INCOME TAXES

The Company has filed, for prior taxable years through its taxable year ended December 31, 2011, consolidated U.S. federal tax returns, which included all of its then wholly owned domestic subsidiaries. For its taxable year commencing January 1, 2012, the Company filed, and intends to continue to file, as a REIT, and its domestic TRSs filed, and intend to continue to file, separate tax returns as required. The Company also files tax returns in various states and countries. The Company’s state tax returns reflect different combinations of the Company’s subsidiaries and are dependent on the connection each subsidiary has with a particular state and form of organization. The following information pertains to the Company’s income taxes on a consolidated basis.

The income tax provision from continuing operations consisted of the following for the years ended December 31, (in thousands):



	2016			2015			2014
Current:
Federal	$	(26,494	)	$	(73,930	)	$	(2,390	)
State	(1,976		)	(21,216		)	(797		)
Foreign	(100,074		)	(55,045		)	(57,934		)
Deferred:
Federal	(616		)	9,131			(4,180		)
State	(259		)	8			(973		)
Foreign	(26,082		)	(16,903		)	3,769
Income tax provision	$	(155,501	)	$	(157,955	)	$	(62,505	)

The effective tax rate (“ETR”) on income from continuing operations for the years ended December 31, 2016, 2015 and 2014 differs from the federal statutory rate primarily due to the Company’s qualification for taxation as a REIT, as well as adjustments for foreign items. As a REIT, the Company may deduct earnings distributed to stockholders against the income generated by its REIT operations. In addition, the Company is able to offset certain income by utilizing its NOLs, subject to specified limitations.

Reconciliation between the U.S. statutory rate and the effective rate from continuing operations is as follows for the years ended December 31:



	2016		2015		2014
Statutory tax rate	35	%	35	%	35	%
Adjustment to reflect REIT status (1)	(35	)	(35	)	(35	)
Foreign taxes	5		3		2
Foreign withholding taxes	4		3		3
Uncertain tax positions	5		—		—
Change in tax law	—		2		—
MIPT tax election (2)	—		11		—
Other	—		—		2
Effective tax rate	14	%	19	%	7	%

_______________

(1) Includes 29%, 36% and 24% from dividend paid deductions in 2016, 2015 and 2014, respectively.

(2) Includes federal and state taxes, net of federal benefit.

The domestic and foreign components of income from continuing operations before income taxes are as follows for the years ended December 31, (in thousands):



	2016		2015		2014
United States	$	882,552	$	785,201	$	857,457
Foreign	243,308		44,761		8,247
Total	$	1,125,860	$	829,962	$	865,704

The components of the net deferred tax asset and liability and related valuation allowance were as follows as of December 31, (in thousands):



	2016			2015
Assets:
Net operating loss carryforwards	$	278,674		$	277,977
Accrued asset retirement obligations	130,014			92,295
Stock-based compensation	4,267			3,889
Unearned revenue	29,003			25,654
Unrealized loss on foreign currency	26,883			37,440
Other accruals and allowances	45,578			13,824
Items not currently deductible and other	26,886			17,608
Liabilities:
Depreciation and amortization	(942,409		)	(194,230		)
Deferred rent	(27,099		)	(20,720		)
Other	(9,294		)	(11,077		)
Subtotal	(437,497		)	242,660
Valuation allowance	(144,397		)	(136,952		)
Net deferred tax (liabilities) assets	$	(581,894	)	$	105,708

As described in note 1, effective January 1, 2016, the Company adopted new guidance on the accounting for share-based payment transactions. As part of this new guidance, excess windfall tax benefits and tax deficiencies related to the Company’s stock option exercises and restricted stock unit vestings are recognized as an income tax benefit or expense in the consolidated statement of operations in the period in which the deduction occurs. Excess windfall tax benefits and tax deficiencies are therefore not anticipated when determining the annual ETR and are instead recognized in the interim period in which those items occur.

At December 31, 2016 and 2015, the Company has provided a valuation allowance of $144.4 million and $137.0 million, respectively, which primarily relates to foreign items. During 2016, the Company increased the amounts recorded as valuation allowances due to the uncertainty as to the timing of, and the Company’s ability to recover, net deferred tax assets in certain foreign operations in the foreseeable future. The increase in the valuation allowance for the year ending December 31, 2016, is offset by fluctuations in foreign currency exchange rates and by a removal of previously reserved deferred tax assets resulting from a restructuring in Germany. The amount of deferred tax assets considered realizable, however, could be adjusted if objective evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as the Company’s projections for growth.

A summary of the activity in the valuation allowance is as follows (in thousands):



	2016			2015			2014
Balance as of January 1,	$	136,952		$	141,241		$	136,006
Additions (1)	14,118			19,512			40,124
Reversals	—			—			(10,769		)
Foreign currency translation	(6,673		)	(23,801		)	(24,120		)
Balance as of December 31,	$	144,397		$	136,952		$	141,241

_______________

(1) Includes net charges to expense and allowances established through goodwill at acquisition.

The recoverability of the Company’s deferred tax assets has been assessed utilizing projections based on its current operations. Accordingly, the recoverability of the deferred tax assets is not dependent on material asset sales or other non-routine transactions. Based on its current outlook of future taxable income during the carryforward period, the Company believes that deferred tax assets, other than those for which a valuation allowance has been recorded, will be realized.

The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. The Company has not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes on $648.7 million of undistributed earnings of foreign subsidiaries indefinitely invested outside of the United States. Should the Company decide to repatriate the foreign earnings, it may have to adjust the income tax provision in the period it determined that the earnings will no longer be indefinitely invested outside of the United States.

At December 31, 2016, the Company had net federal, state and foreign operating loss carryforwards available to reduce future taxable income. If not utilized, the Company’s NOLs expire as follows (in thousands):



Years ended December 31,	Federal		State		Foreign
2017 to 2021	$	—	$	59,213	$	8,950
2022 to 2026	—		388,695		184,611
2027 to 2031	146,763		98,538		—
2032 to 2036	16,604		32,345		—
Indefinite carryforward	—		—		831,185
Total	$	163,367	$	578,791	$	1,024,746

In addition, the Company has Mexican tax credits of $0.9 million, which if not utilized will expire in 2017.

As of December 31, 2016 and 2015, the total amount of unrecognized tax benefits that would impact the ETR, if recognized, is $102.9 million and $28.1 million, respectively. The amount of unrecognized tax benefits for the year ended December 31, 2016, includes additions to the Company’s existing tax positions of $82.9 million, which includes $23.8 million assumed through acquisition.

The Company expects the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this timeframe, or if the applicable statute of limitations lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from zero to $10.8 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows for the years ended December 31, (in thousands):



	2016			2015			2014
Balance at January 1	$	28,114		$	31,947		$	32,545
Additions based on tax positions related to the current year	82,912			5,042			4,187
Additions for tax positions of prior years	—			—			3,780
Foreign currency	(307		)	(5,371		)	(3,216		)
Reduction as a result of the lapse of statute of limitations and effective settlements	(3,168		)	(3,504		)	(5,349		)
Balance at December 31	$	107,551		$	28,114		$	31,947

During the years ended December 31, 2016, 2015 and 2014, the statute of limitations on certain unrecognized tax benefits lapsed and certain positions were effectively settled, which resulted in a decrease of $3.2 million, $3.5 million and $5.3 million, respectively, in the liability for uncertain tax benefits, all of which reduced the income tax provision.

The Company recorded penalties and tax-related interest expense to the tax provision of $9.2 million, $3.2 million and $6.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. In addition, due to the expiration of the statute of limitations in certain jurisdictions, the Company reduced its liability for penalties and income tax-related interest expense related to uncertain tax positions during the years ended December 31, 2016, 2015 and 2014 by $3.4 million, $3.1 million and $9.9 million, respectively.

As of December 31, 2016 and 2015, the total amount of accrued income tax-related interest and penalties included in the consolidated balance sheets were $24.3 million and $20.2 million, respectively.

The Company has filed for prior taxable years, and for its taxable year ended December 31, 2016 will file, numerous consolidated and separate income tax returns, including U.S. federal and state tax returns and foreign tax returns. The Company is subject to examination in the U.S. and various state and foreign jurisdictions for certain tax years. As a result of the Company’s ability to carryforward federal, state and foreign NOLs, the applicable tax years generally remain open to examination several years after the applicable loss carryforwards have been used or have expired. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. The Company believes that adequate provisions have been made for income taxes for all periods through December 31, 2016.