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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s income (loss) before income taxes was subject to taxes in the following jurisdictions for the following periods (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
United States | $ | 97.8 |  |  | $ | 295.3 |  |  | $ | 68.9 |
Foreign | 44.1 |  |  | 55.3 |  |  | (196.4) |
| $ | 141.9 |  |  | $ | 350.6 |  |  | $ | (127.5) |
The expense (benefit) for income taxes is comprised of (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Current tax provision: |  |  |  |  |
Federal | $ | 9.8 |  |  | $ | 2.9 |  |  | $ | 1.7 |
State | 5.7 |  |  | 2.3 |  |  | 1.5 |
Foreign | 6.4 |  |  | 14.6 |  |  | 5.3 |
| 21.9 |  |  | 19.8 |  |  | 8.5 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | (42.6) |  |  | 11.0 |  |  | 8.6 |
State | 7.9 |  |  | 7.2 |  |  | 5.2 |
Foreign | (3.2) |  |  | (9.4) |  |  | (22.9) |
| (37.9) |  |  | 8.8 |  |  | (9.1) |
Income tax (benefit) provision | $ | (16.0) |  |  | $ | 28.6 |  |  | $ | (0.6) |
On March 8, 2021, the Company acquired Topgolf through a non-taxable stock acquisition in a share exchange. The purchase price of Topgolf at acquisition was $3,014.2 million. The Company recorded a deferred tax liability of $250.0 million related to the acquired intangibles, offset by $118.0 million of other acquired deferred tax assets, after consideration of acquired valuation allowances. As described in Note 6, during the three months ended March 31, 2022, the Company finalized its fair value determination of the acquired assets and assumed liabilities and completed its assessment of the purchase price allocation. Due to finalized valuations of acquired assets and liabilities, the Company recorded an additional goodwill adjustment of $12.2 million, a decrease in valuation allowances accrued of $2.8 million, and a discrete income tax benefit of $15.0 million during the three months ended March 31, 2022. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (in millions):
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Operating loss carryforwards | $ | 135.9 |  |  | $ | 149.9 |
Tax credit carryforwards | 57.3 |  |  | 64.3 |
ASC Topic 842 lease liability | 441.6 |  |  | 396.4 |
Deemed landlord financing | 167.5 |  |  | 115.1 |
Other | 90.3 |  |  | 72.7 |
Total deferred tax assets | 892.6 |  |  | 798.4 |
Valuation allowance for deferred tax assets | (100.2) |  |  | (120.5) |
Deferred tax assets, net of valuation allowance | 792.4 |  |  | 677.9 |
Deferred tax liabilities: |  |  |
Basis difference related to fixed assets | (146.6) |  |  | (105.5) |
Basis difference related to intangible assets with an indefinite life | (332.4) |  |  | (331.2) |
ASC Topic 842 ROU assets | (414.7) |  |  | (375.7) |
Other | (0.1) |  |  | (7.9) |
Total deferred tax liabilities | (893.8) |  |  | (820.3) |
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows: |  |  |
Non-current deferred tax assets | 16.1 |  |  | 21.2 |
Non-current deferred tax liabilities | (117.5) |  |  | (163.6) |
Net deferred tax (liabilities)/ assets | $ | (101.4) |  |  | $ | (142.4) |
The net change in net deferred taxes in 2022 of $41.0 million is primarily comprised the release of valuation allowances on the Company’s U.S. deferred tax assets. Deferred tax assets and liabilities result from temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are anticipated to be in effect at the time the differences are expected to reverse. The realization of the deferred tax assets, including loss and credit carry forwards, is subject to the Company generating sufficient taxable income during the periods in which the temporary differences become realizable. In accordance with the applicable accounting rules, the Company maintains a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax assets will not be realized. In evaluating whether a valuation allowance is required under such rules, the Company considers all available positive and negative evidence, including prior operating results, the nature and reason for any losses, its forecast of future taxable income, and the dates on which any deferred tax assets are expected to expire. These assumptions require a significant amount of judgment, including estimates of future taxable income. These estimates are based on the Company’s best judgment at the time made based on current and projected circumstances and conditions. The Company has evaluated all available positive and negative evidence and as a result of the Topgolf merger and the fact that Topgolf’s losses exceed the Company’s income in recent years, the Company has determined that it is not more likely than not that a portion of its U.S. deferred tax assets will be realized. The valuation allowance on the Company’s U.S. deferred tax assets as of December 31, 2022 and 2021 relate primarily to federal and state deferred tax assets for tax attributes that the Company estimates are not more likely than not to be utilized prior to expiration. However, given the Company’s more recent earnings history, management believes that it is possible that within the next 12 months sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets with a potential corresponding decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release would be predicated on continued profitability of the Company combined with the continued profitability management believes the Company can maintain. With respect to non-U.S. entities, there continues to be sufficient positive evidence to conclude that realization of the Company’s deferred tax assets is more likely than not under applicable accounting rules, and therefore no significant valuation allowances have been established. As of December 31, 2022, the Company had federal and state income tax credit carryforwards of $46.6 million and $29.0 million, respectively, which will expire if unused at various dates beginning on December 31, 2026. Such carryforwards expire as follows (in millions):
U.S. foreign tax credit | $ | 2.0 |  |  | 2027-2032
U.S. research tax credit | $ | 8.4 |  |  | 2026-2042
U.S. business tax credits | $ | 36.2 |  |  | 2035-2042
State investment tax credits | $ | 2.3 |  |  | Do not expire
State research tax credits - definite lived | $ | 1.4 |  |  | 2031-2034
State research tax credits - indefinite lived | $ | 25.3 |  |  | Do not expire
As of December 31, 2022, the Company had federal and state net operating loss (“NOLs”) and interest expense carryforwards of $544.1 million and $17.3 million, respectively. Such carryforwards expire as follows (in millions):
U.S. loss carryforwards - definite lived | $ | 96.8 |  |  | 2028-2037
U.S. interest expense carryforwards - indefinite lived | $ | 17.3 |  |  | Do not expire
U.S. loss carryforwards - indefinite lived | $ | 215.9 |  |  | Do not expire
State loss carryforwards | $ | 231.4 |  |  | 2023-2040
The Company’s ability to utilize the NOLs and credits to offset future taxable income may be deferred or limited significantly if the Company were to experience an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an ownership change will occur if there is a cumulative change in ownership of the Company’s stock by “5-percent shareholders” (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. The Company determined that an ownership change has occurred for purposes of Section 382 on the date of the Topgolf merger. Topgolf experienced an ownership change in November 2021. As such, all of the Company’s federal NOLs and credits are limited to an annual Section 382 limitation on the utilization of its tax attributes. This change is not expected to have any material effect on the Company’s results of operations or statements of financial position. In addition, Topgolf’s NOLs are presently expected to be subject to “separate return limitation year” limitations. Separate return limitation year NOLs can only be used in years that both the consolidated group and the entity that created such NOLs have taxable income, which may limit our ability to utilize Topgolf’s NOLs in the future. Therefore, the Company’s ability to utilize Topgolf tax attributes to offset future taxable income may be deferred or limited significantly. A reconciliation of the effective tax rate on income or loss and the statutory tax rate is as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Statutory U.S. tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of U.S. tax benefit | 7.1 | % |  | 2.1 | % |  | (4.1) | %
Foreign income taxed at other than U.S. statutory rate | (8.9) | % |  | (3.3) | % |  | 7.0 | %
Federal tax credits | (8.7) | % |  | (2.0) | % |  | 2.8 | %
Goodwill impairment | — | % |  | — | % |  | (24.5) | %
Revaluation of Company stock attributable to Topgolf merger | — | % |  | (15.1) | % |  | — | %
Other non-deductible expenses | 1.0 | % |  | 0.7 | % |  | (1.7) | %
Non-deductible compensation | 4.5 | % |  | 1.4 | % |  | (0.7) | %
U.S. Foreign tax inclusion | 1.0 | % |  | 0.5 | % |  | (0.4) | %
Foreign derived intangible income deduction | (3.0) | % |  | (2.1) | % |  | 1.1 | %
Stock compensation excess tax benefits | — | % |  | (1.6) | % |  | 1.4 | %
Impact of uncertain tax positions | (0.8) | % |  | (2.2) | % |  | (1.6) | %
Change in deferred tax valuation allowance | (23.0) | % |  | 7.8 | % |  | (0.7) | %
Other | (1.5) | % |  | 1.0 | % |  | 0.8 | %
Effective tax rate | (11.3) | % |  | 8.2 | % |  | 0.4 | %
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| 2022 |  | 2021 |  | 2020
Balance at January 1 | $ | 26.6 |  |  | $ | 28.3 |  |  | $ | 26.0 |
Additions based on tax positions related to the current year | 1.7 |  |  | 1.7 |  |  | 3.1 |
Additions for tax positions of prior years | 1.2 |  |  | 0.5 |  |  | 0.5 |
Reductions for tax positions of prior years | (1.5) |  |  | (0.9) |  |  | (0.2) |
Settlement of tax audits | — |  |  | (2.7) |  |  | — |
Current year acquisitions | — |  |  | 6.7 |  |  | — |
Reductions due to lapsed statute of limitations | (1.8) |  |  | (7.0) |  |  | (1.1) |
Balance at December 31 | $ | 26.2 |  |  | $ | 26.6 |  |  | $ | 28.3 |
As of December 31, 2022, the gross liability for income taxes associated with uncertain tax benefits was $26.2 million. This liability could be reduced by $5.3 million of offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, which was recorded as a long-term income tax receivable, as well as $10.3 million of deferred taxes. The net amount of $10.6 million, if recognized, would affect the Company’s financial statements and favorably affect the Company’s effective income tax rate. The Company does not expect changes to the unrecognized tax benefits in the next 12 months to have a material impact on its results of operations or its financial position. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company recognized a tax benefit of $0.3 million, $0.6 million, and $0.4 million, for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022 and 2021, the gross amount of accrued interest and penalties included in income taxes payable in the accompanying consolidated balance sheets was $2.9 million and $3.2 million, respectively. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in its major jurisdictions as follows:
Major Tax Jurisdiction |  | Years No Longer Subject to Audit
U.S. Federal |  | 2010 and prior
California (U.S.) |  | 2008 and prior
Germany |  | 2013 and prior
Japan |  | 2016 and prior
South Korea |  | 2016 and prior
United Kingdom |  | 2018 and prior
As of December 31, 2022, the Company had $180.5 million of undistributed foreign earnings and profits. Pursuant to the Tax Act, the Company’s undistributed foreign earnings and profits were deemed repatriated as of December 31, 2017 and subsequent foreign profits are not expected to be subject to U.S. income tax upon repatriation. The Company has not provided deferred tax liabilities for foreign withholding taxes and certain state income taxes on the undistributed earnings and profits from certain non-U.S. subsidiaries that will be permanently reinvested outside the United States and expects the net impact of any future repatriations of permanently invested earnings on the Company’s overall tax liability to be insignificant. For jurisdictions in which the Company is not permanently reinvested, the Company has estimated and accrued $1.8 million for the net impact on the Company’s overall tax liability.

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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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