Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 18: Income Taxes

Our tax provision includes federal, state and foreign income taxes payable. The domestic and foreign components of our income (loss) before taxes were as follows:

	Year Ended December 31,
($ in millions)	2021		2020			2019
U.S. income (loss) before tax	$	195	$	(287	)	$	234
Foreign income before tax		74		7			39
Total income (loss) before taxes	$	269	$	(280	)	$	273

The components of our provision for income taxes were as follows:

	Year Ended December 31,
($ in millions)	2021			2020			2019
Current:
Federal	$	(5	)	$	36		$	37
State		9			5			9
Foreign		31			3			8
Total current		35			44			54
Deferred:
Federal		61			(98	)		3
State		(1	)		(23	)		1
Foreign		(2	)		(2	)		(1	)
Total deferred		58			(123	)		3
Total provision for income taxes	$	93		$	(79	)	$	57

Reconciliations of our tax provision at the U.S. statutory rate to the provision for income taxes were as follows:

	Year Ended December 31,
($ in millions)	2021		2020			2019
Statutory U.S. federal income tax provision	$	57	$	(59	)	$	57
State and local income taxes, net of U.S. federal tax benefit		8		(17	)		11
Impact of foreign operations		14		(5	)		1
Interest on installment sales, net of U.S. federal tax benefit		3		1			4
Transaction costs		5		—			—
Share-based compensation, net of IRC §162(m) limitation		5		1			1
Tax accounting method change		—		—			(18	)
Other		1		—			1
Provision for income taxes	$	93	$	(79	)	$	57

Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items.

The compositions of net deferred tax balances were as follows:

	December 31,
($ in millions)	2021			2020
Deferred income tax assets	$	7		$	4
Deferred income tax liabilities		(670	)		(137	)
Net deferred taxes	$	(663	)	$	(133	)

The tax effects of the temporary differences and carryforwards that give rise to our net deferred tax liability were as follows:

	December 31,
($ in millions)	2021			2020
Deferred tax assets:
Compensation	$	22		$	16
Domestic tax loss and credit carryforwards		100			5
Foreign tax loss carryforwards		47			2
Other reserves		179			89
		348			112
Valuation allowance		(74	)		(4	)
Deferred tax assets		274			108
Deferred tax liabilities:
Property and equipment		(165	)		(70	)
Amortizable intangible assets		(309	)		(7	)
Deferred income		(463	)		(164	)
Other liabilities		—			—
Deferred tax liabilities		(937	)		(241	)
Net deferred taxes	$	(663	)	$	(133	)

Our net deferred tax liability increased by $530 million as of December 31, 2021, as compared to the same period in 2020, primarily due to acquired deferred taxes resulting from the Diamond Acquisition.

We have $331 million federal, $179 million foreign, and $406 million state tax loss carryforwards with varying expiration dates. The majority of our federal and foreign tax losses can be carried forward indefinitely. The remaining tax losses have expiration periods generally between five and twenty years. We have foreign tax credit carryforwards of $4 million and state tax credit carryforwards of $3 million. The credit carryforwards have expiration dates between six and fifteen years.

We establish valuation allowances for financial reporting purposes to offset certain deferred tax assets due to uncertainty regarding our ability to realize them in the future. The valuation allowance increased from $4 million as of December 31, 2020, to $74 million as of December 31, 2021, primarily due to acquired deferred tax assets from the Diamond Acquisition for which no future tax benefit is expected.

Reconciliations of the amounts of unrecognized tax benefits were as follows:

	December 31,
($ in millions)	2021			2020		2019
Unrecognized tax benefits at beginning of year	$	—		$	—	$	—
Current period tax position increases		1			—		—
Prior period tax position increases		18			—		—
Decreases due to lapse in applicable statute of limitations		(7	)		—		—
Unrecognized tax benefits at end of year	$	12		$	—	$	—

We recorded $12 million as of December 31, 2021, excluding interest and penalties, as a liability for unrecognized tax benefits in Accounts payable, accrued expenses and other in the consolidated balance sheet. We have $12 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The total liability accrued for interest and penalties was $12 million as of December 31, 2021. We do not anticipate any significant increases or decreases in our unrecognized tax benefits within the next twelve months.

We file federal, state and foreign income tax returns in jurisdictions with varying statute of limitations. We are currently under audit in several tax jurisdictions. The open tax years for major tax jurisdictions are 2006 through 2021. While there is no assurance as to the results, we believe we are adequately reserved for these audits.

Although the Tax Cuts and Jobs Act of 2017 generally eliminates U.S. federal income tax on dividends from foreign subsidiaries, foreign withholding taxes may be incurred if these profits are distributed. No income or deferred taxes have been accrued on foreign earnings or other outside basis differences, as we intend to indefinitely reinvest these amounts in our foreign operations. An estimate of these amounts is not practicable due to the inherent complexity of the multi-jurisdictional tax environment in which the Company operates.