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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our income before income taxes was subject to taxes in the following jurisdictions for the following periods (in millions):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
United States | $ | 3.5 |  |  | $ | 97.8 |  |  | $ | 295.3 |
Foreign | 31.3 |  |  | 44.1 |  |  | 55.3 |
Total | $ | 34.8 |  |  | $ | 141.9 |  |  | $ | 350.6 |
The provision (benefit) for income taxes is comprised of (in millions):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Current tax provision: |  |  |  |  |
Federal | $ | 7.0 |  |  | $ | 9.8 |  |  | $ | 2.9 |
State | 7.1 |  |  | 5.7 |  |  | 2.3 |
Foreign | 6.8 |  |  | 6.4 |  |  | 14.6 |
| 20.9 |  |  | 21.9 |  |  | 19.8 |
Deferred tax provision (benefit): |  |  |  |  |
Federal | (36.3) |  |  | (42.6) |  |  | 11.0 |
State | (37.0) |  |  | 7.9 |  |  | 7.2 |
Foreign | (7.8) |  |  | (3.2) |  |  | (9.4) |
| (81.1) |  |  | (37.9) |  |  | 8.8 |
Income tax (benefit) provision | $ | (60.2) |  |  | $ | (16.0) |  |  | $ | 28.6 |
As described below, the most significant item impacting our tax provision in 2023 is the release of valuation allowances which were recorded on our U.S. deferred tax assets as a result of the merger with Topgolf. This created a large deferred tax benefit recorded to tax provision in 2023. Significant components of our deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows (in millions):
| December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Operating loss carryforwards | $ | 132.3 |  |  | $ | 135.9 |
Tax credit carryforwards | 58.7 |  |  | 57.3 |
ASC Topic 842 lease liability | 461.1 |  |  | 441.6 |
Deemed landlord financing | 252.3 |  |  | 167.5 |
Other | 103.9 |  |  | 90.3 |
Total deferred tax assets | 1,008.3 |  |  | 892.6 |
Valuation allowance for deferred tax assets | (47.7) |  |  | (100.2) |
Deferred tax assets, net of valuation allowance | 960.6 |  |  | 792.4 |
Deferred tax liabilities: |  |  |
Basis difference related to fixed assets | (209.9) |  |  | (146.6) |
Basis difference related to intangible assets with an indefinite life | (337.1) |  |  | (332.4) |
ASC Topic 842 ROU assets | (425.3) |  |  | (414.7) |
Other | (9.3) |  |  | (0.1) |
Total deferred tax liabilities | (981.6) |  |  | (893.8) |
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows: |  |  |
Non-current deferred tax assets | 15.7 |  |  | 16.1 |
Non-current deferred tax liabilities | (36.7) |  |  | (117.5) |
Deferred tax liabilities, net | $ | (21.0) |  |  | $ | (101.4) |
The net change in net deferred taxes in 2023 of $80.4 million is primarily comprised of the release of valuation allowances on our 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 our generating sufficient taxable income during the periods in which the temporary differences become realizable. In accordance with the applicable accounting rules, we maintain 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, we consider all available positive and negative evidence, including prior operating results, the nature and reason for any losses, our 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 our best judgment at the time made based on current and projected circumstances and conditions. During the first quarter of fiscal year 2021, we established a significant valuation allowance on our U.S. deferred tax assets as we were in a cumulative loss position immediately following the merger with Topgolf. During the second quarter of 2023, pursuant to an analysis of all positive and negative evidence, we determined that the majority of our U.S. deferred tax assets were more likely than not to be realized and reversed $50.8 million of the valuation allowance against those deferred tax assets. The remaining valuation allowance on our U.S. deferred tax assets primarily relates to state net operating loss carryforwards and credits that we estimate may not be able to be utilized in future periods. With respect to non-U.S. entities, valuation allowances have been recorded against certain tax attributes for which management believes it is not more likely than not that they will be realized. It is possible that within the next 12 months sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance attributable to non-US entities will no longer be needed, which would result in a non-cash tax benefit. As of December 31, 2023, we had federal and state income tax credit carryforwards of $46.6 million and $33.7 million, respectively, which will expire if unused at various dates beginning on December 31, 2028. Such carryforwards expire as follows (in millions):
U.S. foreign tax credit | $ | 2.2 |  |  | 2028-2033
U.S. business tax credits | $ | 44.4 |  |  | 2030-2043
State business tax credits - indefinite lived | $ | 29.4 |  |  | Do not expire
State business tax credits - definite lived | $ | 4.3 |  |  | 2032-2047
As of December 31, 2023, we had federal, Germany, and United Kingdom net operating losses (“NOLs”) carryforwards of $389.3 million and interest expense carryforwards of $49.9 million, respectively. Such carryforwards expire as follows (in millions):
U.S. loss carryforwards - definite lived | $ | 14.7 |  |  | 2028-2037
U.S. loss carryforwards - indefinite lived | $ | 179.2 |  |  | Do not expire
U.S. interest expense carryforwards | $ | 49.9 |  |  | Do not expire
Germany loss carryforwards | $ | 110.8 |  |  | Do not expire
United Kingdom loss carryforwards | $ | 84.6 |  |  | Do not expire
Our ability to utilize the NOLs and credits to offset future taxable income may be deferred or limited significantly if we 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 our stock by “5-percent shareholders” (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. We 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 our federal NOLs and tax credits are limited to an annual Section 382 limitation on the utilization of our tax attributes. This change is not expected to have any material effect on our 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, our 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,
| 2023 |  | 2022 |  | 2021
Statutory U.S. tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of U.S. tax benefit | (67.7) | % |  | 7.1 | % |  | 2.1 | %
Foreign income taxed at other than U.S. statutory rate | (26.0) | % |  | (8.9) | % |  | (3.3) | %
Federal tax credits | (46.6) | % |  | (8.7) | % |  | (2.0) | %
Revaluation of Company stock attributable to Topgolf merger | — | % |  | — | % |  | (15.1) | %
Other non-deductible expenses | 6.0 | % |  | 1.0 | % |  | 0.7 | %
Non-deductible compensation | 17.9 | % |  | 4.5 | % |  | 1.4 | %
U.S. Foreign tax inclusion | 0.4 | % |  | 1.0 | % |  | 0.5 | %
Foreign derived intangible income deduction | (7.5) | % |  | (3.0) | % |  | (2.1) | %
Stock compensation excess tax benefits | — | % |  | — | % |  | (1.6) | %
Impact of uncertain tax positions | 8.5 | % |  | (0.8) | % |  | (2.2) | %
Change in deferred tax valuation allowance | (88.5) | % |  | (23.0) | % |  | 7.8 | %
Withholding tax impacts on foreign subsidiaries | 5.5 | % |  | — | % |  | — | %
Other | 4.3 | % |  | (1.5) | % |  | 1.0 | %
Effective tax rate | (172.7) | % |  | (11.3) | % |  | 8.2 | %
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| 2023 |  | 2022 |  | 2021
Balance at January 1 | $ | 26.2 |  |  | $ | 26.6 |  |  | $ | 28.3 |
Additions based on tax positions related to the current year | 1.8 |  |  | 1.7 |  |  | 1.7 |
Additions for tax positions of prior years | 2.0 |  |  | 1.2 |  |  | 0.5 |
Reductions for tax positions of prior years | — |  |  | (1.5) |  |  | (0.9) |
Settlement of tax audits | — |  |  | — |  |  | (2.7) |
Current year acquisitions | — |  |  | — |  |  | 6.7 |
Reductions due to lapsed statute of limitations | (0.7) |  |  | (1.8) |  |  | (7.0) |
Balance at December 31 | $ | 29.3 |  |  | $ | 26.2 |  |  | $ | 26.6 |
As of December 31, 2023, the gross liability for income taxes associated with uncertain tax benefits was $29.3 million. This liability could be reduced by $5.1 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 $8.1 million of deferred taxes. The net amount of $16.1 million, if recognized, would affect our financial statements and favorably affect our effective income tax rate. We expect the unrecognized tax benefit liabilities to decrease approximately $3.6 million during the next 12 months. We recognize interest and/or penalties related to income tax matters in income tax provision. We recognized a tax benefit of $0.1 million, $0.3 million, and $0.6 million, for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, the gross amount of accrued interest and penalties included in income taxes payable in the accompanying consolidated balance sheets were each $2.9 million. We or one of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various U.S. states and foreign jurisdictions. We are generally no longer subject to income tax examinations by tax authorities in our major jurisdictions as follows:
Major Tax Jurisdiction |  | Years No Longer Subject to Audit
U.S. Federal |  | 2010 and prior
Germany |  | 2013 and prior
Japan |  | 2017 and prior
South Korea |  | 2021 and prior
United Kingdom |  | 2018 and prior
As of December 31, 2023, we had $177.2 million of undistributed foreign earnings and profits. Pursuant to the Tax Act, our 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. We have 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 reinvested earnings on our overall tax liability to be insignificant. For jurisdictions in which we are not permanently reinvested, we have estimated and accrued $3.3 million for the net impact on our overall tax liability.

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