Income Taxes

12 Months Ended

Dec. 31, 2019

Income before the provision for income taxes is attributable to the following jurisdictions for years ended December 31 (in thousands):



	2019		2018		2017
United States	$	505,818	$	622,214	$	524,669
Foreign	572,001		472,911		368,921
Total	$	1,077,819	$	1,095,125	$	893,590

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



	2019			2018			2017
Current:
Federal	$	50,145		$	165,303		$	303,514
State	10,285			26,036			19,234
Foreign	84,433			95,053			78,354
Total current	144,863			286,392			401,102
Deferred:
Federal	(10,479		)	(19,688		)	(255,188		)
State	3,745			8,727			276
Foreign	44,617			8,211			7,200
Total deferred	37,883			(2,750		)	(247,712		)
Total provision	$	182,746		$	283,642		$	153,390

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 21% for 2019 and 2018 and 35% 2017, respectively, to income before income taxes for the years ended December 31, 2019, 2018 and 2017 due to the following (in thousands):



	2019					2018					2017
Computed “expected” tax expense	$	226,342		21.0	%	$	229,976		21.0	%	$	312,756		35.0	%
Changes resulting from:
Change in valuation allowance	(28,614		)	(2.7	)	25,193			2.8		18,289			2.0
Foreign income tax differential	(15,816		)	(1.4	)	9,921			0.9		(38,695		)	(4.3	)
State taxes net of federal benefits	12,482			1.2		20,480			1.9		12,884			1.4
Foreign-sourced nontaxable income	—					(28,861		)	(2.6	)	(8,836		)	(1.0	)
Foreign withholding tax	20,360			1.9		20,569			1.9		9,362			1.0
IRC Section 199 deduction	—			—		—			—		(8,844		)	(1.0	)
Excess tax benefits related to stock-based compensation	(38,156		)	(3.5	)	(19,255		)	(1.8	)	(18,058		)	(2.0	)
Revaluation of capital loss deferred tax asset	(24,279		)	(2.3	)	—			—		—			—
Impact of the Tax Act:
One-time transition tax	—			—		—			—		195,779			21.9
Foreign tax credit- one-time transition tax	—			—		17,385			1.6		(113,955		)	(12.8	)
Deferred tax effects	—			—		7,128			0.1		(209,965		)	(23.5	)
Sub-part F Income/GILTI	49,859			4.6		40,200			3.7		3,741			0.4
Foreign tax credits	(38,657		)	(3.6	)	(52,095		)	(4.8	)	—			—
Other	19,225			1.8		13,001			1.2		(1,068		)	0.1
Provision for income taxes	$	182,746		17.0	%	$	283,642		25.9	%	$	153,390		17.2	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31 are as follows (in thousands):



	2019			2018
Deferred tax assets:
Accounts receivable, principally due to the allowance for doubtful accounts	$	9,586		$	8,518
Accrued expenses not currently deductible for tax	2,305			6,734
Lease deferral	24,713			—
Interest rate swap	13,781			—
Stock based compensation	39,779			40,081
Income tax credits	35,845			26,770
Net operating loss carry forwards	67,108			53,221
Investments	—			39,062
Accrued escheat	3,098			3,608
Other	3,522			4,240
Deferred tax assets before valuation allowance	199,737			182,234
Valuation allowance	(64,482		)	(90,366		)
Deferred tax assets, net	135,255			91,868
Deferred tax liabilities:
Intangibles—including goodwill	(499,525		)	(483,361		)
Basis difference in investment in subsidiaries	(42,314		)	(38,200		)
Lease deferral	(21,810		)	—
Mark to Market	(3,213		)	—
Accrued Expense Liability	(4,023		)	—
Prepaid expenses	(2,075		)
Property and equipment, prepaid expenses and other	(79,620		)	(59,101		)
Deferred tax liabilities	(652,580		)	(580,662		)
Net deferred tax liabilities	$	(517,325	)	$	(488,794	)

The Company’s deferred tax balances are classified in its balance sheets as of December 31 as follows (in thousands):



	2019			2018
Long term deferred tax assets and liabilities:
Long term deferred tax assets	$	2,655		$	3,152
Long term deferred tax liabilities	(519,980		)	(491,946		)
Net deferred tax liabilities	$	(517,325	)	$	(488,794	)

The valuation allowance for deferred tax assets changed during 2019 as follows (in thousands):



Balance at December 31, 2016	$	76,395
Additions based on changes in deferred tax assets in 2017	5,332
Reduction in valuation allowance due to rate change from Tax Act	(22,378		)
Balance at December 31, 2017 (after impact of tax reform)	59,349
Additions based on changes in deferred tax assets	25,193
Increase in valuation allowance due to rate change from Tax Act	5,824
Balance at December 31, 2018	90,366
Reductions based on changes in deferred tax assets	(28,601		)
Additions based on changes in deferred tax assets	2,717
Balance at December 31, 2019	$	64,482

The valuation allowances relate to basis differences in cost method investments, capital loss carryforwards, income tax credits, foreign net operating loss carryforwards and state net operating loss carryforwards. The net change in the total valuation allowance for the year ended December 31, 2019, was a decrease of $28.6 million. The valuation decrease from the prior year was primarily due to the sale of our investment in Masternaut, which will allow the Company to carryback the capital loss on its investment in Masternaut and offset it against a previously recorded capital gain from the sale of Nextraq in the third quarter of 2017. As the loss was not realizable in prior years based upon the available sources of taxable income in prior periods, a valuation allowance was recorded against the deferred tax asset. The valuation allowance was reversed during the three months ended June 30, 2019 resulting in a recognized tax benefit.

As of December 31, 2019, the Company had a net operating loss carryforward for state income tax purposes of approximately $671.1 million that is available to offset future state taxable income through 2038. Additionally, the Company had $68.1 million net operating loss carryforwards for foreign income tax purposes that are available to offset future foreign taxable income. The foreign net operating loss carryforwards will not expire in future years. The Company has provided a valuation allowance against $474.1 million of the net operating losses as it does not anticipate utilizing the losses in the foreseeable future.

During 2019 and 2018, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $3.4 million and $1.5 million, respectively.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits including interest and penalties for the years ended December 31, 2019, 2018 and 2017 is as follows (in thousands):



Unrecognized tax benefits at December 31, 2016	$	26,155
Additions based on tax provisions related to the current year	4,143
Additions for tax positions due to acquisitions	9,208
Deductions based on settlement/expiration of prior year tax positions	(9,119		)
Additions based on tax provisions related to the prior year	1,171
Unrecognized tax benefits at December 31, 2017	31,558
Additions based on tax provisions related to the current year	3,755
Additions based on tax provisions related to the prior year	3,000
Deductions based on settlement/expiration of prior year tax positions	(4,161		)
Unrecognized tax benefits at December 31, 2018	34,152
Additions based on tax provisions related to the current year	4,284
Additions based on tax provisions related to the prior year	11,679
Deductions based on settlement/expiration of prior year tax positions	(7,342		)
Unrecognized tax benefits at December 31, 2019	$	42,773

As of December 31, 2019, the Company had total unrecognized tax benefits of $42.8 million all of which, if recognized, would affect its effective tax rate. It is not anticipated that there are any unrecognized tax benefits that will significantly increase or decrease within the next twelve months.

The Company has immaterial outside basis differences in investments in foreign subsidiaries and has not recorded incremental income taxes for any additional outside basis differences, as these amounts continue to be indefinitely reinvested in foreign operations.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2014. The statute of limitations for the Company’s U.K. income tax returns has expired for years prior to 2017. The statute of limitations has expired for years prior to 2016 for the Company’s Czech Republic income tax returns, 2016 for the Company’s Russian income tax returns, 2014 for the Company’s Mexican income tax returns, 2014 for the Company’s Brazilian income tax returns, 2014 for the Company’s Luxembourg income tax returns, 2015 for the Company’s New Zealand income tax returns, and 2017 for the Company’s Australian income tax returns.