Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 14—Income Taxes

The following table summarizes the tax effects of temporary differences between the Consolidated Financial Statements carrying amount of assets and liabilities and their respective tax basis, which are recorded at the prevailing enacted tax rate that will be in effect when these differences are settled or realized. These temporary differences result in taxable or deductible amounts in future years. The Company assessed all available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize our existing net deferred tax assets.

The components of the Company’s deferred tax assets and liabilities were as follows:

	December 31,
(in millions)	2021		2020
Deferred tax assets:
Stock-based compensation expense	$	10.6	$	18.2
Accrued expenses	86.2		43.3
Financing and operating leasing obligations	2,351.3		2,336.9
Unrecognized tax benefits	8.9		7.9
Net operating losses, interest limitation and tax credit carryforwards	115.7		153.9
Gross deferred tax assets	2,572.7		2,560.2
Less: Valuation allowance	(124.3)		(101.0)
Net deferred tax assets	2,448.4		2,459.2
Deferred tax liabilities:
Property and equipment, not subject to the Master Leases	(65.6)		(51.1)
Property and equipment, subject to the Master Leases	(992.9)		(1,051.2)
Investments in and advances to unconsolidated affiliates	(6.8)		(27.9)
Discount on convertible notes	(18.1)		(20.9)
Undistributed foreign earnings	—		(0.4)
Intangible assets	(284.8)		(183.4)
Lease right of use assets	(1,269.3)		(1,250.6)
Net deferred tax liabilities	(2,637.5)		(2,585.5)
Long-term deferred tax liabilities, net	$	(189.1)	$	(126.3)

The realizability of the net deferred tax assets is evaluated quarterly by assessing the need for a valuation allowance and by adjusting the amount of the allowance, if necessary. The Company gives appropriate consideration to all available positive and negative evidence including statutory carryback periods, projected future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining if the net deferred tax assets will be realized. ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre‑tax book losses during the three most recent years and is widely considered significant negative evidence that is objective and verifiable and therefore, difficult to overcome. Due to the financial results during the year ended December 31, 2021, the Company has a cumulative pre‑tax book loss of $189.1 million, which reflects the significant negative evidence used in our assessment.

Additionally, the Company expects to remain in a three year cumulative loss position in the near future. As a result of these facts, the Company has recorded a valuation allowance against its net deferred tax assets, excluding net operating losses (“NOLs”) that can be realized based on statutory carryback periods and the reversal of net deferred taxes related to indefinite‑lived intangibles. The Company intends to continue to maintain a valuation allowance on its net deferred tax assets until there is sufficient objectively verifiable positive evidence to support the realization of all or some portion of these deferred tax assets. In the event the Company determines that the deferred income tax assets would be realized in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be recorded, which would reduce the provision for income taxes.

During the year ended December 31, 2021, the Company increased the valuation allowance by $23.3 million of which $18.2 million was recorded to the balance sheet as a purchase accounting adjustment for the theScore acquisition and $5.1 million was recorded through income tax expense.

In general, the Company has not recognized any U.S. tax expense on undistributed foreign earnings, as we intend to reinvest and expand into new markets outside the U.S. for the foreseeable future. If our intent changes or if these earnings are needed for our U.S. operations, we would be required to accrue and pay U.S. taxes on a portion or all these undistributed earnings. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries. The undistributed foreign earnings were immaterial at December 31, 2021.

Following the ownership changes of the Tropicana, the Company has $102.8 million of total gross federal NOL carryforwards that will expire on various dates through 2035. All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations. During the year ended December 31, 2021, the Company decreased its U.S. federal NOL carryforward by $153.7 million due to the current year utilization and generated a current U.S. federal NOL carryforward of $7.9 million due to the acquisition of the theScore’s U.S. operations. The Company acquired total gross U.S. federal NOLs of $16.5 million, state NOLs of $5.8 million, and Canadian NOLs of $42.2 million from theScore acquisition in the amount of $64.5 million. The tax benefit associated with these acquired NOLs is $3.4 million, $0.4 million, and $11.2 million respectively, against which a valuation allowance was recorded of $3.9 million for U.S. federal and state NOLs that will not be recognized. All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations, however, we believe it is more-likely-than-not that the benefit from these attributes will be realized outside of the portion of NOLs with a valuation allowance recorded as noted above.

For state income tax reporting, as of December 31, 2021, the Company had gross state NOL carryforwards aggregating $1.2 billion available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania, Colorado, Illinois, Iowa, Louisiana, Maryland, Michigan, Missouri, New Mexico and Ohio and Michigan localities. The tax benefit associated with these NOL carryforwards was $71.0 million. Due to statutorily limited NOL carryforwards and the level of earnings projections in the respective jurisdictions, a valuation allowance of $49.1 million has been recorded. If not used, the majority of the carryforwards will expire at various dates from December 31, 2022 through December 31, 2041 with the remaining being carried forward indefinitely.

The domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2021, 2020 and 2019 were as follows:

	For the year ended December 31,
(in millions)	2021		2020		2019
Domestic	$	606.0	$	(834.0)	$	85.5
Foreign	(66.9)		(0.2)		0.6
Total	$	539.1	$	(834.2)	$	86.1

The components of income tax benefit (expense) for the years ended December 31, 2021, 2020 and 2019 were as follows: 

	For the year ended December 31,
(in millions)	2021		2020		2019
Current tax benefit (expense)
Federal	$	(100.0)	$	47.0	$	(12.5)
State	(23.1)		0.2		(9.2)
Foreign	—		(0.4)		(0.2)
Total current	(123.1)		46.8		(21.9)
Deferred tax benefit (expense)
Federal	(11.9)		103.6		(16.7)
State	13.3		14.7		(4.4)
Foreign	3.1		—		—
Total deferred	4.5		118.3		(21.1)
Total income tax benefit (expense)	$	(118.6)	$	165.1	$	(43.0)

The following table reconciles the statutory federal income tax rate to the actual effective income tax rate, and related amounts of income tax benefit (expense), for the years ended December 31, 2021, 2020 and 2019:

	For the year ended December 31,
	2021				2020				2019
(in millions, except tax rates)	Percent		Amount		Percent		Amount		Percent		Amount
Percent and amount of pretax income
Federal statutory rate	21.0	%	$	(113.2)	21.0	%	$	175.2	21.0	%	$	(18.1)
State and local income taxes, net of federal benefits	1.4		(7.7)		1.4		12.1		9.9		(8.5)
Nondeductible expenses	2.5		(13.3)		(0.3)		(2.6)		4.0		(3.5)
Goodwill impairment losses	—		—		(2.3)		(19.0)		14.4		(12.4)
Compensation	(1.2)		6.5		2.5		20.5		0.3		(0.3)
Foreign	(0.2)		0.9		—		(0.4)		0.1		(0.1)
Federal valuation allowance	1.1		(5.9)		(3.9)		(32.7)		—		—
Tax credits	(1.1)		5.8		1.2		10.0		—		—
Equity investment write-off	(2.1)		11.3		—		—		—		—
Other	0.6		(3.0)		0.2		2.0		0.2		(0.1)
Total effective tax rate and income tax benefit (expense)	22.0	%	$	(118.6)	19.8	%	$	165.1	49.9	%	$	(43.0)

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(in millions)	Unrecognized tax benefits
Unrecognized tax benefits as of January 1, 2019	$	29.7
Additions based on prior year positions	6.5
Decreases due to settlements and/or reduction in reserves	(0.2)
Unrecognized tax benefits as of December 31, 2019	36.0
Additions based on prior year positions	1.2
Decreases due to settlements and/or reduction in reserves	(0.9)
Unrecognized tax benefits as of December 31, 2020	36.3
Additions based on prior year positions	3.8
Decreases due to settlements and/or reduction in reserves	(0.1)
Unrecognized tax benefits as of December 31, 2021	$	40.0

During the year ended December 31, 2021, we did not record any new tax reserves, and accrued interest or penalties related to current year uncertain tax positions. Regarding prior year tax positions, we recorded $4.6 million of tax reserves and accrued interest and reversed $0.1 million of previously recorded tax reserves and accrued interest for uncertain tax positions. As of December 31, 2021 and 2020, unrecognized tax benefits, inclusive of accruals for income tax related penalties and interest, of $42.3 million and $38.2 million, respectively, were included in “Other long-term liabilities” within the Company’s Consolidated Balance Sheets. Overall, the Company recorded a net tax expense of $3.6 million in connection with its uncertain tax positions for the year ended December 31, 2021.

The liability for unrecognized tax benefits as of December 31, 2021 and 2020 included $33.4 million and $30.2 million, respectively, of tax positions that, if reversed, would affect the effective tax rate. During the years ended December 31, 2021, 2020 and 2019, we recognized $0.7 million, $0.5 million and $0.1 million, respectively, of interest and penalties, net of deferred taxes. In addition, the Company had no reductions in previously accrued interest and penalties for the years ended December 31, 2021 and 2020. We classify any income tax related penalties and interest accrued related to unrecognized tax benefits in “Income tax benefit (expense)” within the Consolidated Statements of Operations.

The Company is currently in various stages of the examination process in connection with its open audits. Generally, it is difficult to determine when these examinations will be closed, but the Company reasonably expects that its ASC 740 liabilities will not significantly change over the next twelve months. As of December 31, 2021, the Company has open tax years 2018 through 2020 that could be subject to examination for U.S. federal income taxes. In addition, we are subject to state and local income tax examinations for various tax years in the taxing jurisdictions in which we operate. Such audits could result in

increased tax liabilities, interest and penalties. While the Company believes its tax positions are appropriate, we cannot assure the outcome will remain consistent with our expectation. The Company believes we have adequately reserved for potential audit exposures of uncertain tax positions. In the event the final outcome of these matters is different than the amounts recorded, such differences will impact our income tax provision in the period in which the determination is made. As of December 31, 2021 and 2020, prepaid income taxes of $42.5 million and $52.7 million, respectively, were included in “Prepaid expenses” within the Company’s Consolidated Balance Sheets.