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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES As a result of steps in the Plan of Reorganization described in Note 2 and the fresh start accounting adjustments described in Note 3, there were significant tax adjustments recorded in the period from January 1, 2019 through May 1, 2019. The Company recorded income tax benefits of $102.9 million for reorganization adjustments in the Predecessor period, primarily consisting of: (1) $483.0 million in tax expense for the reduction in federal and state net operating loss (“NOL”) carryforwards from the cancellation of debt income ("CODI") realized upon emergence; (2) $275.2 million in tax benefit for the reduction in deferred tax liabilities attributed primarily to long-term debt that was discharged upon emergence; (3) $62.3 million in tax benefit for the effective settlement of liabilities for unrecognized tax benefits that were discharged upon emergence; and (4) $263.8 million in tax benefit for the reduction in valuation allowance resulting from the adjustments described above. The Company recorded income tax expense of $185.4 million for fresh start adjustments in the Predecessor period, consisting of $529.1 million tax expense for the increase in deferred tax liabilities resulting from fresh start accounting adjustments, which was partially offset by $343.7 million tax benefit for the reduction in the valuation allowance on our deferred tax assets. Significant components of the provision for income tax benefit (expense) from continuing operations are as follows:
(In thousands) | Successor Company |  |  | Predecessor Company
| Period from May 2, 2019 through December 31, |  |  | Period from January 1, 2019 through May 1, |  | Year Ended December 31,
| 2019 |  |  | 2019 |  | 2018 |  | 2017
Current - Federal | $ | (172 | ) |  |  | $ | 2,264 |  |  | $ | 1 |  |  | $ | (2,049 | )
Current - foreign | (754 | ) |  |  | (282 | ) |  | (969 | ) |  | (729 | )
Current - state | (10,045 | ) |  |  | 74,762 |  |  | (9,225 | ) |  | 2,861 |
Total current benefit (expense) | (10,971 | ) |  |  | 76,744 |  |  | (10,193 | ) |  | 83 |
Deferred - Federal | (14,470 | ) |  |  | (109,511 | ) |  | 1,276 |  |  | 185,161 |
Deferred - foreign | 23 |  |  |  | (8 | ) |  | (1 | ) |  | (12 | )
Deferred - state | 5,327 |  |  |  | (6,320 | ) |  | (4,918 | ) |  | (8,044 | )
Total deferred benefit (expense) | (9,120 | ) |  |  | (115,839 | ) |  | (3,643 | ) |  | 177,105 |
Income tax benefit (expense) | $ | (20,091 | ) |  |  | $ | (39,095 | ) |  | $ | (13,836 | ) |  | $ | 177,188 |
The current tax expense of $11.0 million recorded in the Successor period from May 2, 2019 through December 31, 2019 was primarily related to state income taxes on operating profits generated in certain state jurisdictions during the period. The federal current tax expense for the Successor period was not significant due to the net operating loss carryforwards that were available to offset taxable income. The current tax benefit of $76.7 million recorded for the Predecessor period from January 1, 2019 through May 1, 2019 relates primarily to the effective settlement of liabilities for unrecognized tax benefits that were discharged upon the Company's emergence from bankruptcy for certain state jurisdictions. Current tax expense for the Predecessor period ended December 31, 2018 was $10.2 million compared to a current tax benefit of $0.1 million for the same period in 2017. The current tax expense recorded in 2018 was primarily related to state income tax expense and exceeded the amount in 2017 due to current tax benefits recorded for effectively settled tax examinations and statute of limitations expiring for certain state filings. The deferred tax expense of $9.1 million recorded in the Successor period from May 2, 2019 through December 31, 2019 related primarily to the utilization of federal and state net operating loss carryforwards which offset taxable income during the period. The deferred tax expense of $115.8 million recorded in the Predecessor period from January 1, 2019 through May 1, 2019 related primarily to the impact of reorganization and fresh start adjustments described above. Deferred tax expense for the Predecessor period ended December 31, 2018 was $3.6 million compared with deferred tax benefit of $177.1 million for the same period in 2017. The decrease in deferred tax benefit during 2018 was primarily attributed to the $282.1 million deferred tax benefit recorded in connection with the remeasurement of our U.S. deferred tax balances upon the enactment of the Tax Cuts and Jobs Act. Significant components of the Company's deferred tax liabilities and assets as of December 31, 2019 (Successor) and 2018 (Predecessor) are as follows:
| Successor Company |  |  | Predecessor Company
(In thousands) | 2019 |  |  | 2018
Deferred tax liabilities: |  |  |  |
Intangibles and fixed assets | $ | 1,163,310 |  |  |  | $ | 681,030 |
Long-term debt | — |  |  |  | 259,324 |
Investments | — |  |  |  | 319 |
Operating lase right-of-use assets | 130,123 |  |  |  | — |
Other | — |  |  |  | 4,031 |
Total deferred tax liabilities | 1,293,433 |  |  |  | 944,704 |
Deferred tax assets: |  |  |  |
Accrued expenses | 24,525 |  |  |  | 80,997 |
Net operating loss carryforwards | 167,008 |  |  |  | 621,528 |
Interest expense carryforwards | 324,481 |  |  |  | 280,745 |
Operating lease liability | 109,503 |  |  |  | — |
Capital loss carryforwards | 601,309 |  |  |  | — |
Investments | 26,071 |  |  |  | — |
Bad debt reserves | 9,916 |  |  |  | 8,731 |
Other | 13,799 |  |  |  | 1,318 |
Total gross deferred tax assets | 1,276,612 |  |  |  | 993,319 |
Less: Valuation allowance | 720,622 |  |  |  | 693,541 |
Total deferred tax assets | 555,990 |  |  |  | 299,778 |
Net deferred tax liabilities | $ | 737,443 |  |  |  | $ | 644,926 |
The deferred tax liability related to intangibles and fixed assets primarily relates to the difference in book and tax basis of FCC licenses and other intangible assets that were adjusted for book purposes to estimated fair values as part of the application of fresh start accounting. In accordance with ASC 350-10, Intangibles—Goodwill and Other, the Company does not amortize FCC licenses. As a result, this deferred tax liability will not reverse over time unless the Company recognizes future impairment charges or sells its FCC licenses. As the Company continues to amortize its tax basis in its FCC licenses, the deferred tax liability will increase over time. The Company’s net foreign deferred tax assets for the period ending December 31, 2019 were $0.3 million and the net foreign deferred tax liabilities for the period ending December 31, 2018 were $2.9 million. At December 31, 2019, the Successor Company had recorded net operating loss carryforwards (tax effected) for federal and state income tax purposes of approximately $167.0 million, expiring in various amounts through 2039 or in some cases with no expiration date. In connection with the tax reform legislation passed in December of 2017, Section 163(j) of the Internal Revenue Code was amended, thereby establishing new rules governing a U.S. taxpayer’s ability to deduct interest expense beginning in 2018. Section 163(j), as amended, generally limits the deduction for business interest expense to thirty percent of adjusted taxable income, and provides that any disallowed interest expense may be carried forward indefinitely. In applying the new rules under Section 163(j), the Successor Company recorded a deferred tax asset for federal and state interest limitation carryforward of $324.5 million as of December 31, 2019. In connection with the taxable separation of the Outdoor division as part of the restructuring, the Successor Company realized a $2.4 billion capital loss (gross after attribute reduction calculations). For federal tax purposes the capital loss can be carried forward 5 years and only be used to offset capital gains. For state tax purposes, the capital loss has various carryforward periods. The Successor Company has recorded a full valuation allowance against the deferred tax asset associated with the federal and state capital loss carryforward as it is not expected to be realized. The Successor Company expects to realize the benefits of a portion of its remaining deferred tax assets based upon expected future taxable income from deferred tax liabilities that reverse in the relevant federal and state jurisdictions and carryforward periods. As of December 31, 2019, the Successor Company had recorded a valuation allowance of $720.6 million against a portion of these U.S. federal and state deferred tax assets which it does not expect to realize, relating primarily to capital loss carryforwards and certain state net operating loss carryforwards. After considering the deferred tax adjustments in connection with the utilization of net operating losses, the creation of interest limitation carryforwards, the creation of the capital loss carryforward and the fresh start accounting adjustments to the Successor Company's U.S. federal and state deferred tax valuation allowance increased by $1.1 million during the Successor period of May 2, 2019 through December 31, 2019. Any deferred tax liabilities associated with acquired FCC licenses and tax-deductible goodwill intangible assets are now relied upon as sources of future taxable income for those carryforwards that have an indefinite life such as the Section 163(j) interest carryforward. At December 31, 2019, net deferred tax liabilities include a deferred tax asset of $2.3 million relating to stock-based compensation expense under ASC 718-10, Compensation—Stock Compensation. Full realization of this deferred tax asset requires stock options to be exercised at a price equal to or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the stock price of the Successor Company’s common stock will rise to levels sufficient to realize the entire deferred tax benefit currently reflected in its balance sheet. The reconciliations of income tax on income (loss) from continuing operations computed at the U.S. federal statutory tax rates to the recorded income tax benefit (expense) for the Successor Company and Predecessor Company are:
Successor Company
(In thousands) | Period from May 2, 2019 through December 31,
| 2019
| Amount |  | Percent
Income tax benefit at statutory rates | $ | (28,012 | ) |  | 21.0 | %
State income taxes, net of federal tax effect | (4,718 | ) |  | 3.5 | %
Foreign income taxes | (1,593 | ) |  | 1.2 | %
Nondeductible items | (7,345 | ) |  | 5.5 | %
Changes in valuation allowance and other estimates | 24,439 |  |  | (18.2 | )%
Other, net | (2,862 | ) |  | 2.1 | %
Income tax benefit (expense) | $ | (20,091 | ) |  | 15.1 | %
Predecessor Company
| Period from January 1, 2019 through May 1, |  | Years Ended December 31,
(In thousands) | 2019 |  | 2018 |  | 2017
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
Income tax benefit at statutory rates | $ | (1,999,008 | ) |  | 21.0 | % |  | $ | 5,069 |  |  | 21.0 | % |  | $ | 291,619 |  |  | 35.0 | %
State income taxes, net of federal tax effect | 68,442 |  |  | (0.7 | )% |  | (14,958 | ) |  | (62.0 | )% |  | (15,711 | ) |  | (1.9 | )%
Foreign income taxes | (270 | ) |  | — | % |  | (3,076 | ) |  | (12.7 | )% |  | (572 | ) |  | (0.1 | )%
Nondeductible items | (1,793 | ) |  | — | % |  | (4,834 | ) |  | (20.0 | )% |  | (6,012 | ) |  | (0.7 | )%
Changes in valuation allowance and other estimates | 648,384 |  |  | (6.8 | )% |  | 10,958 |  |  | 45.4 | % |  | (202,018 | ) |  | (24.2 | )%
U.S. tax reform | — |  |  | — | % |  | — |  |  | — | % |  | 282,053 |  |  | 33.9 | %
Tax impact of outdoor charges eliminated in discontinued operations | — |  |  | — | % |  | (8,017 | ) |  | (33.2 | )% |  | (172,472 | ) |  | (20.7 | )%
Reorganization and fresh start adjustments | 1,245,282 |  |  | (13.1 | )% |  | — |  |  | — | % |  | — |  |  | — | %
Other, net | (132 | ) |  | — | % |  | 1,022 |  |  | 4.2 | % |  | 301 |  |  | — | %
Income tax benefit (expense) | $ | (39,095 | ) |  | 0.4 | % |  | $ | (13,836 | ) |  | (57.3 | )% |  | $ | 177,188 |  |  | 21.3 | %
The Successor Company’s effective tax rate for the period from May 2, 2019 through December 31, 2019 is 15.1%. The effective tax rate for the Successor period was primarily impacted by deferred tax benefits recorded for changes in estimates related to the carryforward tax attributes that are expected to survive the emergence from bankruptcy and deferred tax adjustments associated with the filing of the Company’s 2018 tax returns during the fourth quarter of 2019. The primary change to the 2018 tax return filings, when compared to the provision estimates, was the Company's decision to elect out of the first-year bonus depreciation rules for the 2018 year for all qualified capital expenditures. This resulted in less tax depreciation deductions for tax purposes for the 2018 year and higher adjusted tax basis for our fixed assets as of the Effective Date. The Predecessor Company’s effective tax rate for the period from January 1, 2019 through May 1, 2019 is 0.4%. The income tax expense for the period from January 1, 2019 through May 1, 2019 (Predecessor) primarily consists of the income tax impacts from reorganization and fresh start adjustments, including adjustments to our valuation allowance. The Company recorded income tax benefits of $102.9 million for reorganization adjustments in the Predecessor period, primarily consisting of: (1) tax expense for the reduction in federal and state net operating loss (“NOL”) carryforwards from the cancellation of debt income ("CODI") realized upon emergence; (2) tax benefit for the reduction in deferred tax liabilities attributed primarily to long-term debt that was discharged upon emergence; (3) tax benefit for the effective settlement of liabilities for unrecognized tax benefits that were discharged upon emergence; and (4) tax benefit for the reduction in valuation allowance resulting from the adjustments described above. The Company recorded income tax expense of $185.4 million for fresh start adjustments in the Predecessor period, consisting of $529.1 million tax expense for the increase in deferred tax liabilities resulting from fresh start accounting adjustments, which was partially offset by $343.7 million tax benefit for the reduction in the valuation allowance on our deferred tax assets. In addition to the above mentioned adjustments, the Reorganization and fresh start adjustments line above includes the reversal of the $2.0 billion in tax benefits that are presented in the reconciliation table in the Income tax benefit at statutory rates line. The Predecessor Company’s effective tax rate for the year ended December 31, 2018 was (57.3)%. The effective tax rate for 2018 was primarily impacted by $11.3 million of deferred tax expense attributed to the valuation allowance recorded against federal and state deferred tax assets generated in the period due to the uncertainty of the ability to realize those assets in future periods. In addition, the Company did not record a tax effect for charges between the iHeartMedia group and the Outdoor Group that were eliminated in the presentation of discontinued operations as these charges are respected for income tax purposes under the Tax Matters Agreement. The Predecessor Company’s effective tax rate for the year ended December 31, 2017 was 21.3%. The effective tax benefit rate for 2017 was impacted by the effects of U.S. corporate tax reform which resulted in a tax benefit of $282.1 million recorded in connection with the reduction in the U.S. federal corporate tax rate. In partial offset to this tax benefit, the Company recorded tax expense of $202.0 million in connection with the valuation allowance recorded against federal and state deferred tax assets generated in the period due to the uncertainty of the ability to realize those assets in future periods. In addition, the Company did not record a tax effect for charges between the iHeartMedia group and the Outdoor Group that were eliminated in the presentation of discontinued operations as these charges are respected for income tax purposes under the Tax Matters Agreement. The adjustment of $172.5 million included above was primarily related to the $855.7 million loss on the intercompany note between the iHeartMedia group and the Outdoor group. The Company continues to record interest and penalties related to unrecognized tax benefits in current income tax expense. The total amount of interest accrued at December 31, 2019 (Successor) and 2018 (Predecessor) was $6.9 million and $50.6 million, respectively. The total amount of unrecognized tax benefits including accrued interest and penalties at December 31, 2019 (Successor) and 2018 (Predecessor) was $20.5 million and $103.7 million, respectively, of which $20.3 million and $94.1 million is included in “Other long-term liabilities” and $0.0 million and $1.3 million is included in “Accrued expenses” on the Company’s consolidated balance sheets, respectively. In addition, $0.2 million and $8.4 million of unrecognized tax benefits are recorded net with the Company’s deferred tax assets for its net operating losses as opposed to being recorded in “Other long-term liabilities” at December 31, 2019 (Successor) and 2018 (Predecessor), respectively. The total amount of unrecognized tax benefits at December 31, 2019 (Successor) and 2018 (Predecessor) that, if recognized, would impact the effective income tax rate is $15.5 million and $59.3 million, respectively.
(In thousands) | Successor Company |  |  | Predecessor Company
| Years Ended December 31, |  |  | Years Ended December 31,
Unrecognized Tax Benefits | 2019 |  |  | 2018
Balance at beginning of period | $ | 53,156 |  |  |  | $ | 53,234 |
Increases for tax position taken in the current year | 4,070 |  |  |  | 3,228 |
Increases for tax positions taken in previous years | 2,534 |  |  |  | 177 |
Decreases for tax position taken in previous years | (2,948 | ) |  |  | (1,372 | )
Decreases due to settlements with tax authorities | (1,183 | ) |  |  | — |
Decreases due to lapse of statute of limitations | (41,965 | ) |  |  | (2,111 | )
Balance at end of period | $ | 13,664 |  |  |  | $ | 53,156 |
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. During 2019 the Company settled several state and local tax and foreign tax examinations resulting is a reduction of unrecognized tax benefits of $1.2 million, excluding interest. In addition, during 2019 the statute of limitations for certain tax years expired upon our emergence from bankruptcy resulting in the reduction to unrecognized tax benefits of $42.0 million, excluding interest. During 2018, the statute of limitations for certain tax years expired in the U.S. and certain states resulting in the reduction to unrecognized tax benefits of $2.1 million, excluding interest. All federal income tax matters through 2015 are closed. The majority of all material state, local, and foreign income tax matters have been concluded for years through 2017 with the exception of a current examination in Texas that covers the 2008-2016 tax years.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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