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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 20 — Income Taxes The components of income (loss) before income taxes were as follows:
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Domestic | $ | (68.3) |  |  | $ | 14.0 |  |  | $ | (13.9) |
Foreign | 10.2 |  |  | 10.9 |  |  | 9.5 |
| $ | (58.1) |  |  | $ | 24.9 |  |  | $ | (4.4) |
The components of income tax expense (benefit) were as follows:
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 2.1 |  |  | $ | 0.2 |  |  | $ | (20.1) |
State | 0.3 |  |  | (0.8) |  |  | (1.3) |
Foreign | 3.6 |  |  | (0.2) |  |  | 1.6 |
| 6.0 |  |  | (0.8) |  |  | (19.8) |
Deferred: |  |  |  |  |
Federal | (14.6) |  |  | 4.7 |  |  | (2.3) |
State | (2.6) |  |  | (0.7) |  |  | — |
Foreign | (0.5) |  |  | 0.6 |  |  | 0.2 |
Provision for (reversal of) valuation allowance on deferred tax assets | 17.3 |  |  | (3.9) |  |  | 2.3 |
| (0.4) |  |  | 0.7 |  |  | 0.2 |
Other | — |  |  | (0.7) |  |  | (2.8) |
Total | $ | 5.6 |  |  | $ | (0.8) |  |  | $ | (22.4) |
The following table presents a reconciliation of the Income tax provision at the U.S. federal statutory tax rate to our Income tax provision at our actual effective income tax rate:
| Years Ended December 31, |
| 2023 |  | 2022 |  | 2021
| $ | % |  | $ | % |  | $ | %
Expected income tax expense (benefit) at statutory rate | $ | (12.2) |  | 21 | % |  | $ | 5.2 |  | 21 | % |  | $ | (0.9) |  | 21 | %
Differences between expected and actual income tax expense: |  |  |  |  |  |  |  |
CARES Act (1) | — |  | — |  |  | (0.1) |  | — |  |  | (12.6) |  | 289 |
Provision for (reversal of) valuation allowance on deferred tax assets | 17.3 |  | (30) |  |  | (3.9) |  | (16) |  |  | 2.3 |  | (54) |
Provision for (reversal of) liability for uncertain tax positions | 1.1 |  | (2) |  |  | (3.4) |  | (14) |  |  | (8.7) |  | 199 |
Interest on refund claims due from tax authorities | — |  | — |  |  | (0.7) |  | (3) |  |  | (2.8) |  | 64 |
Other provision to return differences | (0.1) |  | — |  |  | (0.2) |  | (1) |  |  | (1.0) |  | 22 |
Foreign tax differential including effectively connected income and foreign withholding taxes (2) | 1.2 |  | (2) |  |  | 2.3 |  | 9 |  |  | 1.4 |  | (31) |
State tax, after Federal tax benefit | (1.8) |  | 3 |  |  | (0.3) |  | (1) |  |  | 0.2 |  | (5) |
Benefit of state NOL carryback claims and amended return filings | — |  | — |  |  | (1.2) |  | (5) |  |  | (1.8) |  | 41 |
Executive compensation disallowance | 1.6 |  | (3) |  |  | 1.6 |  | 6 |  |  | 1.4 |  | (32) |
Excess tax benefits from share-based compensation | (1.9) |  | 3 |  |  | (0.4) |  | (2) |  |  | (0.5) |  | 12 |
Other permanent differences | — |  | — |  |  | 0.1 |  | — |  |  | 0.2 |  | (3) |
Foreign tax credit (generation) utilization | 0.1 |  | — |  |  | 0.1 |  | — |  |  | — |  | — |
U.S. Tax Reform - Global Intangible Low-Taxed Income (GILTI) inclusion | — |  | — |  |  | 0.1 |  | — |  |  | 0.2 |  | (4) |
Other | 0.3 |  | — |  |  | — |  | — |  |  | 0.2 |  | (5) |
Actual income tax expense (benefit) | $ | 5.6 |  | (10) | % |  | $ | (0.8) |  | (3) | % |  | $ | (22.4) |  | 514 | %
(1) We recognized $12.6 million of income tax benefit in 2021 relating to CARES Act claims that represents the release of valuation allowances against certain NOL deferred tax assets that became 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%. During the years ended December 31, 2023, 2022 and 2021, we collected nil, $11.3 million and $24.6 million, respectively, of these tax refunds associated with the NOLs generated in 2018, 2019 and 2020 carried back to prior tax years in application of the CARES Act. (2) 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 above, 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. Net deferred tax assets were comprised of the following:
| December 31,
| 2023 |  | 2022
Deferred tax assets |  |  |
Net operating loss carryforwards - federal and foreign | $ | 106.8 |  |  | $ | 107.9 |
Net operating loss carryforwards and credits - state and local | 82.0 |  |  | 90.3 |
Interest expense disallowance | 123.0 |  |  | 72.6 |
Reserve for servicing exposure | 5.8 |  |  | 5.7 |
Accrued legal settlements | 4.8 |  |  | 10.0 |
Partnership losses | — |  |  | 5.4 |
Stock-based compensation expense | 11.4 |  |  | 10.4 |
Accrued incentive compensation | 4.5 |  |  | 3.7 |
Accrued other liabilities | 4.4 |  |  | 5.4 |
Lease liabilities | 0.9 |  |  | 1.0 |
Intangible asset amortization | 7.2 |  |  | 6.3 |
Foreign deferred assets | 3.4 |  |  | 3.2 |
Tax residuals and deferred income on tax residuals | 1.4 |  |  | 1.5 |
Bad debt and allowance for loan losses | 11.0 |  |  | 8.2 |
Other | 1.7 |  |  | 4.1 |
| 368.3 |  |  | $ | 335.7 |
Deferred tax liabilities |  |  |
Mortgage servicing rights amortization | 175.0 |  |  | 153.1 |
Partnership losses | 3.9 |  |  | — |
Other | 1.2 |  |  | 1.5 |
| 180.1 |  |  | 154.6 |
| 188.2 |  |  | 181.1 |
Valuation allowance | (185.1) |  |  | (178.5) |
Deferred tax assets, net | $ | 3.1 |  |  | $ | 2.6 |
As of December 31, 2023, we had a deferred tax asset, net of deferred tax liability, of $188.2 million including $183.9 million in the U.S. 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. 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, 2023. 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 $183.9 million and $177.5 million on our U.S. net deferred tax assets at December 31, 2023 and 2022, 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, 2023, we had U.S. federal NOL carryforwards of $504.8 million, and state NOL and tax credit carryforwards valued at $82.0 million. These U.S. federal and state NOL carryforwards will expire beginning 2024 through 2043 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 $106.0 million and $82.0 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, 2023 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 recognized the tax-effect of this attribute as a $12.9 million income taxes receivable, of which we received $7.1 million in 2023 from the USVI. We also have disallowed interest carryforwards under Section 163(j) of $498.7 million and U.S. capital loss carryforwards of $0.1 million at December 31, 2023, 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 Corporation 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, 2020 through the present, and our India corporate tax returns for the years ended March 31, 2012 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. The following table presents the activity related to unrecognized tax benefits for uncertain tax positions:
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Beginning balance | $ | 8.7 |  |  | $ | 11.5 |  |  | $ | 20.6 |
Additions for tax positions of current year | — |  |  | — |  |  | — |
Additions for tax positions of prior years | — |  |  | — |  |  | 0.2 |
Reductions for tax positions of prior years | — |  |  | — |  |  | (6.4) |
Reductions for settlements | — |  |  | (2.1) |  |  | (0.6) |
Lapses in statute of limitations | — |  |  | (0.7) |  |  | (2.4) |
Ending balance (1) | $ | 8.7 |  |  | $ | 8.7 |  |  | $ | 11.5 |
(1)At December 31, 2023 and 2022, the balance is included in the Liability for uncertain tax positions in Other liabilities. We recognized total interest and penalties of $1.2 million, $(1.0) million and $0.1 million as income tax expense or benefit in 2023, 2022 and 2021, respectively. At December 31, 2023 and 2022, accruals for interest and penalties were $3.4 million and $2.2 million, respectively, and are included in the Liability for uncertain tax positions in Other liabilities. As of December 31, 2023 and 2022, we had unrecognized tax benefits for uncertain tax positions, excluding accrued interest and penalties, of $8.7 million and $8.7 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, 2023, we have recognized a deferred tax liability of $0.4 million for foreign subsidiary undistributed earnings. We do not consider our foreign subsidiary undistributed earnings to be indefinitely invested outside the U.S. Global Tax Reform The Organization for Economic Co-operation and Development’s (OECD) Inclusive Framework on Base Erosion Profit Shifting (BEPS) has introduced rules to establish a global minimum corporate tax rate of 15% for multinational enterprises with a turnover of more than €750 million, commonly referred to as the Pillar Two rules. Numerous foreign countries have enacted legislation to implement the Pillar Two rules, effective beginning in 2024, or are expected to enact similar legislation. Based upon the current OECD rules and administrative guidance, we do not expect adoption of Pillar Two rules to have a significant impact on our consolidated financial statements in 2024. We will continue to monitor the potential impact of the Pillar Two proposals and developments on our consolidated financial statements.

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