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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19 — Income Taxes On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act includes several significant business tax provisions that, among other things, temporarily repealed the taxable income limitation for certain net operating losses (NOL) and allows businesses to carry back NOLs arising in 2018, 2019, and 2020 tax years to the five prior tax years, accelerated refunds of previously generated corporate Alternative Minimum Tax (AMT) credits, and adjusted the business interest expense limitation under section 163(j) from 30% to 50% of Adjusted Taxable Income (ATI) for 2019 and 2020 tax years. Based on information available at the time, we estimated that modifications to the tax rules for the carryback of NOLs and business interest expense limitations would result in U.S. and USVI federal net tax refunds of approximately $62.6 million and $1.4 million, respectively, and as such we recognized an income tax benefit, net of related uncertain tax positions, of $64.0 million in our consolidated financial statements for the year ended December 31, 2020. We recognized an additional $12.6 million of income tax benefit in our financial statements for the year ended December 31, 2021 as we refined estimates and received resolution on uncertainties related to our CARES Act claims. During the years ended December 31, 2022, 2021 and 2020, we collected $11.3 million, $24.6 million and $51.4 million, respectively, which represents the tax refunds associated with the NOLs generated in 2018, 2019 and 2020 carried back to prior tax years. The income tax benefit recognized represents the release of valuation allowances against certain NOL and Section 163(j) deferred tax assets that are now more likely than not to be realizable as a result of certain provisions of the CARES Act as well as a permanent income tax benefit related to the carryback of NOLs created in a tax year that was subject to U.S. federal tax at 21% to a tax year subject to tax at 35%. For income tax purposes, the components of income (loss) from continuing operations before taxes were as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Domestic | $ | 14.0 |  |  | (13.9) |  |  | (118.0) |
Foreign | 10.9 |  |  | 9.5 |  |  | 12.4 |
| $ | 24.9 |  |  | $ | (4.4) |  |  | $ | (105.7) |
The components of income tax expense (benefit) were as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | 0.2 |  |  | $ | (20.1) |  |  | $ | (67.1) |
State | (0.8) |  |  | (1.3) |  |  | 0.3 |
Foreign | (0.2) |  |  | 1.6 |  |  | 2.6 |
| (0.8) |  |  | (19.8) |  |  | (64.2) |
Deferred: |  |  |  |  |
Federal | 4.7 |  |  | (2.3) |  |  | (26.0) |
State | (0.7) |  |  | — |  |  | (2.1) |
Foreign | 0.6 |  |  | 0.2 |  |  | (1.4) |
Provision for (reversal of) valuation allowance on deferred tax assets | (3.9) |  |  | 2.3 |  |  | 28.2 |
| 0.7 |  |  | 0.2 |  |  | (1.3) |
Other | (0.7) |  |  | (2.8) |  |  | — |
Total | $ | (0.8) |  |  | $ | (22.4) |  |  | $ | (65.5) |
Ocwen is a global company with operations in the U.S., 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. The foreign tax rate differential therefore represents the difference in tax expense between jurisdictional income taxed at the U.S. statutory rate and each respective jurisdictional statutory rate. Income tax expense (benefit) differs from the amounts computed by applying the U.S. Federal corporate income tax rate as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Expected income tax expense (benefit) at statutory rate | $ | 5.2 |  |  | $ | (0.9) |  |  | $ | (22.2) |
Differences between expected and actual income tax expense: |  |  |  |  |
CARES Act | (0.1) |  |  | (12.6) |  |  | (79.0) |
Provision for (reversal of) valuation allowance on deferred tax assets | (3.9) |  |  | 2.3 |  |  | 28.2 |
Provision for (reversal of) liability for uncertain tax positions | (3.4) |  |  | (8.7) |  |  | 13.1 |
Interest on refund claims due from tax authorities | (0.7) |  |  | (2.8) |  |  | — |
Other provision to return differences | (0.2) |  |  | (1.0) |  |  | (3.3) |
Foreign tax differential including effectively connected income (1) | 2.3 |  |  | 1.4 |  |  | (2.5) |
State tax, after Federal tax benefit | (0.3) |  |  | 0.2 |  |  | (1.4) |
Benefit of state NOL carryback claims and amended return filings | (1.2) |  |  | (1.8) |  |  | — |
Executive compensation disallowance | 1.6 |  |  | 1.4 |  |  | 0.6 |
Excess tax benefits from share-based compensation | (0.4) |  |  | (0.5) |  |  | 0.4 |
Other permanent differences | 0.1 |  |  | 0.2 |  |  | 0.4 |
Foreign tax credit (generation) utilization | 0.1 |  |  | — |  |  | — |
U.S. Tax Reform - Global Intangible Low-Taxed Income (GILTI) inclusion | 0.1 |  |  | 0.2 |  |  | 0.2 |
Other | — |  |  | 0.2 |  |  | 0.1 |
Actual income tax expense (benefit) | $ | (0.8) |  |  | $ | (22.4) |  |  | $ | (65.5) |
Net deferred tax assets were comprised of the following:
| December 31,
| 2022 |  | 2021
Deferred tax assets |  |  |
Net operating loss carryforwards - federal and foreign | $ | 107.9 |  |  | $ | 54.6 |
Net operating loss carryforwards and credits - state and local | 90.3 |  |  | 70.7 |
Interest expense disallowance | 72.6 |  |  | 39.3 |
Reserve for servicing exposure | 5.7 |  |  | 6.8 |
Accrued legal settlements | 10.0 |  |  | 9.9 |
Partnership losses | 5.4 |  |  | 8.6 |
Stock-based compensation expense | 10.4 |  |  | 9.9 |
Accrued incentive compensation | 3.7 |  |  | 6.7 |
Accrued other liabilities | 5.4 |  |  | 5.9 |
Lease liabilities | 1.0 |  |  | 2.5 |
Intangible asset amortization | 6.3 |  |  | 5.0 |
Foreign deferred assets | 3.2 |  |  | 3.8 |
Tax residuals and deferred income on tax residuals | 1.5 |  |  | 1.5 |
Bad debt and allowance for loan losses | 8.2 |  |  | 4.0 |
Other | 4.1 |  |  | 5.1 |
| 335.7 |  |  | $ | 234.1 |
Deferred tax liabilities |  |  |
Mortgage servicing rights amortization | 153.1 |  |  | 57.3 |
Other | 1.5 |  |  | 1.3 |
| 154.6 |  |  | 58.6 |
| 181.1 |  |  | 175.4 |
Valuation allowance | (178.5) |  |  | (172.1) |
Deferred tax assets, net | $ | 2.6 |  |  | $ | 3.3 |
As of December 31, 2022, we had a deferred tax asset, net of deferred tax liability, of $181.1 million including $177.5 million in the U.S. As of December 31, 2021, we had a deferred tax asset, net of deferred tax liability, of $175.4 million including $171.1 million in the U.S. Valuation Allowances 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. The U.S. jurisdiction is in a three-year cumulative loss position as of December 31, 2022. We recognize that cumulative losses in recent years is an objective form of negative evidence in assessing the need for a valuation allowance and that such negative evidence is difficult to overcome. 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 full valuation allowance of $177.5 million and $171.1 million on our U.S. net deferred tax assets at December 31, 2022 and 2021, respectively. These U.S. 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 net deferred tax assets in the U.S. until there is sufficient evidence to support the reversal of all or some portion of these allowances. Net Operating Loss Carryforwards At December 31, 2022, we had U.S. federal NOL carryforwards of $510.4 million, and state NOL and tax credit carryforwards valued at $90.3 million. These U.S. federal and state NOL carryforwards will expire beginning 2023 through 2042 with U.S. federal NOLs generated after 2017 never expiring. We believe that it is more likely than not that the benefit from certain U.S. federal and state NOL carryforwards will not be realized. In recognition of this risk, we have provided a total valuation allowance of $107.2 million and $90.3 million on the deferred tax assets relating to the U.S. federal and state NOL carryforwards, respectively. 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, 2022 will be accounted for as a reduction of income tax expense. Additionally, $334.5 million of USVI NOLs have been carried back to offset prior period tax due in the USVI and we have, therefore, reflected the tax-effect of this attribute as a $12.9 million income taxes receivable. We also have U.S. capital loss carryforwards of $7.2 million at December 31, 2022 against which a valuation allowance has been recorded. Change of Control: Annual Limitations on Utilization of Tax Attributes NOL carryforwards may be subject to annual limitations under Internal Revenue Code Section 382 (Section 382) (or comparable provisions of foreign or state law) in the event that certain changes in ownership were to occur. We periodically evaluate our NOL carryforwards and whether certain changes in ownership have occurred that would limit our ability to utilize a portion of our NOL and tax credit carryforwards. If it is determined that an ownership change(s) has occurred, there may be annual limitations on the use of these NOL and tax credit carryforwards under Section 382 (or comparable provisions of foreign or state law). Ocwen and PHH have both experienced historical ownership changes that have caused the use of certain tax attributes to be limited and have resulted in the write-off of certain of these attributes based on our inability to use them in the carryforward periods defined under the tax laws. Ocwen continues to monitor the ownership in its stock to evaluate whether any additional ownership changes have occurred that would further limit its ability to utilize certain tax attributes. As such, our analysis regarding the amount of tax attributes that may be available to offset taxable income in the future without restrictions imposed by Section 382 may continue to evolve. Uncertain Tax Positions Our major jurisdiction tax years that remain subject to examination are our U.S. federal tax return for the years ended December 31, 2018 through the present, our USVI corporate tax return for the years ended December 31, 2019 through the present, and our India corporate tax returns for the years ended March 31, 2010 through the present. During 2021, we concluded our audit in the USVI jurisdiction for tax years 2013 - 2016 related to the carryback of losses generated in 2015 and 2016 to tax years 2013 and 2014, respectively, without any adjustment, and in December 2022, we executed a closing agreement with the BIR that calls for payment of the income tax refunds, plus accrued interest, over a two-year period ending December 31, 2024. A reconciliation of the beginning and ending amounts of the total unrecognized tax benefits for uncertain tax position is as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Beginning balance | $ | 11.5 |  |  | $ | 20.6 |  |  | $ | 10.6 |
Additions for tax positions of current year | — |  |  | — |  |  | — |
Additions for tax positions of prior years | — |  |  | 0.2 |  |  | 15.2 |
Reductions for tax positions of prior years | — |  |  | (6.4) |  |  | (0.2) |
Reductions for settlements | (2.1) |  |  | (0.6) |  |  | (3.1) |
Lapses in statute of limitations | (0.7) |  |  | (2.4) |  |  | (1.9) |
Ending balance (1) | $ | 8.7 |  |  | $ | 11.5 |  |  | $ | 20.6 |
(1)At December 31, 2022 and 2021, $8.7 million and $11.3 million, respectively, of the balance is included in the Liability for uncertain tax positions in Other liabilities, with $0.2 million at December 31, 2021 included as a reduction of Income taxes receivable in Receivables. We recognized total interest and penalties of $(1.0) million, $0.1 million and $(1.6) million as income tax expense or (benefit) in 2022, 2021 and 2020, respectively. At December 31, 2022 and 2021, accruals for interest and penalties were $2.2 million and $3.4 million, respectively, and are included in the Liability for uncertain tax positions in Other liabilities. As of December 31, 2022 and 2021, we had unrecognized tax benefits for uncertain tax positions, excluding accrued interest and penalties, of $8.7 million and $11.5 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. Undistributed Foreign Earnings and Non-U.S. Jurisdictions As of December 31, 2022, we have recognized a deferred tax liability of $0.7 million for foreign subsidiary undistributed earnings. We do not consider our foreign subsidiary undistributed earnings to be indefinitely invested outside the U.S.

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