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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES |
19. | INCOME TAXES
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted in response to the global COVID-19 pandemic. The CARES Act contains several business tax provisions aimed at stimulating a failing economy. One of these provisions allows corporate taxpayers to take net operating losses earned in 2018, 2019 and 2020 and carry back those losses five years. As a result of the impact of the COVID-19 pandemic on the Company’s business, it generated significant net operating losses during the year ended December 31, 2020. The Company carried back these losses under the five-year net operating loss (“NOL”) carryback provision, which enabled the Company to benefit from these losses and re-measure certain deferred tax assets and liabilities at the former federal tax rate of 35%. During the year ended December 31, 2020, the Company recorded tax benefits of $187,515 related to the NOL carryback provision. The Company’s provision for federal and foreign income tax expense for continuing operations consisted of the following:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2019 |  |  | 2020 |
Income (loss) before income taxes: |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 289,727 |  |  | $ | 235,571 |  |  | $ | (784,167 | )
Foreign |  |  | 21,007 |  |  |  | 38,189 |  |  |  | (143,157 | )
Total |  | $ | 310,734 |  |  | $ | 273,760 |  |  | $ | (927,324 | )
Current and deferred income taxes were as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2019 |  |  | 2020 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 46,826 |  |  | $ | 45,247 |  |  | $ | (271,162 | )
Foreign |  |  | 11,822 |  |  |  | 24,022 |  |  |  | 397 |
State |  |  | 13,594 |  |  |  | 12,486 |  |  |  | 289 |
Total current expense |  | $ | 72,242 |  |  | $ | 81,755 |  |  | $ | (270,476 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 27,055 |  |  | $ | (298 | ) |  | $ | (50,445 | )
Foreign |  |  | (6,166 | ) |  |  | 5 |  |  |  | 13,266 |
State |  |  | 2,298 |  |  |  | (1,550 | ) |  |  | (1,721 | )
Total deferred taxes |  | $ | 23,187 |  |  | $ | (1,843 | ) |  | $ | (38,900 | )
Income taxes |  | $ | 95,429 |  |  | $ | 79,912 |  |  | $ | (309,376 | )
A reconciliation between income tax expense and taxes computed by applying the applicable statutory federal income tax rate to income before income taxes follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2019 |  |  | 2020 |
Computed statutory tax expense |  | $ | 65,254 |  |  | $ | 57,490 |  |  | $ | (194,739 | )
State and local income taxes, net of federal income tax impact |  |  | 12,611 |  |  |  | 8,479 |  |  |  | (1,153 | )
Changes in valuation allowance |  | 131 |  |  |  | 2,532 |  |  |  | 46,731 |
Foreign tax rate differential |  |  | 2,235 |  |  |  | 4,646 |  |  |  | (6,633 | )
Foreign dividends |  | — |  |  | — |  |  | — |
Foreign tax credits |  |  | 3,927 |  |  |  | 4,143 |  |  | — |
Impacts related to 2017 Tax Act (1) |  |  | 19,180 |  |  | — |  |  | — |
Impacts related to COVID-19 pandemic (2) |  | — |  |  | — |  |  |  | (187,515 | )
Changes in uncertain tax positions |  |  | (6,139 | ) |  |  | 197 |  |  |  | 24,879 |
Other, net |  |  | (1,770 | ) |  |  | 2,425 |  |  |  | 9,054 |
Income taxes |  | $ | 95,429 |  |  | $ | 79,912 |  |  | $ | (309,376 | )
(1) | The amount for the year ended December 31, 2018 includes a one-time charge to true-up deferred taxes of $1,913 and a reduction in deferred tax assets with regard to foreign tax credit carryforwards of $17,267.
(2) | The amount for the year ended December 31, 2020 includes benefits of a rate differential on earnings of $122,975, tax losses with respect to investments in foreign subsidiaries and a write down of certain intercompany receivables associated with the Company’s foreign subsidiaries of $135,599, offset by a tax charge for the remeasurement of deferred taxes and tax attributes of $49,866 and dislodged foreign tax credits not benefited of $21,193.
As of December 31, 2020, the Company had approximately $160,487 of accumulated undistributed earnings and profits, approximately $113,364 of which was subject to the one-time transition tax pursuant to the 2017 Tax Act. Additional tax due on the repatriation of previously-taxed earnings would generally be foreign withholding and U.S. state income taxes. The Company does not intend to repatriate these offshore earnings and profits, and therefore has not recorded any deferred taxes on such earnings. The Company considers any excess of the amount for financial reporting over the tax basis of its investment in its foreign subsidiaries to be indefinitely reinvested. At this time, the determination of deferred tax liabilities on this amount is not practicable. Deferred Income Taxes The tax effects of significant temporary differences and tax loss and tax credit carryforwards comprising the net long-term deferred income tax liabilities as of the periods presented consisted of the following:
|  | December 31, |
|  | 2019 |  |  | 2020 |
Deferred liabilities: |  |  |  |  |  |  |  |
Theatre properties and equipment |  | $ | 138,382 |  |  | $ | 142,253 |
Operating lease right-of-use assets |  |  | 322,750 |  |  |  | 297,452 |
Intangible asset — other |  |  | 39,282 |  |  |  | 41,297 |
Intangible asset — tradenames |  |  | 72,821 |  |  |  | 72,268 |
Investment in partnerships |  |  | 62,914 |  |  |  | 20,402 |
Total deferred liabilities |  |  | 636,149 |  |  |  | 573,672 |
Deferred assets: |  |  |  |  |  |  |  |
Deferred revenue - NCM |  |  | 85,362 |  |  |  | 83,998 |
Deferred revenue - Other |  |  | 9,953 |  |  |  | 6,208 |
Prepaid rent |  |  | 5,672 |  |  |  | 5,255 |
Gift Cards |  |  | 7,402 |  |  |  | 9,265 |
Operating lease obligations |  |  | 336,034 |  |  |  | 313,552 |
Finance lease obligations |  |  | 34,956 |  |  |  | 31,284 |
Tax impact of items in accumulated other comprehensive income and additional paid-in-capital |  |  | 5,131 |  |  |  | 19,475 |
Other tax loss carryforwards |  |  | 17,053 |  |  |  | 89,320 |
Other tax credit and attribute carryforwards |  |  | 46,577 |  |  |  | 121,698 |
Other expenses, not currently deductible for tax purposes |  |  | 15,901 |  |  |  | 17,698 |
Total deferred assets |  |  | 564,041 |  |  |  | 697,753 |
Net deferred income tax (asset) liability before valuation allowance |  |  | 72,108 |  |  |  | (124,081 | )
Valuation allowance against deferred assets – non-current |  |  | 60,359 |  |  |  | 203,606 |
Net deferred income tax liability |  | $ | 132,467 |  |  | $ | 79,525 |
Net deferred tax (asset) liability — Foreign |  | $ | (4,539 | ) |  | $ | 7,280 |
Net deferred tax liability — U.S. |  |  | 137,006 |  |  |  | 72,245 |
Total |  | $ | 132,467 |  |  | $ | 79,525 |
As noted above, as a result of the CARES Act, the Company generated U.S. taxable income in prior years and expects to have a U.S. tax net operating loss for the year ended December 31, 2020 that will be carried back to prior years when the tax rate was 35%. Most of the state and all foreign jurisdictions in which the Company operates, however, only allow for net operating losses to be carried forward with varying expiration dates. A majority of our foreign tax credit carryforwards expire in 2024 and 2027, with the remainder expiring in 2029. Foreign net operating losses have varying carryforward periods with some being indefinite. Similarly, state net operating losses have varying carryforward periods with some being indefinite. The Company assesses the likelihood that it will be able to recover its deferred tax assets against future sources of taxable income, and reduce the carrying amounts of deferred tax assets by recording a valuation allowance, if, based on all available evidence, the Company believes it is more likely than not that all or a portion of such assets will not be realized. During the year ended December 31, 2020 the Company generated significant pre-tax losses and more specifically, during the fourth quarter of 2020 the Company reached a three-year cumulative pre-tax loss position that is heavily weighted as objectively verifiable negative evidence. For purposes of assessing the recoverability of its deferred tax assets, the Company determined that it could not include future projected earnings in the analysis due to its recent history of significant pre-tax losses. The Company has established a valuation allowance against certain deferred tax assets for which the ultimate realization of future benefits is uncertain. Expiring carryforwards and the required valuation allowances are adjusted annually. After application of the valuation allowances described above, the Company anticipates that no limitations will apply with respect to utilization of any of the other deferred tax assets described above. The Company’s valuation allowance changed from $60,359 at December 31, 2019 to $203,606 at December 31, 2020 (see Note 23). The increase relates to federal deferred tax assets with respect to foreign tax credits, all net foreign deferred tax assets, all state net operating loss carryforwards and minor state tax attributes. The valuation allowance associated with operating loss carryforwards and foreign deferred tax assets is primarily a result of not having sufficient income from deferred tax liability reversals in future periods to support the realization of the deferred tax assets. When the Company begins to generate taxable income at a normal level, the Company expects to reverse the valuation allowances with an offsetting increase to reported earnings. Uncertain Tax Positions The following is a reconciliation of the total amounts of unrecognized tax benefits excluding interest and penalties, for the periods presented:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2019 |  |  | 2020 |
Balance at January 1, |  | $ | 18,266 |  |  | $ | 10,561 |  |  | $ | 10,235 |
Gross increases - tax positions in prior periods |  |  | — |  |  | 1 |  |  |  | 32,417 |
Gross decreases - tax positions in prior periods |  |  | (143 | ) |  |  | — |  |  |  | (88 | )
Gross increases - current period tax positions |  |  | 424 |  |  |  | 202 |  |  |  | 4,010 |
Settlements |  |  | (7,191 | ) |  |  | (522 | ) |  |  | — |
Foreign currency translation adjustments |  |  | (795 | ) |  |  | (7 | ) |  |  | (46 | )
Balance at December 31, |  | $ | 10,561 |  |  | $ | 10,235 |  |  | $ | 46,528 |
The Company had $14,294 and $51,643 of unrecognized tax benefits, including interest and penalties, as of December 31, 2019 and 2020, respectively. Of these amounts, $14,294 and $51,643 represent the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate for the years ended December 31, 2019 and 2020, respectively. The Company had $4,058 and $5,114 accrued for interest and penalties as of December 31, 2019 and 2020, respectively. The Company prepares and files income tax returns based upon its interpretation of tax laws and regulations and record estimates based upon these judgments and interpretations. In the normal course of business, the Company’s income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law resulting from legislation, regulation, and/or as concluded through the various jurisdictions' tax court systems. Significant judgment is exercised in applying complex tax laws and regulations across multiple global jurisdictions where we conduct our operations. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, based upon the technical merits of the position. The Company is no longer subject to income tax audits from the Internal Revenue Service for years before 2017. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2016. The Company is no longer subject to non-U.S. income tax examinations by tax authorities in its major non-U.S. tax jurisdictions for years before 2006. The Company is currently scheduled for an audit in California for tax years 2017 and 2018 and is under audit in the non-U.S. tax jurisdiction of Brazil.

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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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