Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

The sources of income before income taxes for the years ended December 31, 2021, 2020 and 2019 are presented as follows:

	Year Ended December 31,
(in thousands)	2021			2020			2019
Income before taxes:
United States	$	(4,775	)	$	40,323		$	44,290
Foreign	140,450			(32,152		)	389,517
Total income before income taxes	$	135,675		$	8,171		$	433,807

The Company's income tax expense for the years ended December 31, 2021, 2020 and 2019 consisted of the following:

	Year Ended December 31,
(in thousands)	2021			2020			2019
Current tax expense (benefit):
U.S.	$	2,810		$	2,605		$	(4,885	)
Foreign	59,874			39,270			83,792
Total current	62,684			41,875			78,907
Deferred tax expense (benefit):
U.S.	12,269			(16,100		)	(8,424		)
Foreign	(9,865		)	(14,300		)	16,629
Total deferred	2,404			(30,400		)	8,205
Total tax expense	$	65,088		$	11,475		$	87,112

The following is a reconciliation of the federal statutory income tax rates of 21% to the effective income tax rate for the years ended December 31, 2021, 2020 and 2019:

	Year Ended December 31,
(dollar amounts in thousands)	2021			2020			2019
U.S. federal income tax expense at applicable statutory rate	$	28,492		$	1,716		$	91,099
Tax effect of:
State income tax expense at statutory rates, net of U.S. federal income tax	1,516			347			5,101
Non-deductible expenses	538			1,887			2,896
Share-based compensation	(3,524		)	(6,446		)	(2,875		)
Other permanent differences	(2,047		)	3,828			(864		)
Difference between U.S. federal and foreign tax rates	7,438			7,002			12,281
Provision in excess of statutory rates	2,879			(6,491)			3,565
Change in federal and foreign valuation allowance	26,673			(4,238)			2,144
Impairment of goodwill and acquired intangibles assets	—			22,053			—
GILTI, net of tax credits	3,900			—			6,471
U.S. Tax Reform - transition tax and rate change	—			—			(25,728		)
Tax credits	(1,122		)	(3,518		)	(4,500		)
Other	345			(4,665		)	(2,478		)
Total income tax expense	$	65,088		$	11,475		$	87,112
Effective tax rate	48.0		%	140.4		%	20.1		%

We calculate our provision for federal, state and international income taxes based on current tax law. In the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing authorities relating to the U.S. Tax Reform, the Company elected to claim U.S. foreign tax credits, which reduced the net tax expense by $25.7 million.  

The tax effect of temporary differences and carryforwards that give rise to deferred tax assets and liabilities from continuing operations are as follows:

	As of December 31,
(in thousands)	2021			2020
Deferred tax assets:
Tax loss carryforwards	$	65,862		$	45,609
Share-based compensation	9,743			6,771
Accrued expenses	19,907			22,243
Property and equipment	11,949			10,835
Goodwill and intangible amortization	9,353			7,614
Contract costs	9,921			—
Intercompany notes	6,077			7,689
Accrued revenue	7,541			34,663
Tax credits	65,267			65,388
Lease accounting	42,381			39,962
Foreign exchange	8,283			19,160
Other	14,616			14,230
Gross deferred tax assets	270,900			274,164
Valuation allowance	(100,489		)	(77,563		)
Net deferred tax assets	170,411			196,601
Deferred tax liabilities:
Intangible assets related to purchase accounting	(11,763		)	(12,854		)
Goodwill and intangible amortization	(30,339		)	(24,763		)
Accrued expenses	(21,495		)	(43,971		)
Intercompany notes	(10,388		)	(10,396		)
Accrued interest	(34,175		)	(30,932		)
Capitalized research and development	(6,376		)	(6,352		)
Property and equipment	(15,597		)	(18,295		)
Accrued revenue	(2,073		)	(1,829		)
Lease accounting	(42,381		)	(39,962		)
Foreign exchange	(1,211		)	(10,880		)
Other	(3,971		)	(6,826		)
Total deferred tax liabilities	(179,769		)	(207,060		)
Net deferred tax liabilities	$	(9,358	)	$	(10,459	)

Net deferred tax assets of $37.7 million and $27.4 million as of December 31, 2021 and 2020, respectively, are recorded within "Other assets" on the Consolidated Balance Sheet.

Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2021 are expected to be allocated to income taxes in the Consolidated Statements of Operations.

As of December 31, 2021, and 2020, the Company's foreign tax loss carryforwards were $267.3 million and $197.4 million, respectively, and U.S. state tax loss carryforwards were $73.7 million and $95.8 million, respectively. As of December 31, 2021, the Company had U.S. foreign tax credit carryforwards of $61.6 million which are largely not expected to be utilized in future periods.

In assessing the Company's ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances, as of December 31, 2021.

As of December 31, 2021, the Company had foreign tax net operating loss carryforwards of $267.3 million, which will expire as follows:

(in thousands)	Gross		Tax Effected
Year ending December 31,
2022	$	3,960	$	749
2023	2,296		533
2024	3,153		711
2025	21,012		4,664
2026	21,767		4,843
Thereafter	25,465		6,501
Unlimited	189,670		45,792
Total	$	267,323	$	63,793

In addition, the Company's state tax net operating loss carryforwards of $73.7 million will expire periodically from 2022 through 2041, U.S. foreign tax credit carryforwards of $61.6 million that will expire periodically from 2022 through 2030 and U.S. federal research and expenditure credit carryforwards of $3.3 million that will expire periodically from 2034 through 2038.

While U.S. tax expense has been recognized as a result of the transition tax and global intangible low-taxed income, or GILTI, provisions of U.S. Tax Reform, the Company has not provided additional deferred taxes with respect to items such as certain foreign exchange gains or losses, foreign withholding taxes or additional state taxes, if any, on undistributed earnings attributable to foreign subsidiaries and it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely. Gross undistributed earnings reinvested indefinitely in foreign subsidiaries aggregated approximately $1,808.8 million as of December 31, 2021.

Accounting for uncertainty in income taxes 

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2021 and 2020 is as follows: 

	Year Ended December 31,
(in thousands)	2021			2020
Beginning balance	$	39,785		$	44,535
Additions based on tax positions related to the current year	3,815			7,331
Additions for tax positions of prior years	—			—
Reductions for tax positions of prior years	(1,998		)	(1,349		)
Settlements	—			(10,127		)
Statute of limitations expiration	(612		)	(605		)
Ending balance	$	40,990		$	39,785

As of December 31, 2021 and 2020, approximately $29.1 million and $31.8 million, respectively, of the unrecognized tax benefits would impact the Company's provision for income taxes and effective income tax rate, if recognized. Total estimated accrued interest and penalties related to the underpayment of income taxes was $7.2 million and $6.2 million as of December 31, 2021 and 2020, respectively. The following income tax years remain open in the Company's major jurisdictions as of December 31, 2021:

Jurisdictions	Periods
U.S. (Federal)	2014 through 2021
Germany	2016 through 2021
Greece	2013 through 2021
Spain	2015 through 2021
U.K.	2018 through 2021

It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect the Company's operating results. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes.