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Income Taxes

12 Months Ended

Dec. 31, 2019

Note 11 Income Taxes

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


	Year Ended December 31,
United States and Other Jurisdictions	2019		2018		2017
	(In thousands)
United States	$	5,979	$	(119,419)	$	(369,162)
Other jurisdictions		(594,901)		(399,375)		(210,922)
Income (loss) from continuing operations before income taxes	$	(588,922)	$	(518,794)	$	(580,084)

Income tax expense (benefit) from continuing operations consisted of the following:


	Year Ended December 31,
	2019		2018		2017

	(In thousands)
Current:
U.S. federal	$	1,210	$	(32,351)	$	(160,761)
Outside the U.S.		54,097		32,928		59,491
State		318		1,811		(810)
	$	55,625	$	2,388	$	(102,080)
Deferred:
U.S. federal	$	58,157	$	37,476	$	49,020
Outside the U.S.		(25,428)		39,518		(26,684)
State		3,222		(113)		(3,226)
	$	35,951	$	76,881	$	19,110
Income tax expense (benefit)	$	91,576	$	79,269	$	(82,970)

A reconciliation of our statutory tax rate to our worldwide effective tax rate consists of the following:


	Year Ended December 31,
	2019		2018		2017
	(In thousands)
Income tax provision at statutory (Bermuda rate of 0%)	$	—	$	—	$	—
Taxes (benefit) on U.S. and other international earnings (losses) at greater than the Bermuda rate		54,060		49,375		(98,119)
Increase (decrease) in valuation allowance		32,869		38,822		29,165
Impact of Tax Reform Act		—		—		138,635
Tax reserves and interest		1,107		(10,626)		(148,615)
State income taxes (benefit)		3,540		1,698		(4,036)
Income tax expense (benefit)	$	91,576	$	79,269	$	(82,970)
Effective tax rate		(15.5%)		(15.3%)		14.3%

The increase in tax expense during 2019 compared to 2018 was primarily attributable to the change in our geographic mix of pre-tax earnings (losses). The ratio of pre-tax earnings in certain high tax jurisdictions compared to low or zero tax jurisdictions increased in 2019 compared to 2018, resulting in an increase in income tax expense. This increase was partially offset by certain discrete items. During 2019, we recognized a $29.6 million tax benefit from the release of a valuation allowance in one of our foreign jurisdictions related to net operating loss carryforwards. This was partially offset by a $14.4 million settlement of a tax dispute in one of our foreign jurisdictions. During 2018, we recognized a non-cash expense of $52.0 million to reflect a valuation allowance on deferred tax assets in Canada.

The components of our net deferred taxes consisted of the following:


	December 31,
	2019		2018
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	2,834,851	$	1,967,910
Equity compensation		6,577		7,038
Deferred revenue		8,873		16,494
Tax credit and other attribute carryforwards		97,215		100,752
Insurance loss reserves		2,248		2,451
Accrued interest		172,120		206,088
Other		95,588		82,167
Subtotal		3,217,472		2,382,900
Valuation allowance		(2,813,567)		(1,917,390)
Deferred tax assets:	$	403,905	$	465,510
Deferred tax liabilities:
Depreciation and amortization for tax in excess of book expense	$	80,155	$	102,810
Other		21,055		23,920
Deferred tax liability	$	101,210	$	126,730
Net deferred tax assets (liabilities)	$	302,695	$	338,780
Balance Sheet Summary:
Net noncurrent deferred tax asset	$	305,844	$	345,091
Net noncurrent deferred tax liability		(3,149)		(6,311)
Net deferred tax asset (liability)	$	302,695	$	338,780

As of December 31, 2019 we had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $418.3 million, $1.1 billion and 10.9 billion, respectively. Of those amounts, $3.7 billion will expire between 2020 and 2040 if not utilized. We provide a valuation allowance against NOL carryforwards in various tax jurisdictions based on our consideration of existing temporary differences and expected future earning levels in those jurisdictions. A valuation allowance of approximately $2.6 billion has been recognized related to certain NOL carryforwards as we believe it is more likely than not that the benefit of these NOL carryforwards will not be realized.

The following is a reconciliation of our uncertain tax positions:


	Year Ended December 31,
	2019		2018		2017
	(In thousands)
Balance as of January 1	$	25,711	$	33,203	$	179,255
Additions based on tax positions related to the current year		—		—		—
Additions for tax positions of prior years		1,003		308		25,119
Reductions for tax positions for prior years		(860)		(7,800)		(171,171)
Settlements		(84)		—		—
Balance as of December 31	$	25,770	$	25,711	$	33,203

If the unrecognized tax benefits of $25.7 million are realized, this would favorably impact the worldwide effective tax rate. As of December 31, 2019, 2018 and 2017, we had approximately $7.7 million, $6.7 million and $9.7 million, respectively, of interest and penalties related to uncertain tax positions. During 2019, 2018 and 2017, we accrued and recognized estimated interest and penalties related to uncertain tax positions of approximately $0.8 million, $1.0 million and $0.5 million, respectively. We include potential interest and penalties related to uncertain tax positions within our global operations in the income tax expense (benefit) line item in our consolidated statements of income (loss).

It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may increase or decrease in the next twelve months primarily due to the completion of open audits or the expiration of statutes of limitation. However, we cannot reasonably estimate a range of changes in our existing liabilities due to various uncertainties, such as the unresolved nature of various audits.

We conduct business globally and, as a result, we file numerous income tax returns in the U.S. and non-U.S. jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including major jurisdictions such as Algeria, Canada, Mexico, Saudi Arabia and the United States. We are no longer subject to U.S. Federal income tax examinations for years before 2016 and non-U.S. income tax examinations for years before 2007.