Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 10 — Income Taxes

Consolidated income (loss) before taxes and noncontrolling interests for domestic and foreign operations is as follows:

	Year Ended December 31,
	2020		2019		2018
	(In millions)
Foreign	$	(1,614)	$	3,145	$	3,164
Domestic	(567)		627		162
Total income (loss) before income taxes	$	(2,181)	$	3,772	$	3,326

The components of the income tax expense (benefit) are as follows:

	Year Ended December 31,
	2020		2019		2018
	(In millions)
Foreign:
Current	$	7	$	245	$	245
Deferred	3		(10)		(12)
Federal:
Current	(11)		33		15
Deferred	(35)		145		135
State:
Current	(2)		33		2
Deferred	—		22		(10)
Total income tax expense (benefit)	$	(38)	$	468	$	375

The reconciliation of the statutory federal income tax rate and the Company's effective tax rate is as follows:

	Year Ended December 31,
	2020		2019		2018
Statutory federal income tax rate	(21.0)	%	21.0	%	21.0	%
Increase (decrease) in tax rate resulting from:
Change in valuation allowance	9.8	%	2.7	%	4.5	%
Foreign and U.S. tax rate differential	6.7	%	(5.6)	%	(6.5)	%
Tax exempt (income) loss of foreign subsidiary	2.1	%	(8.0)	%	(8.3)	%
Other, net	0.7	%	2.3	%	0.6	%
Effective tax rate	(1.7)	%	12.4	%	11.3	%

The Company enjoys an income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company will continue to benefit from this tax exemption through June 26, 2022, the date VML's subconcession agreement expires. Had the Company not received the income tax exemption in Macao, consolidated net income attributable to LVSC would have been reduced by $200 million and $184 million, and diluted earnings per share would have been reduced by $0.26 and $0.23 per share for the years ended December 31, 2019 and 2018, respectively. The VML gaming losses incurred during 2020 did not generate a tax benefit because they are not subject to tax. This results in an increase in the Company’s overall effective tax rate. In April 2019, the Company entered into a renewed agreement with the Macao government, which is effective through June 26, 2022, and provides for an annual payment of 38 million patacas (approximately $5 million at exchange rates in effect on December 31, 2020) as a substitution for a 12% tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. In September 2013, the Company and the Internal Revenue Service entered into a Pre-Filing Agreement providing the Macao special gaming tax (35% of gross gaming revenue) qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. foreign tax credit.

The Company's foreign and U.S. tax rate differential reflects the fact that the U.S. tax rate of 21% is higher than the statutory tax rates in Singapore and Macao of 17% and 12%, respectively.

The Tax Cuts and Jobs Act (the "Act" or "U.S. tax reform") made significant changes to U.S. income tax laws including lowering the U.S. corporate tax rate to 21% effective beginning in 2018 and transitioning from a worldwide tax system to a territorial tax system resulting in dividends from the Company's foreign subsidiaries not being subject to U.S. income tax and therefore, no longer generating U.S. foreign tax credits. During the year ended December 31, 2018, the Company recorded a tax expense of $57 million resulting from guidance by the Internal Revenue Service ("IRS") related to certain international provisions of U.S. tax reform.

The primary tax affected components of the Company's net deferred tax assets are as follows:

	December 31,
	2020		2019
	(In millions)
Deferred tax assets:
U.S. foreign tax credit carryforwards	$	4,812	$	4,791
Net operating loss carryforwards	466		283
Stock-based compensation	16		15
Provision for credit losses	14		14
Deferred gain on mall sale transactions	12		13
Accrued expenses	10		23
Pre-opening expenses	7		9
Other	—		1
	5,337		5,149
Less — valuation allowances	(4,922)		(4,786)
Total deferred tax assets	415		363
Deferred tax liabilities:
Property and equipment	(274)		(251)
Prepaid expenses	(4)		(5)
Other	(7)		(8)
Total deferred tax liabilities	(285)		(264)
Deferred tax assets, net	$	130	$	99

U.S. tax reform required the Company to compute a one-time mandatory tax on the previously unremitted earnings of its foreign subsidiaries during the year ended December 31, 2017. This one-time deemed repatriation of these earnings did not result in a cash tax liability for the Company as the incremental U.S. taxable income was fully offset by the utilization of the U.S. foreign tax credits generated as a result of the deemed repatriation. In addition, the deemed repatriation generated excess U.S. foreign tax credits, which were carried forward to tax years 2018 and beyond. The Company's U.S. foreign tax credit carryforwards were $4.87 billion and $4.84 billion as of December 31, 2020 and 2019, respectively, which will begin to expire in 2022. There was a valuation allowance of $4.58 billion and $4.51 billion as of December 31, 2020 and 2019, respectively, provided on certain net U.S. deferred tax assets, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition. The Company’s U.S. net operating loss carryforward was $568 million as of December 31, 2020, which does not have an expiration date. Net operating loss carryforwards for the Company's foreign subsidiaries were $2.84 billion and $2.31 billion as of December 31, 2020 and 2019, respectively, which began to expire in 2021. There are valuation allowances of $342 million and $279 million as of December 31, 2020 and 2019, respectively, provided on the net deferred tax assets of certain foreign jurisdictions, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition.

Undistributed earnings of subsidiaries are accounted for as a temporary difference, except deferred tax liabilities are not recorded for undistributed earnings of foreign subsidiaries deemed to be indefinitely reinvested in foreign jurisdictions. U.S. tax reform required the Company to compute a tax on previously unremitted earnings of its foreign subsidiaries upon transition from a worldwide tax system to a territorial tax system during the year ended December 31, 2017. The Company expects these earnings to be exempt from U.S. income tax if distributed as these

earnings were taxed during the year ended December 31, 2017, under U.S. tax reform. The Company does not consider current year's tax earnings and profits of its foreign subsidiaries to be indefinitely reinvested. Beginning with the year ended December 31, 2015, the Company's major foreign subsidiaries distributed, and may continue to distribute, earnings in excess of their current year's tax earnings and profits in order to meet the Company's liquidity needs. As of December 31, 2020, the amount of earnings and profits of foreign subsidiaries the Company does not intend to repatriate was $2.58 billion. The Company does not expect withholding taxes or other foreign income taxes to apply should these earnings be distributed in the form of dividends or otherwise.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows:

	December 31,
	2020		2019		2018
	(In millions)
Balance at the beginning of the year	$	134	$	118	$	92
Additions to tax positions related to prior years	—		1		2
Reductions to tax positions related to prior years	(14)		—		—
Additions to tax positions related to current year	11		15		24
Balance at the end of the year	$	131	$	134	$	118

As of December 31, 2020, 2019 and 2018, unrecognized tax benefits of $60 million, $53 million and $67 million, respectively, were recorded as reductions to the U.S. foreign tax credit deferred tax asset. As of December 31, 2020, 2019 and 2018, unrecognized tax benefits of $71 million, $81 million and $51 million, respectively, were recorded in other long-term liabilities.

Included in the unrecognized tax benefit balance as of December 31, 2020, 2019 and 2018, are $123 million, $115 million and $103 million, respectively, of uncertain tax benefits that would affect the effective income tax rate if recognized.

The Company's major tax jurisdictions are the U.S., Macao and Singapore. The Company could be subject to examination for tax years beginning in 2016 in Macao and Singapore and tax years 2010 through 2015 and 2017 through 2019 in the U.S. The Company believes it has adequately reserved and provided for its uncertain tax positions; however, there is no assurance the taxing authorities will not propose adjustments that are different from the Company's expected outcome and it could impact the provision for income taxes.

The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statement of operations. Interest and penalties of $7 million, $5 million and $3 million were accrued as of December 31, 2020, 2019 and 2018, respectively. The Company does not expect a significant increase or decrease in unrecognized tax benefits over the next twelve months.