Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

(In thousands)	Years Ended December 31,
	2022		2021		2020
Domestic	$	(52,458)	$	292,364	$	437,039
Foreign	22,506		81,868		(34,660)
Total	$	(29,952)	$	374,232	$	402,379

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

(In thousands)	Years Ended December 31,
	2022		2021		2020
Current expense (benefit):
Federal	$	(6,310)	$	19,751	$	86,977
State	2,141		10,360		17,733
Foreign	18,933		25,990		23,845
	14,764		56,101		128,555
Deferred expense (benefit):
Federal	(43,707)		24,923		(2,979)
State	(3,633)		2,715		(405)
Foreign	(3,349)		6,372		26,543
	(50,689)		34,010		23,159
Tax expense (benefit) relating to uncertain tax positions, including accrued interest	(5,055)		4,282		(6,323)
Income tax expense (benefit)	$	(40,980)	$	94,393	$	145,391

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

(In thousands)	Years Ended December 31,
	2022		2021		2020
U.S. federal statutory income tax rate	21	%	21	%	21	%
State and local income taxes, net of federal benefit (a)	20		3		4
Effect of foreign operations (b)	(11)		(1)		2
Non-deductible compensation expenses (c)	(35)		2		1
Excess tax deficiencies related to share-based compensation	(5)		(1)		2
Changes in the valuation allowance (d)	(109)		3		10
Tax expense relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	16		1		(1)
Deferral of investment tax credit benefit	4		(1)		(1)
Deemed liquidation - controlled foreign corporation (a)	235		—		—
Other	1		(2)		(2)
Effective income tax rate	137	%	25	%	36	%

(a)    In the year ended December 31, 2022, the deemed liquidation – controlled foreign corporation is a result of a capital loss sustained related to a change in the entity classification of a wholly-owned controlled foreign corporation. This also impacts state and local income taxes.

(b)    In the years ended December 31, 2022, 2021 and 2020, the effect of foreign operations relates to the income tax benefit or expense as a result of certain entities operating in foreign jurisdictions.

(c)    In the year ended December 31, 2022, the increase in nondeductible compensation expense is primarily due to contractual severance as a result of employee separations. In the year ended December 31, 2021, the increase in nondeductible compensation expense is primarily due to the expiration of grandfathered arrangements related to equity compensation under Internal Revenue Code Section 162(m). Prior periods have been restated for comparative purposes.

(d)    In the year ended December 31, 2022, the increase in valuation allowance relates primarily to the generation of excess capital losses and foreign tax credits. In the year ended December 31, 2021, the increase in valuation allowance from prior year relates primarily to the generation of excess foreign tax credits and a reduction in the expected utilization of interest expense carryforwards as a result of a tax assessment.

The tax effects of temporary differences that give rise to significant components of deferred tax assets or liabilities at December 31, 2022 and 2021 are as follows:

(In thousands)	December 31,
	2022		2021
Deferred Tax Asset (Liability)
NOLs and tax credit carry forwards	$	101,793	$	95,684
Compensation and benefit plans	24,451		19,450
Allowance for doubtful accounts	1,280		1,285
Fixed assets and intangible assets	35,678		39,860
Accrued interest expense	30,346		5,258
Unused capital losses	60,226		—
Other liabilities	21,618		15,913
Deferred tax asset	275,392		177,450
Valuation allowance	(132,164)		(105,494)
Net deferred tax asset	143,228		71,956
Prepaid liabilities	(570)		(642)
Fixed assets and intangible assets	(89,671)		(106,820)
Investments in partnerships	(128,434)		(92,866)
Other assets	(23,577)		(23,894)
Deferred tax liability	(242,252)		(224,222)
Total net deferred tax liability	$	(99,024)	$	(152,266)

At December 31, 2022, the Company had investment tax credit carry forwards of approximately $59.3 million, expiring on various dates from 2032 through 2037 and foreign tax credit carryforwards of approximately $47.3 million, expiring on various dates from 2024 through 2032. The foreign tax credit carryforwards have been reduced by a valuation allowance of $47.3 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 $318.9 million, related primarily to federal and state net operating losses acquired as a result of the purchase of the outstanding shares of RLJ Entertainment and Sentai Holdings of approximately $87.3 million and $6.8 million, respectively, as well as net operating loss carryforwards of our foreign subsidiaries. The deferred tax asset related to the federal and state net operating loss carryforward of approximately $20.8 million has expiration dates ranging from 2023 through 2042 (some are indefinite) and has been reduced by a valuation allowance of approximately $9.7 million, including $7.7 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 $33.6 million for these carry

forwards have been reduced by a valuation allowance of approximately $33.3 million as it is more likely than not that these carry forwards will not be realized. The deferred tax asset related to unused capital losses expires in 2027 and has been reduced by a valuation allowance of approximately $21.6 million as it is more likely than not that these losses will not be realized. The remainder of the valuation allowance at December 31, 2022 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, 2022, $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, 2022, the liability for uncertain tax positions was $6.7 million, excluding accrued interest of $2.1 million and deferred tax assets of $1.7 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, 2021	$	12,193
Increases related to current year tax positions	107
Increases related to prior year tax positions	476
Decreases related to prior year tax positions	(364)
Decreases due to settlements/payments	(1,797)
Decreases due to lapse of statute of limitations	(3,965)
Balance at December 31, 2022	$	6,650

Interest benefit (net of the related deferred tax) of $1.3 million was recognized during the year ended December 31, 2022 and is included in income tax expense in the consolidated statement of income. At December 31, 2022 and 2021, the liability for uncertain tax positions and accrued interest are included in accrued liabilities and 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.