Income Taxes

12 Months Ended

Dec. 31, 2019

Income (loss) from continuing operations before income taxes consists of the following components:


(In thousands)	Years Ended December 31,
			2019			2018			2017
Domestic	$	529,451		$	587,346		$	618,955
Foreign	(43,265)			32,927			21,423
Total	$	486,186		$	620,273		$	640,378

Income tax expense attributable to continuing operations consists of the following components:


(In thousands)	Years Ended December 31,
			2019			2018			2017
Current expense:
Federal	$	81,459		$	80,360		$	162,639
State	12,657			13,663			14,301
Foreign	24,608			25,001			17,382
	118,724			119,024			194,322
Deferred expense (benefit):
Federal	(2,216)			34,636			(38,416)
State	(98)			3,627			(2,436)
Foreign	(36,602)			(4,896)			(7,813)
	(38,916)			33,367			(48,665)
Tax expense (benefit) relating to uncertain tax positions, including accrued interest	(1,338)			3,915			5,084
Income tax expense	$	78,470		$	156,306		$	150,741

A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:


(In thousands)	Years Ended December 31,
			2019			2018			2017
U.S. federal statutory income tax rate	21	%		21	%		35	%
State and local income taxes, net of federal benefit	2			2			2
Effect of foreign operations	2			—			(1)
Effect of rate changes on deferred taxes (a)	—			(2)			(11)
Transition tax, net of foreign taxes deemed paid	—			—			2
Nontaxable income attributable to noncontrolling interests	(1)			(1)			(1)
Changes in the valuation allowance (b)	(4)			3			—
Domestic production activity deduction	—			—			(3)
Tax expense relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	—			—			1
Deferral of investment tax credit benefit (c)	(2)
Other	(2)			2			—
Effective income tax rate	16	%		25	%		24	%

(a) The benefits related to effects of rate changes in the years ended December 31, 2018 and 2017, primarily relate to the one-time impact of the change in the corporate tax rate on deferred tax assets and liabilities as enacted by the Tax Cuts and Jobs Act (enacted December 22, 2017) and the one-time rate change on deferred tax assets and liabilities that resulted from the extension of certain television production cost deductions included in the Bipartisan Budget Act of 2018 (enacted February 9, 2018) and return to provision adjustments.

(b) In the year ended December 31, 2019, the decrease in valuation allowance relates primarily to the expected utilization of foreign net operating loss carryforwards resulting from the reorganization of intellectual property amongst the Company’s international subsidiaries. In the year ended December 31, 2018, the increase in valuation allowance relates primarily to a change in judgement related to U.S. foreign tax credits.

(c) In the year ended December 31, 2019, the deferral of investment tax credit benefit relates to the income tax benefit recognized from investment tax credits recorded using the deferral method of accounting.

The tax effects of temporary differences that give rise to significant components of deferred tax assets or liabilities at December 31, 2019 and 2018 are as follows:


(In thousands)	December 31,
			2019			2018
Deferred Tax Asset (Liability)
NOLs and tax credit carry forwards	$	103,407		$	123,487
Compensation and benefit plans	27,835			29,294
Allowance for doubtful accounts	428			981
Fixed assets and intangible assets	37,893			24,150
Accrued interest expense	7,202			8,832
Other liabilities	27,276			24,594
Deferred tax asset	204,041			211,338
Valuation allowance	(59,584)			(95,185)
Net deferred tax asset	144,457			116,153
Prepaid liabilities	(530)			(514)
Fixed assets and intangible assets	(93,300)			(90,960)
Investments in partnerships	(105,062)			(121,156)
Other assets	(30,931)			(29,694)
Deferred tax liability	(229,823)			(242,324)
Total net deferred tax liability	$	(85,366)		$	(126,171)

At December 31, 2019, the Company had investment tax credit carry forwards of approximately $33.7 million, expiring on various dates from 2031 through 2034 and foreign tax credit carry forwards of approximately $28.9 million, expiring on various dates from 2020 through 2029, which have been reduced by a valuation allowance of $28.1 million as it is more likely than not that these carry forwards will not be realized. The Company had net operating loss carry forwards of approximately $466.7 million, related primarily to federal and state net operating losses acquired as a result of the purchase of the outstanding shares of RLJE of approximately $158.5 million and to net operating loss carryforwards of our foreign subsidiaries. The deferred tax asset related to the federal and state net operating loss carryforward of approximately $27.8 million has expiration dates ranging from 2022 through 2037 and has been reduced by a valuation allowance of approximately $9.9 million that was recorded through goodwill as part of purchase accounting. Although the foreign net operating loss carry forward periods range from 5 years to unlimited, the related deferred tax assets of approximately $45.2 million for these carry forwards have been reduced by a valuation allowance of approximately $20.2 million as it is more likely than not that these carry forwards will not be realized. The remainder of the valuation allowance at December 31, 2019 relates primarily to deferred tax assets attributable to temporary differences of certain foreign subsidiaries for which it is more likely than not that these deferred tax assets will not be realized.

For the year ended December 31, 2019, $1.3 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a 'with-and-without' approach).

At December 31, 2019, the liability for uncertain tax positions was $18.6 million, excluding the related accrued interest liability of $4.6 million and deferred tax assets of $4.1 million. All of such unrecognized tax benefits, if recognized, would reduce the Company's income tax expense and effective tax rate.

A reconciliation of the beginning to ending amount of the liability for uncertain tax positions (excluding related accrued interest and deferred tax benefit) is as follows:


(In thousands)
Balance at December 31, 2018	$	23,169
Increases related to current year tax positions	2,043
Increases related to prior year tax positions	4,880
Decreases related to prior year tax positions	(6,324)
Decreases due to settlements/payments	(4,809)
Decreases due to lapse of statute	(371)
Balance at December 31, 2019	$	18,588

Interest expense (net of the related deferred tax benefit) of $1.0 million was recognized during the year ended December 31, 2019 and is included in income tax expense in the consolidated statement of income. At December 31, 2019 and 2018, the liability for uncertain tax positions and related accrued interest noted above are included in other liabilities in the consolidated balance sheets.

The Company is currently being audited by the State and City of New York and various other states or jurisdictions, with most of the periods under examination relating to tax years 2013 and forward.