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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 14—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) | 2022 |  | 2021
Deferred tax assets: |  |  |
Stock-based compensation expense | $ | 8.1 |  |  | $ | 10.6 |
Accrued expenses | 86.1 |  |  | 86.2 |
Financing and operating leasing obligations | 2,619.3 |  |  | 2,351.3 |
Unrecognized tax benefits | 9.8 |  |  | 8.9 |
Investments in and advances to unconsolidated affiliates | 13.0 |  |  | — |
Discount on convertible notes | 0.4 |  |  | — |
Net operating losses, interest limitation and tax credit carryforwards | 112.7 |  |  | 115.7 |
Gross deferred tax assets | 2,849.4 |  |  | 2,572.7 |
Less: Valuation allowance | (31.2) |  |  | (124.3) |
Net deferred tax assets | 2,818.2 |  |  | 2,448.4 |
Deferred tax liabilities: |  |  |
Property and equipment, not subject to the Master Leases | (99.1) |  |  | (65.6) |
Property and equipment, subject to the Master Leases | (925.0) |  |  | (992.9) |
Investments in and advances to unconsolidated affiliates | — |  |  | (6.8) |
Discount on convertible notes | — |  |  | (18.1) |
Intangible assets | (263.7) |  |  | (284.8) |
Lease right of use assets | (1,564.3) |  |  | (1,269.3) |
Net deferred tax liabilities | (2,852.1) |  |  | (2,637.5) |
Long-term deferred tax liabilities, net | $ | (33.9) |  |  | $ | (189.1) |
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 statutory carryback periods, 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 if the net deferred tax assets will be realized. ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre-tax book losses during the three most recent years and is considered significant negative evidence that is objective and verifiable and therefore, an entity would need sufficient quality and quantity to support a conclusion to overcome. The Company determined that a valuation allowance was no longer required against its federal, foreign and state deferred tax assets for the portion that is more-likely-than-not to be realized. The most significant evidence that led to the reversal of the valuation allowance during the third quarter of 2022, included (i) achievement and sustained growth in our three-year cumulative pre-tax earnings, (ii) substantial total revenue and earnings growth for the retail operating segment over the last seven quarters and (iii) lack of significant asset impairment charges expected to be indicative of the Company’s retail business operations. For the three months ended December 31, 2022, there were no material changes to our core business operations that altered our prior interim conclusion to release the valuation allowance against the federal, foreign and state net deferred tax assets for the portion that is more-likely-than-not to be realized. The Company generated three-year cumulative pre-tax income of $67.3 million at December 31, 2022 despite the $118.2 million impairment charges recorded during the year ended December 31, 2022. As such, the Company released $113.4 million of its total valuation allowance for the year ended December 31, 2022, due to the positive evidence outweighing the negative evidence thereby allowing the Company to achieve the “more-likely-than-not” realization standard. This reversal is included in “Income tax benefit (expense)” in our Consolidated Statements of Operations. The Company has also maintained a valuation allowance of $31.2 million against its net deferred tax assets primarily related to foreign and state net operating loss carryforwards, excluding net operating losses (“NOLs”) that can be realized based on statutory carryback periods and the reversal of net deferred taxes related to indefinite‑lived intangibles. The Company intends to continue to maintain a valuation allowance on its net deferred tax assets until there is sufficient objectively verifiable positive evidence to support the realization of all or some portion of these deferred tax assets. In the event the Company determines that the deferred income tax assets would be realized in the future more than 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, 2022, we had federal NOL carryforwards from prior acquisitions of $96.6 million, and various state NOL carryforwards, the majority of which will expire in periods through 2035. Following theScore acquisition, the Company has the following NOL carryforwards, (i) indefinite gross U.S. federal NOL of $17.9 million, (ii) foreign NOL of $102.1 million that will expire through 2042 and (iii) state NOLs of $24 million that will expire through 2042. The tax benefit associated with these acquired NOLs is $3.8 million, $26.8 million, and $0.2 million respectively, against which a valuation allowance was recorded of $0.2 million for U.S. federal and state NOLs that will not be recognized. All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations. In general, the Company has not recognized any U.S. tax expense on undistributed foreign earnings, as we intend to reinvest and expand into new markets outside the U.S. for the foreseeable future. If our intent changes or if these earnings are needed for our U.S. operations, we would be required to accrue and pay U.S. taxes on a portion or all these undistributed earnings. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries. The undistributed foreign earnings were immaterial at December 31, 2022. For state income tax reporting, as of December 31, 2022, the Company had gross state NOL carryforwards aggregating $1.2 billion available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania, Colorado, Illinois, Iowa, Louisiana, Maryland, Michigan, Missouri, New Mexico, and localities within Ohio and Michigan. The tax benefit associated with these NOL carryforwards was $56.4 million. Due to statutorily limited NOL carryforwards and the level of earnings projections in the respective jurisdictions, a valuation allowance of $9.0 million has been recorded. If not used, the majority of the carryforwards will expire at various dates from December 31, 2022 through December 31, 2041 with the remaining being carried forward indefinitely. The domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2022, 2021, and 2020 were as follows:
| For the year ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Domestic | $ | 295.3 |  |  | $ | 606.0 |  |  | $ | (834.0) |
Foreign | (120.0) |  |  | (66.9) |  |  | (0.2) |
Total | $ | 175.3 |  |  | $ | 539.1 |  |  | $ | (834.2) |
The components of income tax benefit (expense) for the years ended December 31, 2022, 2021, and 2020 were as follows:
| For the year ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Current tax benefit (expense) |  |  |  |  |
Federal | $ | (89.0) |  |  | $ | (100.0) |  |  | $ | 47.0 |
State | (15.3) |  |  | (23.1) |  |  | 0.2 |
Foreign | — |  |  | — |  |  | (0.4) |
Total current | (104.3) |  |  | (123.1) |  |  | 46.8 |
Deferred tax benefit (expense) |  |  |  |  |
Federal | 33.7 |  |  | (11.9) |  |  | 103.6 |
State | 78.5 |  |  | 13.3 |  |  | 14.7 |
Foreign | 38.5 |  |  | 3.1 |  |  | — |
Total deferred | 150.7 |  |  | 4.5 |  |  | 118.3 |
Total income tax benefit (expense) | $ | 46.4 |  |  | $ | (118.6) |  |  | $ | 165.1 |
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, 2022, 2021, and 2020:
| For the year ended December 31,
| 2022 |  | 2021 |  | 2020
(in millions, except tax rates) | Amount |  | Amount |  | Amount
Amount of pre-tax income |  |  |  |  |
Federal statutory rate | $ | (36.8) |  |  | $ | (113.2) |  |  | $ | 175.2 |
State and local income taxes, net of federal benefits | (5.2) |  |  | (7.7) |  |  | 12.1 |
Tax law change | (10.8) |  |  | — |  |  | — |
Nondeductible expenses | (7.8) |  |  | (13.3) |  |  | (2.6) |
Goodwill impairment losses | — |  |  | — |  |  | (19.0) |
Compensation | (6.2) |  |  | 6.5 |  |  | 20.5 |
Foreign | 0.9 |  |  | 0.9 |  |  | (0.4) |
Valuation allowance | 113.4 |  |  | (5.9) |  |  | (32.7) |
Tax credits | 4.6 |  |  | 5.8 |  |  | 10.0 |
Equity investment write-off | — |  |  | 11.3 |  |  | — |
Other | (5.7) |  |  | (3.0) |  |  | 2.0 |
Income tax benefit (expense) | $ | 46.4 |  |  | $ | (118.6) |  |  | $ | 165.1 |
Effective Tax Rate | (26.5) | % |  | 22.0 | % |  | 19.8 | %
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, 2020 | $ | 36.0 |
Additions based on prior year positions | 1.2 |
Decreases due to settlements and/or reduction in reserves | (0.9) |
Unrecognized tax benefits as of December 31, 2020 | 36.3 |
Additions based on prior year positions | 3.8 |
Decreases due to settlements and/or reduction in reserves | (0.1) |
Unrecognized tax benefits as of December 31, 2021 | 40.0 |
Additions based on prior year positions | 2.9 |
Decreases due to settlements and/or reduction in reserves | (0.2) |
Unrecognized tax benefits as of December 31, 2022 | $ | 42.7 |
During the year ended December 31, 2022, we did not record any new tax reserves, and accrued interest or penalties related to current year uncertain tax positions. Regarding prior year tax positions, we recorded $3.7 million of tax reserves and accrued interest and reversed $0.2 million of previously recorded tax reserves and accrued interest for uncertain tax positions. As of December 31, 2022 and 2021, unrecognized tax benefits, inclusive of accruals for income tax related penalties and interest, of $46.0 million and $42.3 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 $3.3 million in connection with its uncertain tax positions for the year ended December 31, 2022. The liability for unrecognized tax benefits as of December 31, 2022 and 2021 included $36.3 million and $33.4 million, respectively, of tax positions that, if reversed, would affect the effective tax rate. During the years ended December 31, 2022, 2021 and 2020, we recognized $0.6 million, $0.7 million and $0.5 million, respectively, of interest and penalties, net of deferred taxes. In addition, the Company had no reductions in previously accrued interest and penalties for the years ended December 31, 2022 and 2021. 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 Operations. 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, 2022, the Company has open tax years 2019 through 2021 that could be subject to examination for U.S. federal income taxes. In addition, we are subject to state and local income tax examinations for various tax years in the taxing jurisdictions in which we operate. Such audits could result in increased tax liabilities, interest and penalties. While the Company believes its tax positions are appropriate, we cannot assure the outcome will remain consistent with our expectation. The Company believes we have adequately reserved for potential audit exposures of uncertain tax positions. In the event the final outcome of these matters is different than the amounts recorded, such differences will impact our income tax provision in the period in which the determination is made. As of December 31, 2022 and 2021, prepaid income taxes of $15.2 million and $42.5 million, respectively, were included in “Prepaid expenses” within the Company’s Consolidated Balance Sheets. Tax Legislation The Pennsylvania House Bill 1342. On July 8, 2022, the Bill was signed into law that reduces the corporate income tax rate over the next nine years from the current rate of 9.99% to 4.99% by 2031. The Company assessed the impact of the law change and recorded an additional income tax expense of $10.0 million in its Consolidated Statements of Operations for the period ended December 31, 2022. Inflation Reduction Act. On August 16, 2022, The Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA contains several provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1.0 billion adjusted financial statement income over a three-year period effective for tax years beginning after December 31, 2022. A CAMT credit would also be allowed to offset regular federal tax in future years. The IRA also includes a 1% excise tax on corporate stock repurchases after January 1, 2023. Although the Company is assessing the impact of the law change and waiting on further guidance from the Department of Treasury, the Company does not believe that these new provisions will have a material impact on its Consolidated Financial Statements.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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