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Income Tax

12 Months Ended

Dec. 31, 2020

15. Income Taxes

The (benefit from) provision for income taxes is as follows:


	Year Ended December 31,
	2020			2019			2018
(in thousands)
Current tax (benefit) expense
Federal	$	(9,106	)	$	45,874		$	21,399
State		4,710			11,311			11,742
Foreign		13,422			12,231			12,140

Total current tax expense		9,026			69,416			45,281

Deferred tax (benefit) expense
Federal		(6,501	)		(53,314	)		(164,208	)
State		868			(11,055	)		(48,653	)
Foreign		(8,724	)		(3,694	)		(754	)

Total deferred tax benefit		(14,357	)		(68,063	)		(213,615	)

Total (benefit from) provision for income taxes	$	(5,331	)	$	1,353		$	(168,334	)

A reconciliation of the provision for taxes based on the federal statutory income tax rate attributable to the Company’s effective income tax rate is as follows:


	Year Ended December 31,
	2020			2019			2018
Statutory U.S. rate		21.0	%		21.0	%		21.0	%
State tax, net of federal tax benefit		(2.6	)%		(1.1	)%		2.2	%
Foreign tax, net of federal tax benefit		1.1	%		(17.4	)%		(0.4	)%
Goodwill impairment		—			—			(10.4	)%
Global Intangible Low Taxed Income		—			(8.3	)%		(0.2	)%
Transaction expenses		(0.1	)%		(5.4	)%		(0.1	)%
Disallowed Executive Compensation		(3.4	)%		—			—
Equity-based compensation		(11.2	)%		(1.5	)%		0.2	%
Meals and entertainment		(0.7	)%		(11.1	)%		(0.2	)%
Contingent consideration fair value adjustment		(1.4	)%		7.1	%		0.7	%
Non-deductible expenses		(0.4	)%		(4.6	)%		—
Return to provision on permanent differences		0.1	%		8.2	%		0.1	%
Work opportunity tax credit		0.5	%		3.3	%		—
Research and development credit		0.3	%		4.0	%		—
Other		—			( 1.6	) %		(0.1	)%

Effective tax rate		3.2	%		(7.4	)%		12.8	%

The geographic components of (loss) income before income taxes are as follows:


	Year Ended December 31,
	2020			2019			2018
(in thousands)
U.S. sources	$	(190,163	)	$	(32,893	)	$	(1,347,770	)
Non-U.S. sources		23,125			14,490			28,213

Loss before income taxes	$	(167,038	)	$	(18,403	)	$	(1,319,557	)

Net deferred tax liabilities consist of the following:


	December 31,
(in thousands)	2020			2019
Deferred tax assets

Accrued liabilities	$	77,599		$	70,420
Interest expense		20,851			49,586
Social security tax deferral		12,656			—
Net operating losses		10,557			7,671
Right-of-use liabilities		11,996			26,648
Transaction expenses		8,643			5,325
Debt issuance costs		6,422			973
Acquired intangibles, including goodwill		2,205			2,292
Insurance reserves		2,262			2,403
Other		4,755			6,158

Total deferred tax assets		157,946			171,476

Deferred tax liabilities
Acquired intangibles including goodwill		618,697			636,245
Right-of-use assets		7,890			20,294
Restructuring expenses		4,977			6,857
Depreciation		2,464			1,617
Unrealized transactions		—			990
Other		6,266			6,038

Total deferred tax liabilities		640,294			672,041

Less: deferred income tax asset valuation allowances		(6,706	)		(5,570	)

Net deferred tax liabilities	$	489,054		$	506,135


	December 31,
(in thousands)	2020		2019
Reported as:
Noncurrent deferred tax asset	$	2,188	$	227
Noncurrent deferred tax liability		491,242		506,362

Net deferred tax liabilities	$	489,054	$	506,135

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, addressing the carryback of net operating loss carryforwards (“NOLs”) for specific periods, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property (“QIP”). Additionally, the CARES Act, in efforts to enhance business’ liquidity, provides for refundable employee retention tax credits and the deferral of the employer-paid portion of social security taxes.

The CARES Act allows employers to defer payment of a portion of payroll taxes otherwise due on wages paid between the enactment date and December 31, 2020 and remit the deferred payroll taxes in equal amounts on December 31, 2021 and December 31, 2022. Under this provision of the CARES Act, the Company has recorded the tax impact of $12.6 million as a deferred tax asset.

The Company held cash and cash equivalents in foreign subsidiaries of $87.7 million and $59.3 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, and 2019, the undistributed earnings of the Company’s foreign subsidiaries are $134.6 million and $92.6 million, respectively.

The Company has not recorded a deferred tax liability related to undistributed earnings of its foreign subsidiaries as of December 31, 2020, except for a $2.1 million of deferred tax liability recorded as of December 31, 2020 for unremitted earnings in Canada with respect to which the Company no longer has an indefinite reinvestment assertion. Taxes have not been provided on the remaining $82.5

million

of undistributed foreign earnings. The incremental tax liability associated with these earnings is expected to be immaterial.

The Company evaluates its deferred tax assets, including a determination of whether a valuation allowance is necessary, based upon its ability to utilize the assets using a more likely than not analysis. Deferred tax assets are only recorded to the extent that they are realizable based upon past and future income. As a result of the evaluation, the Company established a valuation allowance of $6.7 million and $5.6 million on its foreign affiliates’ deferred tax assets as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, the Company had $6.2 million

federal

NOL

$16.3

million state NOLs, and

31.4

million foreign NOLs. The change of ownership provisions of the Tax Reform Act of 1986 may limit utilization of a portion of The Company’s domestic NOLs to future periods.

The federal NOLs expire between 2036 and 2037, $13.2 million of the state NOLs expire between 2023 and 2039 and the remaining $3.1 million of the state NOLs carry forward indefinitely. Foreign NOLs of $11.6 million expire between 2024 and 2032 and the remaining $19.8 million of the foreign NOLs carry forward indefinitely.

- 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.

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