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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The United States and foreign components of income before income taxes and equity in earnings in affiliates are as follows:
|  | 2019 |  | 2018 |  | 2017
|  | (In thousands)
Income before income taxes and equity in earnings in affiliates |  |  |  |  |  |
United States |  | $ | 155,844 |  |  | $ | 131,261 |  |  | $ | 130,205 |
Foreign |  | 17,684 |  |  | 18,056 |  |  | 21,732 |
Income before income taxes and equity in earnings in affiliates |  | $ | 173,528 |  |  | $ | 149,317 |  |  | $ | 151,937 |
The provision for income taxes consists of the following components:
|  | 2019 |  | 2018 |  | 2017
|  | (In thousands)
Federal income taxes: |  |  |  |  |  |
Current |  | $ | 13,018 |  |  | $ | 9,340 |  |  | $ | 13,928 |
Deferred |  | (7,028 | ) |  | (2,195 | ) |  | (3,803 | )
|  | 5,990 |  |  | 7,145 |  |  | 10,125 |
State income taxes: |  |  |  |  |  |
Current |  | 5,093 |  |  | 3,050 |  |  | 3,337 |
Deferred |  | (383 | ) |  | (1,889 | ) |  | (2,269 | )
|  | 4,710 |  |  | 1,161 |  |  | 1,068 |
Foreign income taxes: |  |  |  |  |  |
Current |  | (875 | ) |  | 497 |  |  | (11,545 | )
Deferred |  | 6,823 |  |  | 5,314 |  |  | 18,310 |
|  | 5,948 |  |  | 5,811 |  |  | 6,765 |
Total U.S. and foreign provision for income taxes |  | $ | 16,648 |  |  | $ | 14,117 |  |  | $ | 17,958 |
T he U.S. Tax Cuts and Jobs Act ("Tax Act") enacted on December 22, 2017 introduced significant changes to U.S. income tax law. Effective 2018, the Tax Act reduced the U.S. statutory corporate tax rate from 35% to 21%. The 21% U.S. statutory corporate tax rate is applicable starting in 2018. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company has made reasonable estimates of the effects and recorded provisional amounts in its financial statements for the year ended December 31, 2017. As the Company collected and prepared necessary data, and interpreted any additional guidance issued by the U.S. Treasury Department, the IRS or other standard-setting bodies, it made adjustments over the course of the year to the provisional amounts, including refinements to deferred taxes. The accounting for the tax effects of the enactment of the Tax Act has been completed as of December 31, 2018. Any legislative changes, as well as any other new or proposed Treasury regulations to address questions that arise because of the Tax Act, may result in additional income tax impacts. There are no significant impacts to income tax for the year ended December 31, 2018 and 2019. Due to the change in the statutory tax rate from the Tax Act, the Company remeasured its deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. The net tax expense (benefit) recognized related to the Tax Act was $(0.3) million and $9.6 million for 2018 and 2017, respectively. A reconciliation of the statutory U.S. federal tax rate of 21% and the effective income tax rate is as follows:
|  | 2019 |  | 2018 |  | 2017
|  | (In thousands)
Provisions using statutory federal income tax rate |  | $ | 36,476 |  |  | $ | 31,340 |  |  | $ | 53,175 |
State income taxes (benefit), net of federal tax benefit |  | 2,421 |  |  | 1,915 |  |  | (776 | )
REIT benefit |  | (22,395 | ) |  | (19,992 | ) |  | (43,554 | )
Change in valuation allowance |  | 1,456 |  |  | (1,245 | ) |  | 2,055 |
Federal tax credits |  | (2,118 | ) |  | (1,904 | ) |  | (2,016 | )
Tax Cut and Jobs Act impact |  | — |  |  | (301 | ) |  | 9,584 |
Foreign income taxes (benefit) |  | 1,934 |  |  | 1,479 |  |  | (1,830 | )
Other, net |  | (1,126 | ) |  | 2,825 |  |  | 1,320 |
Total provision for income taxes |  | $ | 16,648 |  |  | $ | 14,117 |  |  | $ | 17,958 |
The Company's effective tax rate differs from the U.S. statutory rate of 21% primarily due to a zero tax rate on earnings generated by the Company's REIT operations. State income taxes (benefit), net of federal tax benefits of $2.4 million, $1.9 million and $(0.8) million for 2019, 2018 and 2017, respectively, is presented exclusive of the related change in valuation allowance of state income tax deferred items. Net of the related change in valuation allowances the state income taxes, net of federal tax benefits is $4.1 million, $1.3 million and $1.5 million for 2019, 2018 and 2017, respectively. The following table presents the breakdown between non-current net deferred tax assets as classified on the balance sheets as of December 31, 2019 and 2018:
|  | 2019 |  | 2018
|  | (In thousands)
Deferred tax assets - non current |  | $ | 36,278 |  |  | $ | 29,924 |
Deferred tax liabilities - non current |  | (19,254 | ) |  | (13,681 | )
Total net deferred tax assets |  | $ | 17,024 |  |  | $ | 16,243 |
The significant components of the Company's deferred tax assets and liabilities consisted of the following as of December 31, 2019 and 2018:
|  | 2019 |  | 2018
Deferred tax assets: |  | (In thousands)
Net operating losses |  | $ | 32,394 |  |  | $ | 35,924 |
Accrued liabilities |  | 24,452 |  |  | 23,719 |
Deferred compensation |  | 15,052 |  |  | 12,031 |
Accrued compensation |  | 7,239 |  |  | 7,735 |
Deferred revenue |  | 13,219 |  |  | 8,458 |
Tax credits |  | 5,223 |  |  | 6,850 |
Equity awards |  | 4,894 |  |  | 4,419 |
Depreciation |  | 15,424 |  |  | 9,960 |
Operating lease liability |  | 13,140 |  |  | — |
Other, net |  | 1,817 |  |  | — |
Valuation allowance |  | (22,786 | ) |  | (21,333 | )
Total deferred tax assets |  | $ | 110,068 |  |  | $ | 87,763 |
Deferred tax liabilities: |  |  |  |
Intangible assets |  | $ | (24,097 | ) |  | $ | (26,543 | )
Capitalized transaction costs |  | (16,797 | ) |  | (16,643 | )
Accounting method change |  | (7,019 | ) |  | — |
Prepaid expenses and other |  | (32,493 | ) |  | (28,214 | )
Lease right-of-use assets |  | (12,638 | ) |  | — |
Other, net |  | — |  |  | (120 | )
Total deferred tax liabilities |  | $ | (93,044 | ) |  | $ | (71,520 | )
Total net deferred tax assets |  | $ | 17,024 |  |  | $ | 16,243 |
Deferred income taxes should be reduced by a valuation allowance if it is not more likely than not that some portion or all of the deferred tax assets will be realized. On a periodic basis, management evaluates and determines the amount of the valuation allowance required and adjusts such valuation allowance accordingly. At year end 2019 and 2018, the Company has a valuation allowance of $22.8 million and $21.3 million, respectively related to deferred tax assets for foreign net operating losses, state net operating losses and state tax credits. The valuation allowance increased by $1.5 million during the year ended December 31, 2019. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are permanently invested outside the United States. At December 31, 2019, $9.9 million of accumulated undistributed earnings of non-U.S. subsidiaries were permanently invested outside the United States. At the existing U.S. federal income and applicable foreign withholding tax rates, additional taxes (net of foreign tax credits) of $0.5 million, consisting solely of withholding taxes, would have to be provided if such earnings were remitted currently. As of the year ended December 31, 2019, the Company had $43.1 million of Federal net operating loss carryforwards which begin to expire in 2032 and $203.7 million of combined net operating loss carryforwards in various states which begin to expire in 2019. The Federal net operating losses are at the Company's REIT which is not subject to tax. The Company has recorded a partial valuation allowance against the deferred tax assets related to the state operating losses. Also, as of the year ended December 31, 2019, the Company had $57.9 million of foreign operating losses which carry forward indefinitely and $5.1 million of state tax credits which begin to expire in 2019. The Company has recorded a partial valuation allowance against the deferred tax assets related to the foreign operating losses and state tax credits. The Company recognizes the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards. The exercise of non-qualified stock options and vesting of restricted stock awards which have been granted under the Company’s equity award plans give rise to compensation income which is includable in the taxable income of the applicable employees and the majority of which is deductible by the Company for federal and state income tax purposes. In the case of non-qualified stock options, the compensation income results from increases in the fair market value of the Company's common stock subsequent to the date of grant. At year end 2019, the deferred tax asset net of a valuation allowance related to unexercised stock options and restricted stock grants for which the Company has recorded a book expense was $4.9 million. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | 2019 |  | 2018 |  | 2017
|  | (In thousands)
Balance at Beginning of Period |  | $ | 4,584 |  |  | $ | 4,461 |  |  | $ | 1,640 |
Additions based on tax positions related to the current year |  | — |  |  | — |  |  | — |
Additions for tax positions of prior years |  | 994 |  |  | 298 |  |  | — |
Additions from current year acquisitions |  | — |  |  | — |  |  | 4,121 |
Reductions for tax positions of prior years |  | — |  |  | — |  |  | (1,290 | )
Reductions as a result of a lapse of applicable statutes of limitations |  | (109 | ) |  | (175 | ) |  | (10 | )
Balance at End of Period |  | $ | 5,469 |  |  | $ | 4,584 |  |  | $ | 4,461 |
All amounts in the reconciliation are reported on a gross basis and do not reflect a federal tax benefit on state income taxes. The Company has accrued $5.3 million of accrued uncertain tax benefits as of December 31, 2019 which is inclusive of the federal tax benefit on state income taxes. The Company believes that it is reasonably possible that a decrease may be necessary in the unrecognized tax benefits within twelve months of the reporting date of approximately $0.04 million, related to state tax exposures, due to a lapse of the statute of limitation. The accrued uncertain tax balance at December 31, 2019 includes $5.3 million of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate. The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2015. The Company was under audit by the IRS for the 2013 tax year, its first REIT year. In the fourth quarter of 2017, the Company received a no change letter from the IRS for the 2013 tax year. One of our foreign subsidiaries is under examination in a foreign jurisdiction for tax years 2015 to 2018, no assessment has been made. The calculation of the Company’s provision (benefit) for income taxes requires the use of significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations. In determining the adequacy of the Company’s provision (benefit) for income taxes, potential settlement outcomes resulting from income tax examinations are regularly assessed. As such, the final outcome of tax examinations, including the total amount payable or the timing of any such payments upon resolution of these issues, cannot be estimated with certainty. During the years ended December 31, 2019 and 2018, the Company did not recognize any interest and penalties. The Company classifies interest and penalties as interest expense and other expense, respectively.

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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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