Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Income before income taxes consists of the following:

	Year Ended December 31
(in thousands)	2021		2020		2019
U.S.	$	421,420	$	403,295	$	390,144
Non-U.S.	28,207		3,973		36,335
	$	449,627	$	407,268	$	426,479

The provision for income taxes consists of the following:

(in thousands)	Current		Deferred		Total
Year Ended December 31, 2021
U.S. Federal	$	20,806	$	64,356	$	85,162
State and Local	4,354		(435)		3,919
Non-U.S.	6,094		1,125		7,219
	$	31,254	$	65,046	$	96,300
Year Ended December 31, 2020
U.S. Federal	$	77,882	$	6,669	$	84,551
State and Local	8,083		4,954		13,037
Non-U.S.	6,958		2,754		9,712
	$	92,923	$	14,377	$	107,300
Year Ended December 31, 2019
U.S. Federal	$	16,500	$	63,838	$	80,338
State and Local	2,949		6,630		9,579
Non-U.S.	9,400		(717)		8,683
	$	28,849	$	69,751	$	98,600

The provision for income taxes differs from the amount of income tax determined by applying the U.S. Federal statutory rate of 21% to the income before taxes as a result of the following:

	Year Ended December 31
(in thousands)	2021		2020		2019
U.S. Federal taxes at statutory rate (see above)	$	94,422	$	85,526	$	89,561
State and local taxes, net of U.S. Federal tax	2,238		15,366		(4,064)
Valuation allowances against state tax benefits, net of U.S. Federal tax	859		(5,067)		11,632
Stock-based compensation	(24)		2,048		(1,743)
Valuation allowances against other non-U.S. income tax benefits	4,042		2,445		1,202
Other, net	(5,237)		6,982		2,012
Provision for Income Taxes	$	96,300	$	107,300	$	98,600

The Company’s effective tax rate for 2021 was favorably impacted by a $17.2 million deferred tax adjustment arising from a change in the estimated deferred state income tax rate attributable to the apportionment formula used in the calculation of deferred taxes related to the Company’s pension and other postretirement plans. This benefit is included in the overall state tax provision of $2.2 million reflected above.

Deferred income taxes consist of the following:

	As of December 31
(in thousands)	2021		2020
Employee benefit obligations	$	64,258	$	72,787
Accounts receivable	3,554		3,795
State income tax loss carryforwards	63,050		53,499
State capital loss carryforwards	107		289
State income tax credit carryforwards	511		281
U.S. Federal income tax loss carryforwards	69,509		18,272
U.S. Federal foreign income tax credit carryforwards	970		992
Non-U.S. income tax loss carryforwards	18,877		15,802
Non-U.S. capital loss carryforwards	3,707		3,925
Leases	63,715		74,240
Other	6,396		6,214
Deferred Tax Assets	294,654		250,096
Valuation allowances	(57,603)		(47,217)
Deferred Tax Assets, Net	237,051		202,879
Prepaid pension cost	594,372		457,644
Unrealized gain on marketable equity securities	138,868		88,371
Goodwill and other intangible assets	103,497		90,921
Property, plant and equipment	15,451		15,807
Leases	51,668		61,148
Non-U.S. withholding tax	2,001		1,866
Deferred Tax Liabilities	905,857		715,757
Deferred Income Tax Liabilities, Net	$	668,806	$	512,878

The Company has $1,026.1 million of state income tax net operating loss carryforwards available to offset future state taxable income. During 2021, the Company recorded $115.4 million of state income tax loss carryforwards as a result of the Leaf acquisition. State income tax loss carryforwards, if unutilized, will start to expire approximately as follows:

(in millions)
2022	$	1.9
2023	7.5
2024	7.5
2025	18.3
2026	14.5
2027 and after	976.4
Total	$	1,026.1

The Company has recorded at December 31, 2021, $63.1 million in deferred state income tax assets, net of U.S. Federal income tax, with respect to these state income tax loss carryforwards. The Company has established $35.4

million in valuation allowances against these deferred state income tax assets, since the Company has determined that it is more likely than not that some of these state tax losses may not be fully utilized in the future to reduce state taxable income.

The Company has $331.0 million of U.S. Federal income tax loss carryforwards obtained as a result of prior stock acquisitions. During 2021, the Company recorded $262.5 million of U.S. Federal income tax loss carryforwards as a result of the Leaf acquisition. U.S. Federal income tax loss carryforwards are expected to be fully utilized as follows:

(in millions)
2022	$	27.9
2023	27.4
2024	27.4
2025	24.4
2026	13.6
2027 and after	210.3
Total	$	331.0

The Company has established at December 31, 2021, $69.5 million in U.S. Federal deferred tax assets with respect to these U.S. Federal income tax loss carryforwards.

For U.S. Federal income tax purposes, the Company has established U.S. Federal deferred tax assets with respect to $1.0 million of foreign tax credits available to be credited against future U.S. Federal income tax liabilities that will start to expire in 2023 if unutilized. The Company has recorded a full valuation allowance against these deferred tax assets since the Company determined that it is more likely than not these foreign tax credit carryforwards may not be utilized in the future to reduce U.S. Federal income taxes.

The Company has $87.1 million of non-U.S. income tax loss carryforwards as a result of operating losses and carryforwards that were obtained in part through prior stock acquisitions that are available to offset future non-U.S. taxable income and has recorded, with respect to these losses, $18.9 million in non-U.S. deferred income tax assets. The Company has established $14.9 million in valuation allowances against the deferred tax assets for the portion of non-U.S. tax losses that may not be utilized to reduce future non-U.S. taxable income. The $87.1 million of non-U.S. income tax loss carryforwards consist of $44.2 million in losses that may be carried forward indefinitely; $12.2 million of losses that, if unutilized, will expire in varying amounts through 2026; and $30.7 million of losses that, if unutilized, will start to expire after 2026.

The Company has $12.4 million of non-U.S. capital loss carryforwards that may be carried forward indefinitely and are available to offset future non-U.S. capital gains. The Company recorded a $3.7 million non-U.S. deferred income tax asset for these non-U.S. capital loss carryforwards and has established a full valuation allowance against this non-U.S. deferred tax asset since the Company has determined that it is more likely than not that the capital loss carryforwards may not be utilized to reduce taxable income in the future.

Deferred tax valuation allowances and changes in deferred tax valuation allowances were as follows:

(in thousands)	Balance at Beginning of Period		Tax Expense and Revaluation		Deductions		Balance at End of Period
Year ended
December 31, 2021	$	47,217	$	13,915	$	(3,529)	$	57,603
December 31, 2020	46,243		7,303		(6,329)		47,217
December 31, 2019	33,120		14,512		(1,389)		46,243

The Company has established $37.5 million in valuation allowances against deferred state tax assets recognized, net of U.S. Federal tax. As stated above, approximately $35.4 million of the valuation allowances, net of U.S. Federal income tax, relate to state income tax loss carryforwards. In most instances, the Company has established valuation allowances against deferred state income tax assets without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing those deferred state tax assets recognized since these temporary differences are not likely to reverse in the foreseeable future. However, certain deferred state tax assets have an indefinite life. As a result, the Company has considered deferred tax liabilities for prepaid pension cost and goodwill as a source of future taxable income for realizing those deferred state tax assets with indefinite lives. The valuation allowances established against deferred state income tax assets may increase or decrease within the next 12 months, based on operating results or the market value of investment holdings. In 2021, the Company released $1.8 million in valuation allowances against deferred state income tax assets at the healthcare division as the healthcare division generated positive operating results that support the realization of these deferred

tax assets, net of the federal benefit. The Company will monitor future results on a quarterly basis to determine whether the valuation allowances provided against deferred state tax assets should be increased or decreased as future circumstances warrant.

The Company has established $19.1 million in valuation allowances against non-U.S. deferred tax assets, and, as stated above, $14.9 million of the non-U.S. valuation allowances relate to non-U.S. income tax loss carryforwards and $3.7 million relate to non-U.S. capital loss carryforwards. Valuation allowances established against non-U.S. deferred tax assets are recorded at the education division and other businesses. These non-U.S. valuation allowances may increase or decrease within the next 12 months, based on operating results. As a result, the Company is unable to estimate the potential tax impact, given the uncertain operating environment. The Company will monitor future education division and other businesses’ operating results and projected future operating results on a quarterly basis to determine whether the valuation allowances provided against non-U.S. deferred tax assets should be increased or decreased as future circumstances warrant.

The Company estimates that unremitted non-U.S. subsidiary earnings, when distributed, will not be subject to tax except to the extent non-U.S. withholding taxes are imposed. Approximately $2.0 million of deferred tax liabilities remain recorded on the books at December 31, 2021 with respect to future non-U.S. withholding taxes the Company estimated may be imposed on future cash distributions.

U.S. Federal and state tax liabilities may be recorded if the investment in non-U.S. subsidiaries become held for sale instead of being held indefinitely, but calculation of the tax due is not practicable.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted, which included several technical corrections to the Tax Cuts and Jobs Act and provisions allowing certain net operating losses generated by businesses in 2018, 2019, and 2020 to be carried back five years. Overall, the CARES Act had limited impact on the Company’s tax provision for the year ended December 31, 2021.

On July 1, 2015 (the Distribution Date), the Company completed the spin-off of Cable ONE as an independent, publicly traded company. The transaction was structured as a tax-free spin-off of Cable ONE to the stockholders of the Company. Since July 1, 2015, Cable ONE has been an independent public company trading on the New York Stock Exchange under the symbol “CABO”. In connection with the CARES Act, Cable ONE has the ability to carryback its 2019 taxable losses to the tax period from January 1, 2015 to June 30, 2015, the period in which Cable ONE was included in the Company’s 2015 tax return. As a result, the Company amended its 2015 tax returns in order to accommodate Cable ONE’s request to carryback its 2019 taxable losses. The Company expects that this action will have no impact on the results or the financial position of the Company. To reflect the expected refund due to Cable ONE, the Company has included a $15.9 million current income tax receivable and a corresponding liability to Cable ONE on its balance sheet as of December 31, 2021.

The 2018 U.S. Federal tax return and subsequent years remain open to IRS examination. The Company files income tax returns with the U.S. Federal government and in various state, local and non-U.S. governmental jurisdictions, with the consolidated U.S. Federal tax return filing considered the only major tax jurisdiction.

The Company endeavors to comply with tax laws and regulations where it does business, but cannot guarantee that, if challenged, the Company’s interpretation of all relevant tax laws and regulations will prevail and that all tax benefits recorded in the financial statements will ultimately be recognized in full.

The following summarizes the Company’s unrecognized tax benefits, excluding interest and penalties, for the respective periods:

	Year Ended December 31
(in thousands)	2021		2020		2019
Beginning unrecognized tax benefits	$	1,898	$	1,572	$	2,483
Increases related to current year tax positions	1,061		742		—
Increases related to prior year tax positions	45		656		1,072
Decreases related to prior year tax positions	—		—		—
Decreases related to settlement with tax authorities	—		(1,072)		(1,291)
Decreases due to lapse of applicable statutes of limitations	—		—		(692)
Ending unrecognized tax benefits	$	3,004	$	1,898	$	1,572

The unrecognized tax benefits relate to federal and state research and development tax credits applicable to the 2019 to 2021 tax periods, as well as state income tax filing positions applicable to the 2012 to 2014 and 2020 tax periods. In making these determinations, the Company presumes that taxing authorities pursuing examinations of the Company’s compliance with tax law filing requirements will have full knowledge of all relevant information, and, if necessary, the Company will pursue resolution of disputed tax positions by appeals or litigation. Although the Company cannot predict the timing of resolution with tax authorities, the Company estimates that some of the

unrecognized tax benefits may change in the next 12 months due to settlement with the tax authorities. The Company expects that a $1.8 million federal tax benefit and a $1.3 million state tax benefit, net of $0.3 million federal tax expense, will reduce the effective tax rate in the future if the unrecognized tax benefits are recognized.

The Company classifies interest and penalties related to uncertain tax positions as a component of interest and other expenses, respectively. As of December 31, 2021, the Company has not accrued interest related to the unrecognized tax benefits. The Company has not accrued any penalties related to the unrecognized tax benefits.