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Income Taxes | 12 Months Ended
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Dec. 31, 2020
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, | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
United States | $ | 6,391 |  |  | $ | 17,493 |  |  | $ | (33,123) |
Foreign | (72,660) |  |  | (77,421) |  |  | (72,667) |
State | — |  |  | — |  |  | — |
Total current | (66,269) |  |  | (59,928) |  |  | (105,790) |
Deferred: |  |  |  |  |
United States | 124,718 |  |  | 22,337 |  |  | 29,619 |
Foreign | 25,612 |  |  | 6,265 |  |  | 4,814 |
State | 46,008 |  |  | 285 |  |  | 161 |
Total deferred | 196,338 |  |  | 28,887 |  |  | 34,594 |
Total income tax benefit (expense) | $ | 130,069 |  |  | $ | (31,041) |  |  | $ | (71,196) |
For the years ended December 31, 2020, 2019 and 2018, foreign (loss) income from Continuing Operations before income taxes was $(250,910), $2,358, and $391,038, respectively. For the years ended December 31, 2020, 2019 and 2018, domestic loss from Continuing Operations before income taxes was $199,928, $122,019, and $511,159, respectively. Significant components of deferred tax assets and liabilities arising from Continuing Operations were as follows:
December 31, | 2020 |  | 2019
Deferred tax assets: |  |  |
Net operating loss and tax credits carryforwards | $ | 410,456 |  |  | $ | 335,325 |
Depreciation | 45,717 |  |  | 38,532 |
Deferred revenue | 10,913 |  |  | 13,587 |
Allowance for doubtful accounts | 13,552 |  |  | 9,772 |
Deferred compensation | 16,997 |  |  | 20,551 |
Unrealized loss | 3,128 |  |  | 5,395 |
Nondeductible reserves | 24,835 |  |  | 27,062 |
Interest | 32,282 |  |  | 8,630 |
Operating lease asset | 140,500 |  |  | 158,189 |
Total deferred tax assets | 698,380 |  |  | 617,043 |
Deferred tax liabilities: |  |  |
Investment in subsidiaries | 71,183 |  |  | 86,906 |
Amortization of intangible assets | 133,091 |  |  | 175,386 |
Operating lease liability | 127,131 |  |  | 148,436 |
Other | 1,918 |  |  | 3,137 |
Total deferred tax liabilities | 333,323 |  |  | 413,865 |
Net deferred tax assets | 365,057 |  |  | 203,178 |
Valuation allowance for deferred tax assets | (320,858) |  |  | (324,119) |
Net deferred tax assets (liabilities) | $ | 44,199 |  |  | $ | (120,941) |
The 2019 column of the table above was recast to remove deferred taxes now classified as held for sale. During 2020, the Company amended the partnership agreement of one of its subsidiaries that owned intellectual property, such that the subsidiary became subject to tax in the Netherlands, and conducted an internal restructuring of its Dutch subsidiaries. Additionally, during the year there was an impairment event for book purposes in the Netherlands, affecting the value of its intellectual property. The net result was a tax benefit of approximately $19,000 that represents the book-and-tax basis difference of the intellectual property, measured based on the intellectual property’s fair value. In the effective tax rate reconciliation table below, this net benefit is reflected in two components. The first component is simply a benefit from pretax loss at the United States statutory tax rate of $51,000. The second component of $32,000 is primarily the tax-effected difference between the book basis being impaired and the tax basis, net of uncertain tax positions, being established during the year. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The CARES Act did not have a significant impact on Laureate’s Continuing Operations for the year ended December 31, 2020. We continue to monitor any effects that may result from the CARES Act as well as any similar stimulus legislation enacted in other jurisdictions where Laureate has material operations. In July 2020, the U.S. Treasury Department released final regulations addressing global intangible low-taxed income (GILTI). Among other changes, these regulations provide an election to exclude certain foreign income of foreign corporations from GILTI if such income is deemed high-taxed in a foreign jurisdiction. These elective provisions may be applied retroactively and accordingly require significant analysis of the potential financial statement impacts. During the third quarter of 2020, the Company recorded a discrete tax benefit of approximately $70,900 related to 2018 and 2019. Laureate previously has not provided deferred taxes on unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. As of December 31, 2020, undistributed earnings from foreign subsidiaries totaled $610,800. 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 $100 on $2,000 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 $18,800 in additional deferred tax liabilities. The amount of additional deferred tax liabilities recognized could increase if our expectations change based on future developments such that some or all of the undistributed earnings of our foreign subsidiaries are remitted to the United States in the foreseeable future. The Company has $634,200 of US federal net operating loss carryforwards that expire from 2035 to 2036 and $67,600 of US federal net operating loss carryforwards that do not expire. The Company has $168,100 of deferred tax asset for US state net operating loss carryforwards that expire from 2021 to 2040 and $7,500 of deferred tax asset for US state net operating loss carryforwards that do not expire. The Company has $509,200 of foreign net operating loss carryforwards that expire from 2023 to 2030. The Company has $152,700 of tax credit carryforwards that do not expire and $76,400 of interest carryforwards that do not expire. The Company assesses the realizability of deferred tax assets by examining all available evidence, both positive and negative. Accounting guidance restricts the amount of reliance the Company can place on projected taxable income to support the recovery of the deferred tax assets when a company is in a three-year cumulative loss position. A valuation allowance is recorded when the company is not able to identify a source of income to support realization of the deferred tax asset on a more-likely-than-not basis. 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, | 2020 |  | 2019 |  | 2018
Balance at beginning of period | $ | 324,119 |  |  | $ | 562,944 |  |  | $ | 624,487 |
(Deductions) additions from tax expense from continuing operations | (19,879) |  |  | 2,427 |  |  | (61,373) |
Charges to other accounts |  |  |  |  |
Additions | 16,618 |  |  | — |  |  | — |
Deductions | — |  |  | (241,252) |  |  | (170) |
Balance at end of period | $ | 320,858 |  |  | $ | 324,119 |  |  | $ | 562,944 |
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, | 2020 |  | 2019 |  | 2018
Tax benefit at the United States statutory rate | $ | 94,676 |  |  | $ | 19,566 |  |  | $ | 17,456 |
Permanent differences | (24,184) |  |  | (7,693) |  |  | 6,008 |
Global Intangible Low Taxed Income | 70,965 |  |  | (38,305) |  |  | (35,631) |
Netherlands intellectual property restructuring | (32,425) |  |  | — |  |  | — |
State income tax benefit, net of federal tax effect | 36,343 |  |  | 5,783 |  |  | 4,445 |
Tax effect of foreign income taxed at lower rate | (5,534) |  |  | (25,228) |  |  | 33,451 |
Change in valuation allowance | 3,241 |  |  | (25,337) |  |  | (46,171) |
Effect of tax contingencies | 2,706 |  |  | 11,635 |  |  | 2,215 |
Tax credits | (2,302) |  |  | 26,436 |  |  | — |
Withholding taxes | (13,254) |  |  | (869) |  |  | (52,064) |
Other | (163) |  |  | 2,971 |  |  | (905) |
Total income tax benefit (expense) | $ | 130,069 |  |  | $ | (31,041) |  |  | $ | (71,196) |
The reconciliations of the beginning and ending amount of unrecognized tax benefits were as follows:
For the years ended December 31, | 2020 |  | 2019 |  | 2018
Beginning of the period | $ | 56,395 |  |  | $ | 50,900 |  |  | $ | 69,801 |
Additions for tax positions related to prior years | 3,582 |  |  | — |  |  | 1,640 |
Decreases for tax positions related to prior years | — |  |  | (1,338) |  |  | (199) |
Additions for tax positions related to current year | 327,142 |  |  | 8,585 |  |  | 8,731 |
Decreases for unrecognized tax benefits as a result of a lapse in the statute of limitations | (1,836) |  |  | (1,752) |  |  | (1,500) |
Settlements for tax positions related to prior years | — |  |  | — |  |  | (27,573) |
End of the period | $ | 385,283 |  |  | $ | 56,395 |  |  | $ | 50,900 |
Laureate records interest and penalties related to uncertain tax positions as a component of Income tax expense. During the years ended December 31, 2020, 2019 and 2018, Laureate recognized interest and penalties related to income taxes of $1,402, $2,587, and $2,762, respectively. Laureate had $14,731 and $16,513 of accrued interest and penalties at December 31, 2020 and 2019, respectively. During the years ended December 31, 2020, 2019 and 2018, Laureate derecognized $4,458, $6,920, and $11,523, respectively, of previously accrued interest and penalties. Approximately $264,526 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 $13,265 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 2010. United States federal and state statutes are generally open back to 2017; however, the Internal Revenue Service (the IRS) has the ability to challenge 2005 through 2016 net operating loss carryforwards. Except as discussed below, statutes of other major jurisdictions are open back to 2014 for Spain and 2010 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 ($13,500 at December 31, 2020), 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 ($21,000 at December 31, 2020), 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 $5,000 at December 31, 2020), including interest. In February 2019, the Company appealed this assessment to the Highest Administrative Court. As of December 31, 2020, the Company has posted a cash-collateralized letter of credit of approximately $5,500 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 $5,300 at December 31, 2020). ICE intends to appeal the referred assessment before the Administrative Central Court, and, in order to do so, ICE has posted a cash-collateralized letter of credit of approximately EUR 4,300 ($5,300 at December 31, 2020). Finally, the referred tax audit was extended in June 2019 to the non-resident income tax for the second semester of fiscal year 2015. On March 11, 2020, ICE received a preliminary assessment of approximately EUR 21,600 (approximately $26,400 at December 31, 2020). This assessment is not final, and we intend to challenge the referred assessment before the STA.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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