Income Taxes

12 Months Ended

Dec. 31, 2020

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


(In thousands)	Years Ended December 31,
	2020		2019		2018
Domestic	$	437,039	$	529,451	$	587,346
Foreign	(34,660)		(43,265)		32,927
Total	$	402,379	$	486,186	$	620,273

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


(In thousands)	Years Ended December 31,
	2020		2019		2018
Current expense:
Federal	$	86,977	$	81,459	$	80,360
State	17,733		12,657		13,663
Foreign	23,845		24,608		25,001
	128,555		118,724		119,024
Deferred expense (benefit):
Federal	(2,979)		(2,216)		34,636
State	(405)		(98)		3,627
Foreign	26,543		(36,602)		(4,896)
	23,159		(38,916)		33,367
Tax expense (benefit) relating to uncertain tax positions, including accrued interest	(6,323)		(1,338)		3,915
Income tax expense	$	145,391	$	78,470	$	156,306

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


(In thousands)	Years Ended December 31,
	2020		2019		2018
U.S. federal statutory income tax rate	21	%	21	%	21	%
State and local income taxes, net of federal benefit	4		2		2
Effect of foreign operations	2		2		—
Effect of rate changes on deferred taxes (a)	—		—		(2)
Excess tax deficiencies related to share-based compensation	2		—		—
Nontaxable income attributable to noncontrolling interests	(1)		(1)		(1)
Changes in the valuation allowance (b)	10		(4)		3

Tax expense relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	(1)		—		—
Deferral of investment tax credit benefit (c)	(1)		(2)		—
Other	—		(2)		2
Effective income tax rate	36	%	16	%	25	%

(a) The benefits related to effects of rate changes in the year ended December 31, 2018, primarily relate to 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, 2020, the increase in valuation allowance relates primarily to a change in judgement and a change in local tax law related to the utilization of foreign net operating loss carryforwards and other deferred tax assets. 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 years ended December 31, 2020 and 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, 2020 and 2019 are as follows:


(In thousands)	December 31,
	2020		2019
Deferred Tax Asset (Liability)
NOLs and tax credit carry forwards	$	98,631	$	103,407
Compensation and benefit plans	22,562		27,835
Allowance for doubtful accounts	1,832		428
Fixed assets and intangible assets	42,550		37,893
Accrued interest expense	5,599		7,202
Other liabilities	16,682		27,276
Deferred tax asset	187,856		204,041
Valuation allowance	(96,199)		(59,584)
Net deferred tax asset	91,657		144,457
Prepaid liabilities	(538)		(530)
Fixed assets and intangible assets	(84,005)		(93,300)
Investments in partnerships	(77,619)		(105,062)
Other assets	(36,458)		(30,931)
Deferred tax liability	(198,620)		(229,823)
Total net deferred tax liability	$	(106,963)	$	(85,366)

At December 31, 2020, the Company had investment tax credit carry forwards of approximately $38.8 million, expiring on various dates from 2031 through 2035 and foreign tax credit carry forwards of approximately $31.0 million, expiring on various dates from 2020 through 2030, which have been reduced by a valuation allowance of $31.0 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 $411.3 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 $113.1 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 $23.4 million has expiration dates ranging from 2022 through 2038 and has been reduced by a valuation allowance of approximately $7.8 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 $43.0 million for these carry forwards have been reduced by a valuation allowance of approximately $40.8 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, 2020 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, 2020, $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, 2020, the liability for uncertain tax positions was $9.7 million, excluding the related accrued interest liability of $2.7 million and deferred tax assets of $2.1 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, 2019	$	18,588
Increases related to current year tax positions	173
Increases related to prior year tax positions	1,999

Decreases related to prior year tax positions	(988)
Decreases due to settlements/payments	(10,087)

Balance at December 31, 2020	$	9,685

Interest expense (net of the related deferred tax benefit) of $0.6 million was recognized during the year ended December 31, 2020 and is included in income tax expense in the consolidated statement of income. At December 31, 2020 and 2019, 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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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