Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	2021		2020		2019
United States	$	515,041	$	457,090	$	505,818
Foreign	593,767		425,435		572,001
Total	$	1,108,808	$	882,525	$	1,077,819

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

 

	2021		2020		2019
Current:
Federal	$	118,861	$	71,123	$	50,145
State	31,674		19,597		10,285
Foreign	107,751		71,921		84,433
Total current	258,286		162,641		144,863
Deferred:
Federal	(12,165)		143		(10,479)
State	(4,540)		(4,323)		3,745
Foreign	27,730		19,848		44,617
Total deferred	11,025		15,668		37,883
Total provision	$	269,311	$	178,309	$	182,746

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 21% for 2021, 2020, and 2019, respectively, to income before income taxes for the years ended December 31, 2021, 2020 and 2019 due to the following (in thousands):

 

	2021				2020				2019
Computed “expected” tax expense	$	232,850	21.0	%	$	185,330	21.0	%	$	226,342	21.0	%
Changes resulting from:
Change in valuation allowance	1,378		0.1		25,932		2.9		(28,614)		(2.7)
Foreign income tax differential	(10,326)		(0.9)		(20,852)		(2.3)		(15,816)		(1.4)
State taxes net of federal benefits	18,352		1.7		7,489		0.8		12,482		1.2
Increase in tax expense due to uncertain tax positions	8,185		0.7		14,848		1.7		—		—
Foreign withholding tax	9,143		0.8		15,630		1.8		20,360		1.9
Excess tax benefits related to stock-based compensation	(16,304)		(1.5)		(58,942)		(6.7)		(38,156)		(3.5)
Revaluation of capital loss deferred tax asset	—		—		—		—		(24,279)		(2.3)
Sub-part F Income/GILTI	72,449		6.5		34,990		4.0		49,859		4.6
Foreign tax credits	(63,926)		(5.8)		(30,497)		(3.5)		(38,657)		(3.6)
Other	17,510		1.6		4,381		0.5		19,225		1.8
Provision for income taxes	$	269,311	24.3	%	$	178,309	20.2	%	$	182,746	17.0	%

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):

	2021		2020
Deferred tax assets:
Accounts receivable, principally due to the allowance for doubtful accounts	$	13,987	$	10,515
Accrued expenses not currently deductible for tax	6,252		3,442
Lease deferral	20,349		23,506
Interest rate swap	7,621		21,792
Stock based compensation	39,658		36,015
Income tax credits	51,264		51,264
Net operating loss carry forwards	76,988		83,372
Accrued escheat	3,170		3,567
Other	10,078		11,711
Deferred tax assets before valuation allowance	229,367		245,184
Valuation allowance	(94,601)		(90,340)
Deferred tax assets, net	134,766		154,844
Deferred tax liabilities:
Intangibles—including goodwill	(520,349)		(481,388)
Basis difference in investment in subsidiaries	(42,938)		(42,313)
Lease deferral	(17,739)		(19,977)
Accrued Expense Liability	(795)		(513)
Prepaid expenses	(1,788)		(2,126)
Withholding taxes	(38,704)		(30,488)
Property and equipment and other	(76,810)		(71,342)
Deferred tax liabilities	(699,123)		(648,147)
Net deferred tax liabilities	$	(564,357)	$	(493,303)

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

 

	2021		2020
Long term deferred tax assets and liabilities:
Long term deferred tax assets	$	1,934	$	4,851
Long term deferred tax liabilities	(566,291)		(498,154)
Net deferred tax liabilities	$	(564,357)	$	(493,303)

The valuation allowances relate to 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, 2021, was an increase of $4.3 million. The valuation increase was primarily due to net operating losses generated in certain states where the Company and its subsidiaries file on a separate company basis as well as an increase in foreign net operating losses where significant negative evidence on future utilization was considered.

As of December 31, 2021, the Company had a net operating loss carryforward for U.S. federal income tax purposes of approximately $4.0 million gross of tax that is available to offset U.S. federal taxable income indefinitely. The Company had a net operating loss carryforward for state income tax purposes of approximately $837.2 million gross of tax that is available to offset future state taxable income indefinitely, and in some cases subject to expiration in 15 or 20 years. Additionally, the Company had $93.9 million net operating loss carryforwards gross of tax that are available to offset future foreign taxable income. Most foreign net operating loss carryforwards will not expire in future years. The Company has provided a valuation allowance against $42.0 million of its deferred tax asset related to the net operating losses as it does not anticipate utilizing the losses in the foreseeable future.

In addition, the Company has foreign tax credits for foreign income purposes in the amount of $51.2 million. The Company has provided a valuation allowance against $51.2 million of the tax credits as it does not anticipate utilizing the credits in the foreseeable future.

During 2021 and 2020, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $5.6 million and $5.7 million, respectively. Accumulated interest and penalties were $18.1 million and $12.5 million on the Consolidated Balance Sheets at December 31, 2021 and 2020, respectively. In accordance with the Company's accounting policy, interest and penalties related to unrecognized tax benefits are included as a component of income tax expense.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands):

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
Additions based on tax provisions related to the current year	6,412
Additions based on tax provisions related to the prior year	13,532
Deduction of cumulative interest and penalties	(12,508)
Deductions based on expiration of prior year tax positions	(14,460)
Unrecognized tax benefits at December 31, 2020	35,749
Additions based on tax provisions related to the current year	8,543
Additions based on tax provisions related to the prior year	5,909
Deductions based on settlement of prior year tax positions	(2,122)
Deductions based on expiration of prior year tax positions	(1,058)
Unrecognized tax benefits at December 31, 2021	$	47,021

In prior years, the Company included interest and penalties related to unrecognized tax benefits in its tabular reconciliation above. A cumulative adjustment was made in 2020 to remove interest and penalties from the above tabular disclosure.

As of December 31, 2021, the Company had total unrecognized tax benefits of $47.0 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 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 most state income tax returns has expired for years prior to 2018. The statute of limitations has expired for years prior to 2018 for the Company’s Russian income tax returns, 2016 for the Company’s Mexican income tax returns, and 2016 for the Company’s Luxembourg income tax returns.