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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 13—Income Taxes The following table summarizes the tax effects of temporary differences between the Consolidated Financial Statements carrying amount of assets and liabilities and their respective tax basis, which are recorded at the prevailing enacted tax rate that will be in effect when these differences are settled or realized. These temporary differences result in taxable or deductible amounts in future years. The Company assessed all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize our existing net deferred tax assets. The components of the Company’s deferred tax assets and liabilities were as follows:
| December 31,
(in millions) | 2019 |  | 2018
Deferred tax assets: |  |  |
Stock-based compensation expense | $ | 11.7 |  |  | $ | 9.0 |
Accrued expenses | 37.6 |  |  | 42.9 |
Financing obligations associated with the Master Leases | 1,097.6 |  |  | 1,919.7 |
Unrecognized tax benefits | 7.7 |  |  | 6.7 |
Investments in and advances to unconsolidated affiliates | — |  |  | 3.6 |
Net operating losses, interest limitation and tax credit carryforwards | 87.6 |  |  | 122.8 |
Gross deferred tax assets | 1,242.2 |  |  | 2,104.7 |
Less: Valuation allowance | (54.2 | ) |  | (89.5 | )
Net deferred tax assets | 1,188.0 |  |  | 2,015.2 |
Deferred tax liabilities: |  |  |
Property and equipment, not subject to the Master Leases | (53.1 | ) |  | (47.3 | )
Property and equipment, subject to the Master Leases | (1,088.9 | ) |  | (1,599.9 | )
Investments in and advances to unconsolidated affiliates | (2.9 | ) |  | — |
Undistributed foreign earnings | (0.4 | ) |  | (0.4 | )
Intangible assets | (287.3 | ) |  | (287.0 | )
Net deferred tax liabilities | (1,432.6 | ) |  | (1,934.6 | )
Long-term deferred tax assets (liabilities), net | $ | (244.6 | ) |  | $ | 80.6 |
Upon adoption of the new lease standard on January 1, 2019, we recorded a $739.2 million decrease in net deferred tax assets associated with our financing obligations and $435.4 million decrease in net deferred tax liabilities associated with property and equipment that is subject to our Master Leases. The net amount of these two adjustments was recorded as a decrease to stockholders’ equity (see Note 3, “New Accounting Pronouncements”). The realizability of the net deferred tax assets is evaluated quarterly by assessing the need for a valuation allowance and by adjusting the amount of the allowance, if necessary. The Company gives appropriate consideration to all available positive and negative evidence including projected future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining the net deferred tax assets will be realized. In the event the Company determines that the deferred income tax assets would be realized in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be recorded, which would reduce the provision for income taxes. As of December 31, 2019, the Company has significant three-year cumulative pretax income of $150.9 million, supporting the position that a federal valuation allowance is not necessary except for the valuation allowance recorded on federal capital loss carryforwards. The Company continues to maintain a valuation allowance of $54.2 million as of December 31, 2019 primarily related to certain state filing groups where we continue to be in a three-year cumulative pretax loss position. During the year ended December 31, 2018, we released a partial valuation allowance on a capital loss carryforward in the amount of $22.4 million that offset the capital gain realized on the Plainridge Park Casino Sale-Leaseback. This reversal is reflected in our income tax benefit within the Consolidated Statements of Income. During the third quarter of 2017, we determined that a valuation allowance was no longer required against our federal and state net deferred tax assets for the portion that will be realized. The most significant evidence that led to the reversal of our valuation allowance as of the aforementioned period included, (i) the achievement and sustained growth in our three-year cumulative pretax earnings, (ii) substantial pretax income in seven of the last eight quarters with the only loss reported eight quarters ago, and (iii) the lack of significant goodwill and other intangible asset impairment losses expected in 2017. During the fourth quarter of 2017, there were no material changes to our core business operations that altered our prior interim conclusion to release the valuation allowance against the federal and state net deferred tax assets for the portion that is more-likely-than-not to be realized. As such, we released $741.9 million of our total valuation allowance for the year ended December 31, 2017 due to the positive evidence outweighing the negative evidence thereby allowing us to achieve the more-likely-than-not realization standard. Overall, our valuation allowance decreased year-over-year by a net amount of $35.3 million, primarily due to the adoption of the new lease standard as of January 1, 2019, and was recorded as an increase to stockholders’ equity. The impact of the new lease standard was partially offset by an increase in the valuation allowance for state net operating loss carryforwards. Following the ownership changes of the Tropicana Las Vegas, the Company has $120.3 million of total gross federal net operating loss carryforwards that will expire on various dates from 2020 through 2035. The Company acquired federal net operating loss carryforwards from the Pinnacle Acquisition, which were fully utilized as of December 31, 2019. All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations, however, we believe it is more-likely-than-not that the benefit from these tax attributes will be realized. For state income tax reporting, as of December 31, 2019, we had gross state net operating loss carryforwards aggregating $766.2 million available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania and the States of Colorado, Iowa, Louisiana, Missouri, New Mexico and Ohio localities. The tax benefit associated with these net operating loss carryforwards was $52.2 million. Due to statutorily limited operating loss carryforwards and income and loss projections in the applicable jurisdictions, a valuation allowance has been recorded to reflect the net operating losses which are not presently expected to be realized in the amount of $36.4 million. If not used, substantially all the carryforwards will expire at various dates from December 31, 2020 through December 31, 2039. The domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2019, 2018 and 2017 were as follows:
| For the year ended December 31,
(in millions) | 2019 |  | 2018 |  | 2017
Domestic | $ | 85.5 |  |  | $ | 89.6 |  |  | $ | (29.6 | )
Foreign | 0.6 |  |  | 0.3 |  |  | 4.5 |
Total | $ | 86.1 |  |  | $ | 89.9 |  |  | $ | (25.1 | )
The components of income tax benefit (expense) for the years ended December 31, 2019, 2018 and 2017 were as follows:
| For the year ended December 31,
(in millions) | 2019 |  | 2018 |  | 2017
Current tax benefit (expense) |  |  |  |  |
Federal | $ | (12.5 | ) |  | $ | (15.3 | ) |  | $ | (16.3 | )
State | (9.2 | ) |  | (6.4 | ) |  | (6.1 | )
Foreign | (0.2 | ) |  | (1.4 | ) |  | 3.0 |
Total current | (21.9 | ) |  | (23.1 | ) |  | (19.4 | )
Deferred tax benefit (expense) |  |  |  |  |
Federal | (16.7 | ) |  | 14.6 |  |  | 480.7 |
State | (4.4 | ) |  | 10.9 |  |  | 39.3 |
Foreign | — |  |  | 1.2 |  |  | (2.1 | )
Total deferred | (21.1 | ) |  | 26.7 |  |  | 517.9 |
Total income tax benefit (expense) | $ | (43.0 | ) |  | $ | 3.6 |  |  | $ | 498.5 |
On December 22, 2017, the President of the United States signed into law comprehensive tax reform legislation commonly known as Tax Cuts and Jobs Act (the “Tax Act”), which most notably, reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. For the year ended December 31, 2017, we recorded a provisional amount for certain enactment-date effects of the Tax Act, resulting in a net charge of $266.0 million included as income tax expense within the Consolidated Statements of Income consisting of three components: (i) a $261.3 million charge due to the revaluation of the net deferred tax assets in the U.S. based on the new lower federal income tax rate, (ii) a $2.6 million charge related to the one-time mandatory repatriation tax on previously deferred earnings from our wholly-owned Canadian subsidiary (which we will pay interest-free over eight years) and (iii) a $2.1 million foreign withholding tax charge due to the new favorable U.S. treatment of foreign dividends whereby we have changed our indefinite reinvestment assertion. During the year ended December 31, 2018, we finalized our assessment of the effects of the Tax Act, resulting in a $1.2 million increase to the provisional amount, which increased the effective tax rate by 1.3%. The following table reconciles the statutory federal income tax rate to the actual effective income tax rate, and related amounts of income tax benefit (expense), for the years ended December 31, 2019, 2018 and 2017:
| For the year ended December 31,
| 2019 |  | 2018 |  | 2017
(in millions, except tax rates) | Percent |  | Amount |  | Percent |  | Amount |  | Percent |  | Amount
Percent and amount of pretax income |  |  |  |  |  |  |  |  |  |  |
Federal statutory rate | 21.0 | % |  | $ | (18.1 | ) |  | 21.0 | % |  | $ | (18.9 | ) |  | 35.0 | % |  | $ | 8.8 |
State and local income taxes, net of federal benefits | 9.9 |  |  | (8.5 | ) |  | (6.2 | ) |  | 5.6 |  |  | 6.3 |  |  | 1.6 |
Nondeductible expenses | 4.0 |  |  | (3.5 | ) |  | 6.9 |  |  | (6.2 | ) |  | (16.0 | ) |  | (4.0 | )
Goodwill impairment losses | 14.4 |  |  | (12.4 | ) |  | — |  |  | — |  |  | (20.5 | ) |  | (5.1 | )
Compensation | 0.3 |  |  | (0.3 | ) |  | (3.8 | ) |  | 3.4 |  |  | 29.5 |  |  | 7.4 |
Contingent liability settlement | — |  |  | — |  |  | — |  |  | — |  |  | 22.9 |  |  | 5.7 |
Foreign | 0.1 |  |  | (0.1 | ) |  | (0.1 | ) |  | 0.1 |  |  | 11.3 |  |  | 2.8 |
Valuation allowance | — |  |  | — |  |  | (20.3 | ) |  | 18.3 |  |  | 2,962.3 |  |  | 741.9 |
Tax Act - deferred rate change | — |  |  | — |  |  | — |  |  | — |  |  | (1,043.5 | ) |  | (261.3 | )
Other | 0.2 |  |  | (0.1 | ) |  | (1.5 | ) |  | 1.3 |  |  | 3.3 |  |  | 0.7 |
Total effective tax rate and income tax benefit (expense) | 49.9 | % |  | $ | (43.0 | ) |  | (4.0 | )% |  | $ | 3.6 |  |  | 1,990.6 | % |  | $ | 498.5 |
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(in millions) | Unrecognized tax benefits
Unrecognized tax benefits as of January 1, 2017 | $ | 26.8 |
Additions based on current year positions | 2.9 |
Additions based on prior year positions | 2.8 |
Decreases due to settlements and/or reduction in reserves | (1.3 | )
Currency translation adjustments | (0.1 | )
Settlement payments | (0.2 | )
Unrecognized tax benefits as of December 31, 2017 | 30.9 |
Additions based on prior year positions | 0.8 |
Decreases due to settlements and/or reduction in reserves | (2.0 | )
Unrecognized tax benefits as of December 31, 2018 | 29.7 |
Additions based on prior year positions | 6.5 |
Decreases due to settlements and/or reduction in reserves | (0.2 | )
Unrecognized tax benefits as of December 31, 2019 | $ | 36.0 |
During the year ended December 31, 2019, we did no t record any new tax reserves, and accrued interest or penalties related to current year uncertain tax positions. Regarding prior year tax positions, we recorded $7.1 million of tax reserves and accrued interest and reversed $0.2 million of previously recorded tax reserves and accrued interest for uncertain tax positions that are anticipated to settle and/or close within the next 12 months. As of December 31, 2019 and 2018, unrecognized tax benefits, inclusive of accruals for income tax related penalties and interest, of $37.2 million and $30.4 million, respectively, were included in “Other long-term liabilities” within the Company’s Consolidated Balance Sheets. Overall, the Company recorded a net tax expense of $2.8 million in connection with its uncertain tax positions for the year ended December 31, 2019. The liability for unrecognized tax benefits as of December 31, 2019 and 2018 included $29.4 million and $23.6 million, respectively, of tax positions that, if reversed, would affect the effective tax rate. During the years ended December 31, 2019, 2018 and 2017, we recognized $0.1 million, $0.5 million and $1.7 million, respectively, of interest and penalties, net of deferred taxes. The Company had no reductions in previously accrued interest and penalties for the year ended December 31, 2019. We classify any income tax related penalties and interest accrued related to unrecognized tax benefits in “Income tax benefit (expense)” within the Consolidated Statements of Income. The Company is currently in various stages of the examination process in connection with its open audits. Generally, it is difficult to determine when these examinations will be closed, but the Company reasonably expects that its ASC 740 liabilities will not significantly change over the next twelve months. As of December 31, 2019, the Company is subject to U.S. federal income tax examinations for the tax years 2015, 2016, 2017 and 2018. In addition, we are subject to state and local income tax examinations for various tax years in the taxing jurisdictions in which we operate. As of December 31, 2019 and 2018, prepaid income taxes of $22.2 million and $14.9 million, respectively, were included in “Prepaid expenses” within the Company’s Consolidated Balance Sheets.

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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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