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Income Taxes | 12 Months Ended
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Dec. 31, 2021
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, | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
United States | $ | (48,523) |  |  | $ | 6,391 |  |  | $ | 17,493 |
Foreign | (148,437) |  |  | (72,660) |  |  | (77,421) |
Total current | (196,960) |  |  | (66,269) |  |  | (59,928) |
Deferred: |  |  |  |  |
United States | 87,310 |  |  | 124,718 |  |  | 22,337 |
Foreign | (10,347) |  |  | 25,612 |  |  | 6,265 |
State | (25,576) |  |  | 46,008 |  |  | 285 |
Total deferred | 51,387 |  |  | 196,338 |  |  | 28,887 |
Total income tax (expense) benefit | $ | (145,573) |  |  | $ | 130,069 |  |  | $ | (31,041) |
For the years ended December 31, 2021, 2020 and 2019, foreign income (loss) from Continuing Operations before income taxes was $80,864, $(250,910), and $2,358, respectively. For the years ended December 31, 2021, 2020 and 2019, domestic loss from Continuing Operations before income taxes was $(218,371), $(199,928), and $(122,019), respectively. Significant components of deferred tax assets and liabilities arising from Continuing Operations were as follows:
December 31, | 2021 |  | 2020
Deferred tax assets: |  |  |
Net operating loss and tax credits carryforwards | $ | 246,405 |  |  | $ | 410,456 |
Operating lease asset | 135,365 |  |  | 140,500 |
Depreciation | 45,702 |  |  | 45,717 |
Interest | 25,029 |  |  | 32,282 |
Deferred compensation | 23,219 |  |  | 16,997 |
Deferred revenue | 11,432 |  |  | 10,913 |
Nondeductible reserves | 9,470 |  |  | 24,835 |
Allowance for doubtful accounts | 8,437 |  |  | 13,552 |
Unrealized loss | — |  |  | 3,128 |
Total deferred tax assets | 505,059 |  |  | 698,380 |
Deferred tax liabilities: |  |  |
Operating lease liability | 122,728 |  |  | 127,131 |
Investment in subsidiaries | 74,310 |  |  | 71,183 |
Amortization of intangible assets | 41,776 |  |  | 133,091 |
Deferred gain on Walden | 14,652 |  |  | — |
Unrealized Gain | 2,559 |  |  | — |
Other | — |  |  | 1,918 |
Total deferred tax liabilities | 256,025 |  |  | 333,323 |
Net deferred tax assets | 249,034 |  |  | 365,057 |
Valuation allowance for deferred tax assets | (283,945) |  |  | (320,858) |
Net deferred tax (liabilities) assets | $ | (34,911) |  |  | $ | 44,199 |
During the first quarter of 2021, the Company recorded an out-of-period adjustment of approximately $12,400 for income tax expense that should have been recorded during 2016 through 2020. The Company concluded that the adjustment was immaterial to the consolidated financial statements for both the current and prior periods. Laureate does not provide deferred taxes on the portion of its unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. As of December 31, 2021, undistributed earnings from foreign subsidiaries totaled $679,813. The Company has recorded a deferred tax liability of $100 on $2,000 of earnings to account for the withholding taxes on a portion of unremitted earnings associated with one of its Peruvian subsidiaries. If the Company were to remove its assertion and distribute the remaining unremitted earnings, we would record approximately $20,000 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 historical earnings of our foreign subsidiaries are remitted to the United States. The Company has $53,700 of deferred tax asset for US state net operating loss carryforwards that expire from 2023 to 2042 and $2,400 of deferred tax asset for US state net operating loss carryforwards that do not expire. The Company has $168,100 of foreign net operating loss carryforwards that expire from 2023 to 2031. The Company has $159,400 of tax credit carryforwards that do not expire and $28,200 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, | 2021 |  | 2020 |  | 2019
Balance at beginning of period | $ | 320,858 |  |  | $ | 324,119 |  |  | $ | 562,944 |
Additions (deductions) from tax expense from continuing operations | 9,115 |  |  | (19,879) |  |  | 2,427 |
Charges to other accounts |  |  |  |  |
Additions | — |  |  | 16,618 |  |  | — |
Deductions | (46,028) |  |  | — |  |  | (241,252) |
Balance at end of period | $ | 283,945 |  |  | $ | 320,858 |  |  | $ | 324,119 |
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, | 2021 |  | 2020 |  | 2018
Tax benefit at the United States statutory rate | $ | 28,877 |  |  | $ | 94,676 |  |  | $ | 19,566 |
Permanent differences | (8,217) |  |  | (24,184) |  |  | (7,693) |
Global intangible low taxed income | (30,616) |  |  | 70,965 |  |  | (38,305) |
Netherlands intellectual property restructuring | (53,643) |  |  | (32,425) |  |  | — |
State income tax (expense) benefit, net of federal tax effect | (36,782) |  |  | 36,343 |  |  | 5,783 |
Tax effect of foreign income taxed at lower rate | (16,665) |  |  | (5,534) |  |  | (25,228) |
Change in valuation allowance | 17,642 |  |  | 3,241 |  |  | (25,337) |
Effect of tax contingencies | (12,573) |  |  | 2,706 |  |  | 11,635 |
Tax credits | 10,458 |  |  | (2,302) |  |  | 26,436 |
Withholding taxes | (43,578) |  |  | (13,254) |  |  | (869) |
Other | (476) |  |  | (163) |  |  | 2,971 |
Total income tax (expense) benefit | $ | (145,573) |  |  | $ | 130,069 |  |  | $ | (31,041) |
The reconciliations of the beginning and ending amount of unrecognized tax benefits were as follows:
For the years ended December 31, | 2021 |  | 2020 |  | 2019
Beginning of the period | $ | 385,283 |  |  | $ | 56,395 |  |  | $ | 50,900 |
Additions for tax positions related to prior years | 80,885 |  |  | 3,582 |  |  | — |
Decreases for tax positions related to prior years | (227,051) |  |  | — |  |  | (1,338) |
Additions for tax positions related to current year | 21,993 |  |  | 327,142 |  |  | 8,585 |
Decreases for unrecognized tax benefits as a result of a lapse in the statute of limitations | (3,523) |  |  | (1,836) |  |  | (1,752) |
End of the period | $ | 257,587 |  |  | $ | 385,283 |  |  | $ | 56,395 |
Laureate records interest and penalties related to uncertain tax positions as a component of Income tax expense. During the years ended December 31, 2021, 2020 and 2019, Laureate recognized interest and penalties related to income taxes of $6,182, $1,402, and $2,587, respectively. Laureate had $14,527 and $14,731 of accrued interest and penalties at December 31, 2021 and 2020, respectively. During the years ended December 31, 2021, 2020 and 2019, Laureate derecognized $12,661, $4,458, and $6,920, respectively, of previously accrued interest and penalties. Approximately $123,760 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 $1,958 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 2018; however, the Internal Revenue Service (the IRS) has the ability to challenge 2005 through 2017 net operating loss carryforwards. Except as discussed below, statutes of other major jurisdictions are open back to 2015 for Spain and 2011 for Mexico. Spanish Tax 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 former Spanish holding company, for EUR 11,051 ($13,500 at December 31, 2021), 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, 2021), 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, 2021), including interest. In February 2019, the Company appealed this assessment to the Highest Administrative Court. 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, 2021). ICE has appealed the referred assessment before the Administrative Central Court, and, in order to do so, ICE posted a cash-collateralized letter of credit of approximately EUR 4,300 ($5,300 at December 31, 2021). As of December 31, 2021, the Company has posted a total cash-collateralized letter of credit of approximately $10,700. On July 22, 2021, the Spanish National Court issued a decision on the Company’s appeal regarding the STA audits of ICE for the fiscal years 2006-2007 and 2008-2010. Based on our understanding of the decision, the matter is not yet resolved in favor of either the Company or the STA. During the third quarter of 2021, both the Company and the STA appealed the Spanish National Court decision. The Spanish Supreme Court to date has not yet ruled on whether or not the appeals will be considered. During the fourth quarter of 2021, the Company made payments to the STA totaling approximately $9,300, for the final assessments that were issued in October 2018 and January 2020. Following these payments, the Company expects that the related cash-collateralized letters of credit will be released during the first half of 2022. The Company does not believe that this matter will have a material effect on its consolidated financial statements. Other Matters 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. In the year ended December 31, 2021, the Company recorded tax expense of approximately $35,700 for changes in estimate associated with provision-to-return adjustments for tax years 2018 through 2020, primarily related to the final regulations that were released by the U.S. Treasury Department in July 2020 for the high-tax exception to global intangible low-taxed income. During the year ended December 31, 2021, Laureate recognized income tax expense of $53,643 related to additional income tax reserves recorded associated with the intellectual property in the Netherlands.

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