XML 45 R28.htm IDEA: XBRL DOCUMENT
v3.6.0.2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19 — Income Taxes For income tax purposes, the components of loss before taxes were as follows for the years ended December 31:
| 2016 |  | 2015 |  | 2014
Domestic | $ | (130,920 | ) |  | $ | (62,903 | ) |  | $ | (401,741 | )
Foreign | (75,441 | ) |  | (66,958 | ) |  | (41,418 | )
| $ | (206,361 | ) |  | $ | (129,861 | ) |  | $ | (443,159 | )
The components of income tax expense (benefit) were as follows for the years ended December 31:
| 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |  |  |  |
Federal | $ | (8,025 | ) |  | $ | 46,680 |  |  | $ | (20,824 | )
State | 460 |  |  | 1,079 |  |  | (403 | )
Foreign | 5,099 |  |  | 161 |  |  | 9,195 |
| (2,466 | ) |  | 47,920 |  |  | (12,032 | )
Deferred: |  |  |  |  |  |  |  |
Federal | (22,054 | ) |  | (27,173 | ) |  | 41,986 |
State | 4,701 |  |  | (3,719 | ) |  | (997 | )
Foreign | (2,806 | ) |  | 2,754 |  |  | (6,162 | )
Provision for valuation allowance on deferred tax assets | 15,639 |  |  | 97,069 |  |  | 3,601 |
| (4,520 | ) |  | 68,931 |  |  | 38,428 |
Total | $ | (6,986 | ) |  | $ | 116,851 |  |  | $ | 26,396 |
Income tax expense differs from the amounts computed by applying the U.S. Federal corporate income tax rate of 35% as follows for the years ended December 31:
| 2016 |  | 2015 |  | 2014
Expected income tax expense (benefit) at statutory rate | $ | (72,225 | ) |  | $ | (45,451 | ) |  | $ | (155,106 | )
Differences between expected and actual income tax expense: |  |  |  |  |  |  |  |
Impairment of goodwill | — |  |  | — |  |  | 92,034 |
State tax, after Federal tax benefit | 250 |  |  | (2,867 | ) |  | (1,084 | )
Provision for liability for uncertain tax positions | 2,236 |  |  | 18,205 |  |  | 47 |
Provision for liability for intra-entity transactions | 3,357 |  |  | 4,700 |  |  | 6,037 |
Non-deductible regulatory settlements | — |  |  | 700 |  |  | 53,375 |
Other permanent differences | 515 |  |  | (463 | ) |  | (254 | )
Foreign tax differential | 42,463 |  |  | 41,695 |  |  | 27,799 |
Provision for valuation allowance on deferred tax assets (1) | 15,639 |  |  | 97,069 |  |  | 3,601 |
Other | 779 |  |  | 3,263 |  |  | (53 | )
Actual income tax expense (benefit) | $ | (6,986 | ) |  | $ | 116,851 |  |  | $ | 26,396 |
(1) | The provision for valuation allowance in 2016 and 2015 primarily relates to the recording of the valuation allowance on both the U.S. and USVI net deferred tax assets as of December 31, 2016 and 2015. Also included in the provision for valuation allowance in 2015 is the reversal of a portion of the valuation allowance previously recorded on taxable losses earned by OMS which were taxable in the U.S. as effectively connected income (ECI), which is equal to the positive taxable income that is expected to be generated for ECI purposes for the year ended December 31, 2015.
Ocwen is a global company with operations in the USVI, India and the Philippines, among other jurisdictions. In the effective tax rate reconciliation, we first calculate income tax expense attributable to worldwide continuing operations at the U.S. statutory tax rate of 35%. The foreign tax rate differential therefore represents the difference in tax expense between jurisdictional income taxed at the U.S. statutory rate of 35% and each respective jurisdictional statutory rate. As the U.S. tax rate is among the highest global tax rates and a majority of our income is subject to tax in the USVI at a significantly lower tax rate, the foreign tax rate differential component of our effective tax rate reconciliation is often the most significant adjusting item to our global rate. Net deferred tax assets were comprised of the following at December 31:
| 2016 |  | 2015
Deferred tax assets: |  |  |  |  |
Net operating loss carryforward | $ | 67,657 |  |  | $ | 24,511 |
Mortgage servicing rights amortization | 11,592 |  |  | 15,697 |
Partnership losses | 8,976 |  |  | 10,137 |
Intangible asset amortization | 8,223 |  |  | 10,293 |
Accrued incentive compensation | 8,017 |  |  | 10,107 |
Accrued legal settlements | 9,178 |  |  | 10,519 |
Stock-based compensation expense | 5,659 |  |  | 4,834 |
Accrued other liabilities | 5,543 |  |  | 5,641 |
Foreign deferred assets | 5,219 |  |  | 3,647 |
Foreign tax credit | 4,262 |  |  | — |
Tax residuals and deferred income on tax residuals | 4,037 |  |  | 4,052 |
Bad debt and allowance for loan losses | 3,268 |  |  | 6,227 |
Reserve for servicing exposure | 1,900 |  |  | 3,353 |
Delinquent servicing fees | 1,647 |  |  | 2,360 |
Capital losses | 1,450 |  |  | 1,710 |
Other | 1,872 |  |  | 7,056 |
| 148,500 |  |  | 120,144 |
Deferred tax liabilities: |  |  |  |  |
Foreign undistributed earnings | 13,619 |  |  | 5,421 |
Other | 76 |  |  | 77 |
| 13,695 |  |  | 5,498 |
| 134,805 |  |  | 114,646 |
Valuation allowance | (132,073 | ) |  | (116,434 | )
Deferred tax assets (liabilities), net | $ | 2,732 |  |  | $ | (1,788 | )
We conduct periodic evaluations of positive and negative evidence to determine whether it is more likely than not that the deferred tax asset can be realized in future periods. In these evaluations, we gave more significant weight to objective evidence, such as our actual financial condition and historical results of operations, as compared to subjective evidence, such as projections of future taxable income or losses. We are diversifying our strategic focus due to both regulatory and market-based factors affecting the Servicing business, and we believe our residential lending business and other new business lines will be our primary driver of growth for the future. As a result, we are seeking to transform Ocwen over time by reinvesting cash flows generated by the Servicing business to grow not only our residential mortgage lending business but also to grow other new business lines, which we believe can diversify our income profile and assist us in returning Ocwen to profitability. Both the U.S. and USVI jurisdictions are in a three-year cumulative loss position as of December 31, 2016 due to poor operating results in both jurisdictions in addition to the significant goodwill impairment and NY DFS settlement in 2014 in the US jurisdiction and significant monitoring and regulatory compliance costs in the USVI jurisdiction. Other factors considered in these evaluations are estimates of future taxable income, future reversals of temporary differences, taxable income in prior carryback years, tax character and the impact of tax planning strategies that may be implemented, if warranted. As a result of these evaluations, we recorded a valuation allowance of $95.5 million and $84.5 million on our U.S. net deferred tax assets at December 31, 2016 and 2015, respectively, and a valuation allowance of $36.2 million and $31.6 million on our USVI net deferred tax assets at December 31, 2016 and 2015, respectively. These U.S. and USVI jurisdictional deferred tax assets are not considered to be more likely than not realizable based on all available positive and negative evidence. We intend to continue maintaining a full valuation allowance on our deferred tax assets in both the U.S. and USVI until there is sufficient evidence to support the reversal of all or some portion of these allowances. At December 31, 2016, we had U.S. NOL carryforwards and USVI NOL carryforwards of $192.4 million and $361.2 million. These carryforwards will expire beginning 2019 through 2035. We believe that it is more likely than not that the benefit from certain U.S. NOL carryforwards will not be realized. In recognition of this risk, we have provided a total valuation allowance of $67.3 million on the deferred tax assets relating to these U.S. NOL carryforwards. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2016 will be accounted for as a reduction of income tax expense. Additionally, it is our expectation that $361.2 million of USVI NOLs will be carried back to offset prior period tax due in the USVI and we have, therefore, reflected the tax-effect of this attribute as a component of income taxes receivable. We also have USVI capital loss carryforwards of $23.0 million at December 31, 2016 against which a valuation allowance has been recorded. Our major jurisdiction tax years that remain subject to examination are our U.S. federal tax return for the years ended December 31, 2012 through the present, our USVI corporate tax return for the years ended December 31, 2012 through the present and our India corporate tax returns for the years ended March 31, 2009 through the present. Our U.S. federal tax return for the year ended December 31, 2012 is currently under examination. A reconciliation of the beginning and ending amount of the total liability for uncertain tax positions is as follows for the years ended December 31:
| 2016 |  | 2015 |  | 2014
Beginning balance | $ | 32,548 |  |  | $ | 22,523 |  |  | $ | 27,273 |
Additions for tax positions of prior years | — |  |  | 13,162 |  |  | 1,392 |
Reductions for tax positions of prior years | — |  |  | (2,741 | ) |  | (6,010 | )
Reductions for settlements | (14,420 | ) |  | — |  |  | — |
Lapses in statute of limitations | (1,134 | ) |  | (396 | ) |  | (132 | )
Ending balance | $ | 16,994 |  |  | $ | 32,548 |  |  | $ | 22,523 |
We recognized total interest and penalties of $(1.0) million, $6.3 million and $2.3 million in 2016, 2015 and 2014, respectively. At December 31, 2016 and 2015, accruals for interest and penalties were $6.2 million and $12.2 million, respectively. As of December 31, 2016 and 2015, we had a liability for uncertain tax positions of $17.0 million and $32.5 million, respectively, all of which if recognized would affect the effective tax rate. It is reasonably possible that there could be a change in the amount of our unrecognized tax benefits within the next 12 months due to activities of the Internal Revenue Service or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of applicable statutes of limitations. We believe that it is reasonably possible that a decrease of up to $17.0 million in unrecognized tax benefits may be necessary within the next 12 months. As of December 31, 2016, we have recognized a deferred tax liability of $13.6 million for India and Philippines subsidiary undistributed earnings of $29.7 million. With the exception of the India and Philippines subsidiary earnings, we consider the remainder of our foreign subsidiary undistributed earnings to be indefinitely invested outside the U.S. based on our specific plans for reinvestment. As of December 31, 2016, our foreign subsidiaries have approximately $157.0 million of undistributed earnings and $200.2 million of cash and short-term investments. Should we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability is not practicable. OMS is headquartered in Frederiksted, St. Croix, USVI and is located in a federally recognized economic development zone where qualified entities are eligible for certain benefits. We refer to these benefits as “EDC benefits” as they are granted by the USVI Economic Development Commission. We were approved as a Category IIA service business, and are therefore entitled to receive benefits that may have a favorable impact on our effective tax rate. These benefits, among others, enable us to avail ourselves of a credit of 90% of income taxes on certain qualified income related to our servicing business. The exemption was granted as of October 1, 2012 and is available for a period of 30 years until expiration on September 30, 2042. The impact of these EDC benefits decreased our current foreign tax benefit by $62.7 million and $68.2 million related to 2016 and 2015 USVI losses, respectively, and decreased our foreign tax expense by $61.2 million related to 2014 USVI income. The benefit (detriment) of these EDC benefits on diluted earnings per share was $(0.51), $(0.54) and $0.47 for 2016, 2015 and 2014, respectively.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration