XML 42 R23.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before income taxes for the periods were as follows (in millions):
Years Ended December 31,
202120202019
Domestic$280.8 $95.5 $61.9 
Foreign9.6 (1.4)1.7 
Income before income taxes$290.4 $94.1 $63.6 

The provision for income taxes consists of the following (in millions):
Years Ended December 31,
202120202019
Current:
Federal$— $— $(1.4)
Foreign0.9 1.8 3.5 
State and local12.0 6.1 3.7 
Total current12.9 7.9 5.8 
Deferred:
Federal56.7 22.5 15.9 
Foreign2.1 (7.1)0.4 
State and local(5.4)(2.9)(6.0)
Total deferred53.4 12.5 10.3 
Total income tax provision$66.3 $20.4 $16.1 
The principal items of the U.S. and foreign net deferred tax assets (liabilities) are as follows (in millions):
December 31, 2021December 31, 2020
Deferred tax assets:
Employee benefit plans$3.6 $5.3 
Tax credit carryforwards2.4 0.5 
Right-of-use assets104.2 48.5 
Accrued expenses40.4 37.0 
Net operating loss carryforwards106.4 75.1 
Total deferred tax assets257.0 166.4 
Less: valuation allowance(3.4)(3.2)
Total net deferred tax assets253.6 163.2 
Deferred tax liabilities:
Lease liabilities(101.1)(46.4)
Prepaid Expenses(1.8)(1.8)
Depreciation on tangible assets(619.1)(517.4)
Intangible assets(68.4)(71.6)
Total deferred tax liabilities(790.4)(637.2)
Net deferred tax liability$(536.8)$(474.0)

As of December 31, 2021, a deferred tax asset of $91.5 million was recorded for unutilized federal net operating loss carryforwards ("NOL carryforwards"). The total federal NOL carryforwards are $443.9 million and have an indefinite carryforward period. State NOL carryforwards have generated a deferred tax asset of $12.5 million and expire over various years beginning in 2022.

As of December 31, 2021, deferred tax assets of $2.4 million were recorded for federal and various state tax credit carryforwards and expire in various years beginning in 2034. As of December 31, 2021, deferred tax assets of $2.5 million were recorded for foreign NOL carryforwards of $15.5 million, all of which have an indefinite carryforward period.

In determining the valuation allowance, an assessment of positive and negative evidence was performed regarding realization of the net deferred tax assets in accordance with Topic 740. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, the availability of carryforwards and estimates of projected future taxable income. Based on the assessment, as of December 31, 2021, total valuation allowances of $3.4 million were recorded against deferred tax assets. Although realization is not assured, the Company has concluded that it is more likely than not the remaining deferred tax assets of $253.6 million will be realized and as such no valuation allowance has been provided on these assets.
The income tax in the accompanying consolidated statements of operations differs from the income tax calculated by applying the statutory federal income tax rate to income (loss) before income taxes due to the following (in millions):
Years Ended December 31,
202120202019
Income tax provision at statutory rate$61.0 $19.8 $13.3 
Increases (decreases) resulting from:
Foreign taxes0.2 (0.1)0.9 
State and local income taxes, net of federal income tax7.3 3.1 (3.7)
Federal and foreign0.1 3.5 3.1 
Change in valuation allowance— (5.8)2.6 
Outside basis difference in foreign subsidiaries— — (0.9)
Tax Credits(1.9)— — 
All other items, net(0.4)(0.1)0.8 
Income tax provision$66.3 $20.4 $16.1 

As a result of the Tax Cuts and Jobs Act of 2017, previously undistributed earnings from foreign subsidiaries are deemed to have been repatriated as of December 31, 2017 for federal income tax purposes. Beginning in 2018, companies are generally able to repatriate earnings from foreign subsidiaries with no U.S. federal income tax impact. As of December 31, 2021, the Company continues to assert that earnings from foreign operations are not permanently invested. The Company, as a matter of policy, looks to repatriate foreign earnings in a tax efficient manner. Many foreign jurisdictions impose taxes on distributions to other jurisdictions. Due to the variations and complexities of these laws, the Company believes it would be impractical to calculate and accrue these taxes beyond the normal earnings and profits standard for U.S. tax purposes.

As of December 31, 2021, the Company is maintaining the assertion that future earnings associated with the potential stock sale or liquidation of foreign subsidiaries are permanently reinvested. Accordingly, the Company has not recorded any deferred tax liabilities associated with these book-to-tax differences. The Company has analyzed the potential tax liability associated with these differences to be approximately $51.5 million.

The total cumulative amount of unrecognized tax benefits is $6.4 million and $2.7 million as of December 31, 2021 and 2020, respectively.

The Company conducts business globally and, as a result, files one or more income tax returns in the U.S. and non-U.S. jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The open tax years for these jurisdictions span from 2014 to 2021. The IRS completed its audit of the Company's 2007 to 2011 consolidated income tax returns, in which Herc was included, and had no changes to the previously filed tax returns. The Company is currently under audit for the 2014 through 2016 income tax years. Several U.S. state and non-U.S. jurisdictions are under audit. The Company does not expect any material assessments resulting from these audits.