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Income Taxes | 9 Months Ended
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Sep. 30, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 11. Income Taxes
| (a) | Income Tax Expense
For the three months ended September 30, 2021, the Company recorded income tax expense of $4.4 million (2020 — income tax expense of $19.3 million). For the three months ended September 30, 2021, the Company’s effective tax rate of (226.6)% varies from the Canadian statutory tax rate of 26.2% that was in effect during the period as follows:
| Three Months Ended |  |  | Three Months Ended
| September 30, 2021 |  |  | September 30, 2020
(In thousands of U.S. Dollars, except rates) | Amount |  |  | Rate |  |  | Amount |  |  | Rate
Income tax benefit at combined statutory rates | $ | 509 |  |  | 26.2% |  |  | $ | 7,279 |  |  | 26.2%
Adjustments resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |
Unrealized investment gains not taxable |  | — |  |  |  | — |  |  |  | 420 |  |  | 1.5%
Increase of valuation allowance |  | (4,270 | ) |  | (219.8%) |  |  |  | (23,707 | ) |  | (85.3%)
Changes to tax reserves |  | (215 | ) |  | (11.1%) |  |  |  | (181 | ) |  | (0.7%)
Withholding taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries |  | — |  |  |  | — |  |  |  | (186 | ) |  | (0.7%)
Reduction in tax benefits resulting from the vesting of share-based compensation |  | (4 | ) |  | (0.2%) |  |  |  | (38 | ) |  | (0.1%)
Other non-deductible/non-taxable items |  | (422 | ) |  | (21.7%) |  |  |  | (2,936 | ) |  | (10.5%)
Income tax expense | $ | (4,402 | ) |  | (226.6%) |  |  | $ | (19,349 | ) |  | (69.6%)
For the three months ended September 30, 2021, the Company recorded an additional $4.3 million valuation allowance against deferred tax assets in jurisdictions where management could not reliably forecast that future tax liabilities would arise, principally due to the uncertainties around the long-term impact of the COVID-19 global pandemic. Accordingly, the tax benefit associated with the current period losses in these jurisdictions is not ultimately reflected in the Company’s Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2021, the Company recorded income tax expense of $9.4 million (2020 — $24.6 million). For the nine months ended September 30, 2021, the Company’s effective tax rate of (69.5)% varies from the Canadian statutory tax rate of 26.2% that was in effect during the period as follows:
| Nine Months Ended |  | Nine Months Ended |
| September 30, 2021 |  | September 30, 2020 |
(In thousands of U.S. Dollars, except rates) | Amount |  |  | Rate |  | Amount |  |  | Rate |
Income tax benefit at combined statutory rates | $ | 3,548 |  |  | 26.2% |  | $ | 29,201 |  |  | 26.2% |
Adjustments resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |
Realized and unrealized investment gains (losses) not taxable |  | 1,367 |  |  | 10.1% |  |  | (239 | ) |  | (0.2%) |
Increase of valuation allowance |  | (14,248 | ) |  | (105.2%) |  |  | (23,706 | ) |  | (21.3%) |
Changes to tax reserves |  | 1,234 |  |  | 9.1% |  |  | (4,978 | ) |  | (4.5%) |
Withholding taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries |  | (547 | ) |  | (4.0%) |  |  | (18,661 | ) |  | (16.7%) |
Increase in tax benefits resulting from the vesting of share-based compensation |  | 709 |  |  | 5.2% |  |  | 33 |  |  |  | — |
Other non-deductible/non-taxable items |  | (1,479 | ) |  | (10.9%) |  |  | (6,256 | ) |  | (5.6%) |
Income tax expense | $ | (9,416 | ) |  | (69.5%) |  | $ | (24,606 | ) |  | (22.1%) |
As of September 30, 2021, the Company’s Condensed Consolidated Balance Sheets include net deferred income tax assets of $18.7 million, net of a valuation allowance of $45.5 million (December 31, 2020 — $18.0 million, net of a valuation allowance of $28.8 million). The $16.7 million valuation allowance change recorded during the nine months ended September 30, 2021 is reflected within Income Tax Expense in the Company’s Condensed Consolidated Statements of Operations ($14.2 million) and within Shareholder’s Equity on the Company’s Condensed Consolidated Balance Sheets ($2.5 million). The valuation allowance is expected to reverse at the point in time when management determines it is more likely than not that the Company will incur sufficient tax liabilities to allow it to utilize the deferred tax assets against which the valuation allowance is recorded. Despite the valuation allowance recorded against its deferred tax assets, the Company remains entitled to benefit from tax attributes which currently have a valuation allowance applied to them. During the three and nine months ended September 30, 2021, $20.4 million of historical earnings from a subsidiary in China were repatriated and, as a result $2.0 million of foreign withholding taxes were paid in the period (2020 — $nil).
| (b) | Income Tax Effect on Other Comprehensive (Loss) Income
For the three and nine months ended September 30, 2021 and 2020, the income tax expense related to the following items in Other Comprehensive (Loss) Income are:
| Three Months Ended | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(In thousands of U.S. Dollars) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Unrealized change in cash flow hedging instruments |  | $ | 199 |  |  | $ | (160 | ) |  |  | $ | 42 |  |  |  | $ | 235 |
Realized change in cash flow hedging instruments |  |  | 82 |  |  |  | (29 | ) |  |  |  | 358 |  |  |  |  | (211 | )
Reclassification of unrealized change in ineffective cash flow hedging instruments |  |  | 7 |  |  |  | — |  |  |  |  | 83 |  |  |  |  | — |
Defined benefit and postretirement benefit plans |  |  | (12 | ) |  |  | — |  |  |  |  | (37 | ) |  |  |  | 40 |
|  | $ | 276 |  |  | $ | (189 | ) |  |  | $ | 446 |  |  |  | $ | 64 |

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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=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 http://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 http://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 http://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 http://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 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 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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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