Income Taxes

12 Months Ended

Dec. 31, 2020

14.INCOME TAXES

As discussed in Note 2, the Company began operating in compliance with REIT requirements for federal income tax purposes effective January 1, 2016. As a REIT, the Company must distribute at least 90 percent of its taxable income (including dividends paid to it by its TRSs) except to the extent offset by NOLs. In addition, the Company must meet a number of other organizational and operational requirements. It is management's intention to adhere to these requirements and maintain the Company's REIT status. Most states where the Company operates conform to the federal rules recognizing REITs. Certain subsidiaries have made an election with the Company to be treated as TRSs in conjunction with the Company's REIT election; the TRS elections permit the Company to engage in certain business activities in which the REIT may not engage directly. A TRS is subject to federal and state income taxes on the income from these activities. A provision for taxes of the TRSs and of foreign branches of the REIT is included in its consolidated financial statements.

Income (loss) before provision (benefit) for income taxes by geographic area is as follows:



		For the year ended December 31,
	2020		2019		2018

	(in thousands)
Domestic	$	151,421	$	133,046	$	99,203
Foreign		(169,170)		53,843		(47,519)
Total	$	(17,749)	$	186,889	$	51,684

The provision (benefit) for income taxes consists of the following components:



		For the year ended December 31,
	2020		2019		2018

	(in thousands)
Current provision:
State	$	753	$	5,520	$	5,764
Foreign		20,638		18,150		13,756
Total current		21,391		23,670		19,520

Deferred provision (benefit) for taxes:
Federal		(7,552)		(3,306)		(9,463)
State		(4,684)		1,952		(1,412)
Foreign		(59,956)		13,138		(16,673)
Change in valuation allowance		9,005		4,151		12,261
Total deferred		(63,187)		15,935		(15,287)
Total provision (benefit) for income taxes	$	(41,796)	$	39,605	$	4,233

A reconciliation of the provision (benefit) for income taxes at the statutory U.S. Federal tax rate (21%) and the effective income tax rate is as follows:



	For the year ended December 31,
	2020		2019		2018

	(in thousands)
Statutory federal expense	$	(3,727)	$	39,247	$	10,854
Rate and permanent differences on non-U.S. earnings ⁽¹⁾		(7,531)		15,937		3,620
State and local tax expense		(3,707)		7,578		4,824
REIT adjustment		(35,539)		(28,975)		(22,241)
Permanent differences		(736)		18		437
Tax Act impact on deferred taxes		—		—		(6,040)
Other		439		1,649		518
Valuation allowance		9,005		4,151		12,261
(Benefit) provision for income taxes	$	(41,796)	$	39,605	$	4,233

(1)This item includes the effect of foreign exchange rate changes which were previously shown on a separate line.

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The components of the net noncurrent deferred income tax asset (liability) accounts are as follows:



	As of December 31,
	2020			2019

	(in thousands)
Deferred tax assets:
Net operating losses	$	55,657	$	61,741
Property, equipment, and intangible basis differences		9,813		5,946
Accrued liabilities		6,561		9,994
Non-cash compensation		20,128		19,198
Operating lease liability		232,329		276,824
Deferred revenue		2,846		2,527
Allowance for doubtful accounts		3,017		4,190
Currency translation		99,344		47,468
Other		5,808		2,657
Valuation allowance		(63,239)		(54,610)
Total deferred tax assets, net ⁽¹⁾		372,264		375,935

Deferred tax liabilities:
Property, equipment, and intangible basis differences		(145,328)		(158,419)
Right of use asset		(223,366)		(269,586)
Straight-line rents		(20,809)		(25,535)
Deferred foreign withholding taxes		(9,796)		(7,706)
Deferred lease costs		—		(34)
Other		(1,532)		(783)
Total deferred tax liabilities, net ⁽¹⁾	$	(28,567)	$	(86,128)

(1)Of these amounts, $53,722 and $82,290 are included in Other assets and Other long-term liabilities, respectively on the accompanying Consolidated Balance Sheets as of December 31, 2020. As of December 31, 2019, $4,342, $1,650, and $88,820 are included in Other assets, Other current liabilities, and Other long-term liabilities, respectively on the accompanying Consolidated Balance Sheet.

A deferred tax asset is reduced by a valuation allowance if based on the weight of all available evidence, including both positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that the value of such assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The realization of deferred tax assets, including carryforwards and deductible temporary differences, depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. All sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies, should be considered.

The Company has recorded a valuation allowance for certain deferred tax assets as management believes that it is not “more-likely-than-not” that the Company will generate sufficient taxable income in future periods to recognize the assets. Valuation allowances of $63.2 million and $54.6 million were being carried to offset net deferred income tax assets as of December 31, 2020 and 2019, respectively. The net change in the valuation allowance for the years ended December 31, 2020 and 2019 was an increase of $8.6 million and a decrease of $4.0 million, respectively.

The Company has available at December 31, 2020, a federal NOL carry-forward of approximately $770.8 million. $745.2 million of these NOL carry-forwards will expire between 2025 and 2037, and $25.6 million have an indefinite carry-forward. As of December 31, 2020, $651.1 million of the federal NOLs are attributes of the REIT. The Company may use these NOLs to offset its REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized. The Internal Revenue Code places limitations upon the future availability of NOLs based upon changes in the equity of the Company. If these occur, the ability of the Company to offset future income with existing NOLs may be limited. In addition, the Company has available at December 31, 2020, a foreign NOL carry-forward of $65.9 million and a net state operating tax loss carry-forward of approximately $412.0 million. These net operating tax loss carry-forwards begin to expire in 2021.

The tax losses generated in tax years 2002 through 2014 remain subject to audit adjustment, and tax years 2015 and forward are open to examination by the major jurisdictions in which the Company operates.

The Company has removed the permanent reinvestment assertion as of December 31, 2020 for all foreign earnings of the Company’s foreign jurisdictions except Argentina. The Company has also removed its permanent reinvestment assertion on the investment in the Company’s Guatemala and El Salvador subsidiaries. The Company has recorded deferred foreign withholding taxes of $9.8 million at December 31, 2020. No additional income taxes have been provided for any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations except as noted in Guatemala and El Salvador. The deferred incomes taxes related to the Guatemala and El Salvador subsidiaries are immaterial and determining the amount of unrecognized deferred tax liability for any additional outside basis differences in these entities that the investment is indefinitely reinvested is not practicable.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year it is incurred. The income inclusion for GILTI for the year ended December 31, 2020 is $10.0 million.

- 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.

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