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INCOME TAXES

12 Months Ended

Dec. 31, 2019

22. INCOME TAXES

The components of income from continuing operations before income taxes and income tax expense are as follows:


	Years Ended December 31,
	2019		2018		2017
	(in millions)
Components of income from continuing operations before income taxes:
Domestic	$	591.9	$	1,052.7	$	883.8
Foreign		146.5		162.3		178.7
Total	$	738.4	$	1,215.0	$	1,062.5
Components of income tax expense:
Current
Federal	$	126.0	$	152.2	$	295.0
State		35.8		58.0		17.5
Foreign		11.5		52.8		56.7
Total current		173.3		263.0		369.2
Deferred
Federal		(11.8)		48.0		(65.3)
State		6.7		14.7		6.2
Foreign		(2.4)		(56.2)		(16.8)
Total deferred		(7.5)		6.5		(75.9)
Total provision for income taxes	$	165.8	$	269.5	$	293.3

A reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate for all periods to income from continuing operations before income taxes is as follows:


	Years Ended December 31,
	2019		2018		2017
	(in millions)
Expected expense at statutory rate	$	155.1	$	255.1	$	371.9
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit		33.6		57.4		14.5
Foreign rate differential		(2.3)		11.6		(26.0)
Foreign restructuring		—		(48.0)		—
Impact of 2017 Tax Reform		(30.2)		(29.7)		(64.9)
Global intangible low-taxed income		8.7		15.5		—
Non-deductible expenses (non-taxable income)		9.1		3.7		(4.6)
Other		(8.2)		3.9		2.4
Total	$	165.8	$	269.5	$	293.3

H.R. 1, originally known as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Reform”) was enacted on December 22, 2017. The 2017 Tax Reform permanently reduced the corporate tax rate to 21% from 35%, effective January 1, 2018 and implemented a change from a system of worldwide taxation with deferral to a hybrid territorial system. This system taxes excess foreign profits above a deemed routine return through the Global Intangible Low-Taxed Income (“GILTI”) regime. The Company recognizes tax on GILTI as an expense in the period incurred. For the year ended December 31, 2019, the Company recorded an income tax benefit of approximately $30.2 million related to a decrease in unrecognized tax benefits as a result of a tax accounting method change required by the 2017 Tax Reform.

Deferred tax assets and liabilities consist of the following:


	December 31,
	2019		2018
	(in millions)
Deferred tax assets
Deferred revenue	$	9.5	$	10.6
Allowance for doubtful accounts		267.6		267.0
Net operating loss carryforwards and other carryforwards		69.0		57.8
Stock-based compensation and other employee benefits		13.7		24.4
Lease liabilities		74.4		—
Accrued expenses and other		40.3		66.2
Intangible assets		23.2		—
Total deferred tax assets		497.7		426.0
Valuation allowance		(64.0)		(36.3)
Deferred tax assets, net of valuation allowance		433.7		389.7
Deferred tax liabilities
Deferred income	$	365.6	$	409.8
Depreciation		41.8		79.0
Right of use assets		61.1		—
Intangible assets		—		113.4
Total deferred tax liabilities		468.5		602.2

Net deferred tax liability	$	(34.8)	$	(212.5)

Amounts recognized in the consolidated balance sheets:
Non-current assets	$	45.2	$	44.0
Non-current liabilities		(80.0)		(256.5)
Total – Net deferred tax liability	$	(34.8)	$	(212.5)

At December 31, 2019, included in the Company’s U.S. tax returns are approximately $20.1 million of U.S. federal net operating loss carryovers (“NOLs”) and approximately $33.8 million of foreign tax credits. With the exception of NOLs generated after December 31, 2017, these attributes expire at various times through the year 2037. Pursuant to Section 382 of the Internal Revenue Code, the Company’s utilization of a portion of such NOLs is subject to an annual limitation. The Company does not believe it is more likely than not that all of its NOLs will be utilized and has therefore, in accordance with ASC 740-10-30, “Income Taxes-Overall-Initial Measurement,” established a valuation allowance against a portion of the NOLs. At December 31, 2019, the Company has state income tax NOLs of approximately $175.4 million and state credits of approximately $5.9 million available to offset future state taxable income. The state NOLs and credits will expire at various times through the year 2038. The Company believes a majority of these NOLs will expire before utilization and has therefore established a valuation allowance against those NOLs expected to expire unutilized. The Company has $216.3 million of foreign NOLs and $5.6 million of foreign capital losses at December 31, 2019. The foreign NOLs and capital losses have an unlimited carryforward period. The Company does not believe it is more likely than not that the NOLs or capital losses will be utilized and has therefore, in accordance with ASC 740-10-30, “Income Taxes—Overall—Initial Measurement,” established a full valuation allowance against them. The Company’s valuation allowance increased $27.7 million during the year ended December 31, 2019, due primarily to an increase in the amount of state and foreign NOLs that the Company does not believe will be utilized. The Company’s valuation allowance decreased $40.1 million during the year ended December 31, 2018 and increased $31.7 million during the year ended December 31, 2017.

Should certain substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of carryovers and credits that can be utilized. The impact of such a limitation would likely not be significant.

At December 31, 2019, the Company did not have any excess financial reporting basis over tax basis from a U.S. federal tax perspective primarily as a result of the GILTI regime pursuant to the 2017 Tax Reform. The Company may

have, in certain state or foreign jurisdictions, amounts of financial reporting basis that exceeds tax basis as of December 31, 2019. However, these amounts are immaterial and no additional state or foreign tax liability has been recorded. Finally, despite the immaterial nature, the Company intends to permanently reinvest any previously undistributed earnings of our foreign subsidiaries in the operations outside the United States to support its international growth.

The net tax impact of the change in the carrying value of the Euro-denominated Senior Notes due 2022 and 2023 due to foreign exchange fluctuations that was recorded directly to other comprehensive income was an expense of $1.6 million, an expense of $9.5 million and a benefit of $26.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. These notes were repaid in July 2019.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):


Balance at January 1, 2017	$	192.0
Increases related to prior years’ tax positions		9.3
Decreases related to prior years’ tax positions		(15.7)
Increases related to current year tax positions		33.0
Settlements during the period		(6.7)
Lapses of applicable statutes of limitation		(3.6)
Balance at December 31, 2017	$	208.3
Increases related to prior years’ tax positions		41.3
Decreases related to prior years’ tax positions		(9.6)
Increases related to current year tax positions		61.5
Settlements during the period		(1.0)
Lapses of applicable statutes of limitation		(4.2)
Balance at December 31, 2018	$	296.3
Increases related to prior years’ tax positions		2.7
Decreases related to prior years’ tax positions		(76.6)
Increases related to current year tax positions		58.3
Settlements during the period		(0.6)
Lapses of applicable statutes of limitation		(5.8)
Balance at December 31, 2019	$	274.3

Included in the balance at December 31, 2019 are tax positions reclassified from deferred income taxes. Deductibility or taxability is highly certain for these tax positions but there is uncertainty about the timing of such deductibility or taxability. Because of the impact of deferred tax accounting, other than interest and penalties, this timing uncertainty, if realized, would not have a material effect on the annual effective tax rate but could accelerate the payment of cash to the taxing authority to an earlier period.

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has potential cumulative interest and penalties with respect to unrecognized tax benefits of approximately $67.0 million, $66.7 million and $41.6 million at December 31, 2019, 2018 and 2017, respectively. For the years ended December 31, 2019, 2018 and 2017, the Company recorded approximately an $0.8 million benefit, a $24.5 million expense and a $5.7 million expense, respectively, for potential interest and penalties with respect to unrecognized tax benefits.

At December 31, 2019, 2018 and 2017, the Company had unrecognized tax benefits of approximately $255.1 million, $247.7 million and $170.0 million, respectively, that, if recognized, would impact the effective tax rate. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits over the next twelve months.

The Company files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. With some exceptions, the tax returns filed by the Company are no longer subject to U.S. federal income tax examinations for the years before 2015, state and local examinations for years before 2014 or foreign income tax examinations for years before 2013.