Income Taxes

12 Months Ended

Dec. 31, 2019

NOTE 13. INCOME TAXES

Components of Earnings Before Income Taxes

The following table summarizes the components of earnings before income taxes for the years ended December 31 (in thousands):

	2019		2018		2017
Domestic	$	981,188	$	1,078,678	$	1,207,503
International		795,175		807,612		608,065
Earnings before income taxes	$	1,776,363	$	1,886,290	$	1,815,568

Summary of Current and Deferred Income Taxes

The following table summarizes the components of the provision for income taxes for the years ended December 31 (in thousands):

	2019			2018			2017
Current income tax expense:
U.S. federal	$	3,232		$	1,727		$	214
International		41,855			50,731			45,185
State and local		17,209			9,424			14,215
Total current income tax expense		62,296			61,882			59,614

Deferred income tax expense (benefit):
U.S. federal		(208	)		(317	)		2,533
International		12,429			1,765			(7,538	)
Total deferred income tax expense (benefit)		12,221			1,448			(5,005	)
Total income tax expense	$	74,517		$	63,330		$	54,609

Current Income Taxes

Current income tax expense incurred in international jurisdictions over the last three years was due to tax charged on the following: (i) the contribution of real estate properties to our unconsolidated co-investment ventures and sales to third-parties; (ii) recurring and transactional fees earned; and (iii) taxable earnings from unconsolidated co-investment ventures.

For the years ended December 31, 2019, 2018 and 2017, we did not recognize any expense for uncertain tax positions.

During the years ended December 31, 2019, 2018 and 2017, cash paid for income taxes, net of refunds, was $62.1 million, $60.3 million and $46.7 million, respectively.

Deferred Income Taxes

The deferred income tax expense recognized in 2019 and 2018 was due to changes in temporary differences and utilization of NOLs. The deferred income tax benefit recognized in 2017 was principally due to the reversal of deferred tax liabilities from the contribution and disposition of properties.

The following table summarizes the deferred income tax assets and liabilities at December 31 (in thousands):

	2019			2018
Gross deferred income tax assets:
NOL carryforwards	$	287,516		$	336,485
Basis difference – real estate properties		42,472			55,198
Basis difference – equity investments		445			5,448
Basis difference – intangibles		-			1,076
Section 163(j) interest limitation		480			4,771
Capital loss carryforward		1			1
Other – temporary differences		2,754			3,487
Total gross deferred income tax assets		333,668			406,466
Valuation allowance		(299,092	)		(379,987	)
Gross deferred income tax assets, net of valuation allowance		34,576			26,479
Gross deferred income tax liabilities:
Basis difference – real estate properties		78,113			69,157
Basis difference – equity investments		12,622			2,380
Other – temporary differences		1,898			2,941
Total gross deferred income tax liabilities		92,633			74,478
Net deferred income tax liabilities	$	58,057		$	47,999

At December 31, 2019, we had NOL carryforwards as follows (in thousands):

	U.S.			Europe			Mexico			Japan			Other
Gross NOL carryforward	$	72,880		$	652,026		$	292,213		$	117,500		$	36,062
Tax-effected NOL carryforward		17,781			149,197			90,116			21,634			8,788
Valuation allowance		(5,542	)		(143,552	)		(90,116	)		(21,634	)		(7,188	)
Net deferred tax asset – NOL carryforward	$	12,239		$	5,645		$	-		$	-		$	1,600
Expiration periods	2022 – indefinite			2020 – indefinite			2020 – 2030			2020 – 2029			2020 – indefinite

The deferred tax asset valuation allowance at December 31, 2019, was adequate to reduce the total deferred tax asset to an amount that we estimate will more likely than not be realized.

Liability for Uncertain Tax Positions

During the years ended December 31, 2019, 2018 and 2017, we believe that we have complied with the REIT requirements of the IRC. The statute of limitations for our tax returns is generally three years. As such, our tax returns that remain subject to examination would be primarily from 2016 and thereafter.

The liability for uncertain tax positions was $3.0 million at December 31, 2019 and 2018 and consisted of estimated income tax liabilities in Mexico for both periods.