Income Taxes

9 Months Ended

Sep. 30, 2020

Income Taxes [Abstract]

Income Taxes

7. Income Taxes

The following summarizes our income tax provision (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Current income tax provision	$	(262)	$	(1,781)	$	(1,209)	$	(2,699)
Deferred income tax (provision) benefit		(47)		506		253		(2,802)
Income tax provision	$	(309)	$	(1,275)	$	(956)	$	(5,501)

For the nine month periods ended September 30, 2020 and 2019, our income tax provision is computed by applying an expected effective annual tax rate against the pre-tax results for each period (after adjusting for certain tax items that are discrete to each period). For the three month periods ended September 30, 2020 and 2019, this amount is then reduced by the tax recorded for the six month periods ended June 30, 2020 and 2019. The current income tax provision for each period includes our anticipated income tax liability related to GILTI from Telesat and our provision for UTPs. The deferred income tax provision for each period includes the impact of equity in net income of affiliates from our condensed consolidated statement of operations and the periodic effect of our accounting for GILTI. The deferred income tax (provision) benefit for the three and nine months ended September 30, 2020 also include benefits of $2.2 million and $5.7 million, respectively, from the Coronavirus Aid, Relief, and Economic Security Act which was signed into law on March 27, 2020.

To the extent that profitability from operations is not sufficient to realize the benefit from our remaining net deferred tax assets, we would generate sufficient taxable income from the appreciated value of our Telesat investment in order to prevent federal net operating losses from expiring and realize the benefit of all remaining deferred tax assets.

The following summarizes amounts for UTPs included in our income tax provision (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Current provision for UTPs	$	(244)	$	(1,751)	$	(1,052)	$	(2,488)
Deferred benefit for UTPs		50		86		222		239
Tax provision for UTPs	$	(194)	$	(1,665)	$	(830)	$	(2,249)

As of September 30, 2020, we had unrecognized tax benefits relating to UTPs of $43 million. The Company recognizes interest and penalties related to income taxes in income tax expense on a quarterly basis. As of September 30, 2020, we have accrued no penalties and approximately $3.1 million for the potential payment of tax-related interest.

With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years prior to 2014. Earlier years related to certain foreign jurisdictions remain subject to examination. To the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carryforward. While we intend to contest any future tax assessments for uncertain tax positions, no assurance can be provided that we would ultimately prevail. Pursuant to the purchase agreement for the sale of SSL, we are obligated to indemnify SSL for certain taxes related to periods prior to the closing of the transaction.

As of September 30, 2020, if our positions are sustained by the taxing authorities, the Company’s income tax provision would be reduced by approximately $8.1 million. We do not anticipate any significant change to our unrecognized tax benefits during the next twelve months.