service (the IRS) has the ability to challenge 2005 through 2015 net operating loss carryforwards. Except as discussed below, statutes of other major jurisdictions are open back to 2016 for Brazil, 2013 for Chile and Spain, and 2009 for Mexico. ICE Audit During 2010 and 2013, Laureate was notified by the Spain Tax Authorities (STA) that two tax audits of our Spanish subsidiaries were being initiated for 2006 through 2007, and for 2008 through 2010, respectively. On June 29, 2012, the STA issued a final assessment to ICE, our Spanish holding company, for EUR 11,051 ($12,256 at December 31, 2019), including interest, for the 2006 through 2007 period. Laureate appealed this final assessment related to the 2006 through 2007 period and issued a cash-collateralized letter of credit in July 2012, in order to continue the appeal process. In October 2015, the STA issued a final assessment to ICE for the 2008 through 2010 period for approximately EUR 17,187 ($19,060 at December 31, 2019), including interest, for those three years. In order to continue the appeals process, we issued cash-collateralized letters of credit for the 2008 to 2010 period assessment amount, plus interest and surcharges. During the second quarter of 2015, the Company reassessed its position regarding the ICE tax audit matters as a result of recent adverse decisions from the Spanish Supreme Court and the Spanish National Court on cases for taxpayers with similar facts and determined that it could no longer support a more-likely-than-not position. As a result, during 2015, the Company recorded a provision totaling EUR 37,610 (approximately $42,100 at that date). The Company plans to continue the appeals process for the periods already audited and assessed. During the second quarter of 2016, we were notified by the STA that tax audits of the Spanish subsidiaries were also being initiated for 2011 and 2012, and in July 2017 the tax audit was extended to include 2013. Also, during the second quarter of 2016, the Regional Administrative Court issued a decision against the Company on its appeal. The Company has further appealed at the Highest Administrative Court level, which appeal was rejected. The Company has appealed both decisions to the National Court. In the first quarter of 2018, the Company made payments to the Spanish Tax Authorities (STA) totaling approximately EUR 29,600 (approximately $36,800 at the time of payment) in order to reduce the amount of future interest that could be incurred as the appeals process continues. The payments were made using the restricted cash that collateralized the letters of credit and reduced the liability that had been recorded for this income tax contingency. In October of 2018, the STA issued a final assessment to ICE for the 2011 through 2013 period totaling approximately EUR 4,100 (approximately $4,500 at December 31, 2019), including interest. In February 2019, the Company appealed this assessment to the Highest Administrative Court. As of December 31, 2019, the Company has posted a cash-collateralized letter of credit of approximately $5,600 for the assessment, plus a surcharge. In May 2019, the Company was notified by the STA that a new tax audit of fiscal years 2014 and 2015 was being initiated. In January 2020, ICE received a final assessment from the STA for the 2014 to 2015 period totaling approximately EUR 4,300 (approximately $4,800 at December 31, 2019). ICE plans to appeal this assessment and, in order to appeal, ICE will be required to issue a guarantee to cover the assessment amount. TCJA The TCJA was enacted in December 2017. Among other provisions, the TCJA reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, required companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred and creates new taxes on certain foreign-sourced earnings. In connection with Laureate’s initial analysis of the impact of the enactment of the TCJA, the Company recorded a net tax benefit of $135,700 in the fourth quarter of 2017. Of this amount, $82,392 related to the rate change and $53,300 related to the valuation allowance release, net of rate adjustment, on the deferred tax assets other than net operating loss carryforwards (NOLs) that, when realized, may become indefinite-lived NOLs. In 2018, we made adjustments to line items within the 2017 rate reconciliation of approximately $3,600 in connection with the allocation of the effects of the TCJA to entities in discontinued operations. Laureate has completed its accounting for the income tax effects of the TCJA, several of which are detailed immediately below. Transition tax: The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) at December 31, 2017 of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, Laureate determined, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. Laureate was able to make a reasonable estimate of the transition tax and recorded a provisional obligation resulting in additional tax expense of $149,800 in the fourth quarter of 2017. However, Laureate was able to offset this liability with current year losses and, under alternative minimum tax, up to 90% of the remaining liability, with pre-2017 net operating losses, resulting in a net liability of $3,200. Additionally, the TCJA repeals the corporate alternative minimum tax prospectively. Thus, Laureate recorded a deferred tax asset for an amount equal to the payable under the alternative minimum tax, resulting in no net income tax expense related to the transition tax. During the fourth quarter of 2018, Laureate updated the calculation of the transition tax for the income tax return filing and made adjustments to the 2017 amounts in connection with the allocation of the effects of the TCJA to entities in discontinued operations. Remeasurement of deferred tax assets/liabilities: Laureate remeasured certain deferred tax assets and liabilities in the fourth quarter of 2017 based on the rates at which they are expected to reverse in the future, which is generally 21% under the TCJA, and recorded a tax benefit in the amount of $82,392. Additionally, Laureate recorded a tax benefit in the fourth quarter of 2017 related to the valuation allowance release, net of rate adjustment, on the deferred tax assets other than NOLs that, when realized, will become indefinite-lived NOLs in the amount of $53,300. Laureate has analyzed certain aspects of the TCJA, including state conformity, considering additional technical guidance, and refining its calculations, which affected the measurement of these balances or gave rise to new deferred tax amounts. The 2018 blended state tax rates for the U.S., 6.63% (current) and 6.61% (deferred), were calculated using the apportionment percentages from our most recently filed tax returns at that time (2017) and the highest applicable state tax rate. This rate was applied to all items, except that the NOL utilization related to Global Intangibles Low-Taxed Income (GILTI) was 4.11% (deferred) and was applied using the blended rate of only those states that conform to federal GILTI provisions. Valuation Allowance: In 2017, the Company's valuation allowance was changed due to the impact of the TCJA. The major drivers of the change in balance were: impact of the US rate change in the amount of $215,600, utilization of the prior year NOLs against continued and discontinued operations in the amount of $53,600 and valuation allowance release, net of rate adjustment, on the deferred tax assets other than NOLs that when realized will become indefinite-lived NOLs in the amount of $53,300. In 2018, we made adjustments to line items within the 2017 rate reconciliation in connection with the allocation of the effects of the TCJA to entities in discontinued operations.

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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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