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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes Provision for income taxes consists of the following for the periods presented (in thousands):
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (18,215 | ) |  | $ | 18,954 |  |  | $ | 13,962 |
State |  |  | 4,981 |  |  |  | 3,440 |  |  |  | 1,113 |
Foreign |  |  | 732 |  |  |  | 1,602 |  |  |  | 1,569 |
Total current |  |  | (12,502 | ) |  |  | 23,996 |  |  |  | 16,644 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 46,442 |  |  |  | (1,572 | ) |  |  | (7,176 | )
State |  |  | 564 |  |  |  | 2,509 |  |  |  | (10 | )
Foreign |  |  | 6,102 |  |  |  | 152 |  |  |  | 449 |
Total deferred provision |  |  | 53,108 |  |  |  | 1,089 |  |  |  | (6,737 | )
Provision for income taxes |  | $ | 40,606 |  |  | $ | 25,085 |  |  | $ | 9,907 |
A reconciliation of the U.S. federal statutory rate to the effective tax rate is as follows for the periods presented:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. federal statutory rate on income before income taxes |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Impact of foreign operations |  |  | (0.5 | ) |  |  | 1.1 |  |  |  | 0.6 |
Effects of statutory rate change |  |  | 3.2 |  |  |  | — |  |  |  | — |
Impacts of SAB 118 |  |  | — |  |  |  | — |  |  |  | (16.4 | )
State income taxes, net of federal tax effect |  |  | 5.1 |  |  |  | 5.8 |  |  |  | 3.4 |
Permanent differences |  |  | 1.5 |  |  |  | 3.3 |  |  |  | 9.2 |
Change in valuation allowance |  |  | 127.4 |  |  |  | 0.6 |  |  |  | (0.3 | )
Unrecognized tax benefit release |  |  | (0.4 | ) |  |  | 0.5 |  |  |  | (0.9 | )
Federal tax credits |  |  | (1.0 | ) |  |  | (2.2 | ) |  |  | (2.3 | )
Basis recognition related to foreign divestiture |  |  | (129.9 | ) |  |  | — |  |  |  | — |
CARES Act impacts to net operating losses |  |  | (4.5 | ) |  |  | — |  |  |  | — |
Other |  |  | 0.2 |  |  |  | 1.9 |  |  |  | 0.4 |
Effective income tax rate |  |  | 22.1 | % |  |  | 32.0 | % |  |  | 14.7 | %
For the year ended December 31, 2020, the provision for income taxes was $40.6 million, reflecting an effective tax rate of 22.1%, compared to $25.1 million, reflecting an effective tax rate of 32.0%, for the year ended December 31, 2019. The decrease in the effective tax rate for the year ended December 31, 2020 was primarily attributable to the release of a state valuation allowance and permanent benefits generated from the application of federal net operating loss carryback provisions within the CARES Act. The federal net operating loss legislation within the CARES Act allows net operating losses generated in tax years 2018 through 2020 to be carried back at a 35% tax rate to offset income in tax years prior to 2018 (21% for tax years after 2017), resulting in a permanent benefit. The domestic and foreign components of income from continuing operations before income taxes for continuing operations are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Foreign |  | $ | 9,904 |  |  | $ | 6,070 |  |  | $ | 9,947 |
Domestic |  |  | 173,893 |  |  |  | 72,325 |  |  |  | 57,448 |
Income from continuing operations before income taxes |  | $ | 183,797 |  |  | $ | 78,395 |  |  | $ | 67,395 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities of the Company at December 31, 2020 and December 31, 2019 were as follows (in thousands):
|  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses and tax credit carryforwards – federal and state |  | $ | 7,682 |  |  | $ | 9,913 |
Bad debt allowance |  |  | 1,243 |  |  |  | 996 |
Accrued compensation and severance |  |  | 20,889 |  |  |  | 14,241 |
Insurance reserves |  |  | 18,497 |  |  |  | 16,485 |
Leases |  |  | 846 |  |  |  | 800 |
Accrued expenses |  |  | 11,817 |  |  |  | 1,020 |
Interest carryforwards |  |  | 3,374 |  |  |  | 40,792 |
Lease right-of-use liabilities |  |  | 24,402 |  |  |  | 26,375 |
Fixed asset basis difference |  |  | — |  |  |  | 14,714 |
Basis in foreign subsidiary |  |  | 239,073 |  |  |  | — |
Other assets |  |  | 13,251 |  |  |  | 2,777 |
Total gross deferred tax assets |  |  | 341,074 |  |  |  | 128,113 |
Less: valuation allowance |  |  | (241,225 | ) |  |  | (6,859 | )
Deferred tax assets |  |  | 99,849 |  |  |  | 121,254 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed asset basis difference |  |  | (5,553 | ) |  |  | — |
Prepaid items |  |  | (2,960 | ) |  |  | (2,163 | )
Intangible assets |  |  | (115,196 | ) |  |  | (100,881 | )
Lease right-of-use assets |  |  | (22,948 | ) |  |  | (24,898 | )
Other liabilities |  |  | — |  |  |  | (12,793 | )
Total deferred tax liabilities |  |  | (146,657 | ) |  |  | (140,735 | )
Total net deferred tax liability |  | $ | (46,808 | ) |  | $ | (19,481 | )
The Company has established a deferred tax asset related to the Company’s investment in a foreign subsidiary in the amount of $239.1 million, resulting from the divestiture of the U.K. business. This deferred tax asset was not recognized in prior years under the exception within ASC 740-30-25-9 that limits the recognition of deferred tax assets for the excess of tax basis over book basis in an investment in a subsidiary to only instances when it is apparent that the difference will reverse in the foreseeable future. As a result of the divestiture of the U.K. business, and the classification of the U.K. business as discontinued operations during the year, the Company no longer meets this exception and accordingly recognized the deferred tax asset as a component of income tax expense. Further, as this deferred tax asset is expected to result in a capital loss upon the finalization of the divestiture, the Company has concluded a full valuation allowance of $239.1 million is necessary due to the limitations in realizing the asset via offsetting capital gains in the future. The recognition of the valuation allowance on this deferred tax asset has also been recognized as a component of income tax expense. As of December 31, 2020, no deferred taxes have been provided on the accumulated undistributed earnings of our continuing foreign operations within Puerto Rico. An actual repatriation of earnings from our foreign operations could still be subject to additional foreign withholding and U.S. state taxes. Based upon evaluation of our foreign operations, undistributed earnings are intended to remain permanently reinvested to finance anticipated future growth and expansion, and accordingly, deferred taxes have not been recorded. If undistributed earnings of our foreign operations were not considered permanently reinvested as of December 31, 2020, an immaterial amount of additional deferred taxes would have been recorded. Our foreign subsidiary in Puerto Rico has been granted a tax exemption for which a tax credit of up to 15% of eligible payroll expenses is available to offset up to 50% of the income taxes attributed to that entity. The impact of this tax exemption is not material to the tax provision. The Company records a valuation allowance to reduce its net deferred tax assets to the amount that is more likely than not to be realized. At December 31, 2020 and 2019, the Company carried a valuation allowance against deferred tax assets of $241.2 million and $6.9 million, respectively. These amounts are primarily related to deferred tax assets related to the Company’s investment in a foreign subsidiary and certain state net operating losses. As of December 31, 2020 and 2019, the Company had no federal net operating loss carryforwards. The foreign net operating loss carryforwards at December 31, 2020 and 2019 are approximately $0.1 million and $0.1 million, respectively, and have no expiration. The Company has state net operating loss carryforwards at December 31, 2020 and 2019 of approximately $170.0 million and $220.8 million, respectively. These net operating loss carryforwards, if not used to offset future taxable income, will expire from 2022 to 2035. In addition, the Company has certain state tax credits of $0.6 million which will begin to expire in 2030 if not utilized. Income taxes receivable was $0.9 million and $4.8 million at December 31, 2020 and 2019, respectively, and was included in other current assets in the consolidated balance sheets. Income taxes payable of $16.3 million at December 31, 2020 was included in other accrued liabilities in the consolidated balance sheets. The Company recorded income taxes payable related to unrecognized tax benefits of $2.5 million and $3.1 million at December 31, 2020 and December 31, 2019, respectively. These amounts are inclusive of any interest and penalties, which is included in other liabilities on the consolidated balance sheets. A reconciliation of the beginning and ending amount of unrecognized income tax benefits, net of the federal benefit, is as follows (in thousands):
|  | 2020 |  |  | 2019 |
Balance at January 1 |  | $ | 2,441 |  |  | $ | 713 |
Additions based on tax positions related to the current year |  |  | — |  |  |  | 3,001 |
Reductions as a result of the lapse of applicable statutes of limitations and settlements with tax authorities |  |  | (381 | ) |  |  | (1,273 | )
Balance at December 31 |  | $ | 2,060 |  |  | $ | 2,441 |
At December 31, 2020 and 2019, the cumulative amounts of interest and penalties recognized were $0.5 million and $0.6 million, respectively. Unrecognized tax benefits of $0.4 million would affect the effective rate if recognized. It is possible the amount of unrecognized tax benefit could change in the next twelve months as a result of a lapse of the statute of limitations and settlements with taxing authorities; however, management does not anticipate the change will have a material impact on the Company’s consolidated financial statements. The Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The Company and its subsidiaries file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar year 2017 through 2019. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. While no other foreign jurisdictions are presently under examination, the Company may be subject to examination for calendar years 2016 through 2019. Generally, for state tax purposes, the Company’s 2014 through 2019 tax years remain open for examination by the tax authorities. At the date of this report there were no audits or inquires that had progressed sufficiently to predict their ultimate outcome. On December 22, 2017, Public Law 115-97, informally referred to as The Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The Tax Act provided for significant changes to the U.S. tax code that has impacted businesses. ASC 740 “Income Taxes” (“ASC 740”) requires the Company to recognize the effect of tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) which allowed the Company to record provisional amounts during a measurement period similar to the measurement period used when accounting for business combinations. As part of the analysis of the Tax Act, the Company made an adjustment regarding the treatment of foreign dividends of $10.9 million during the year ended December 31, 2018, impacting the effective tax rate.

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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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