Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

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	2020		2019		2018
	(In thousands)
United States	$	(182,706)	$	5,979	$	(119,419)
Other jurisdictions		(522,861)		(594,901)		(399,375)
Income (loss) from continuing operations before income taxes	$	(705,567)	$	(588,922)	$	(518,794)

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

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Current:
U.S. federal	$	(39,268)	$	1,210	$	(32,351)
Outside the U.S.		33,858		54,097		32,928
State		(2,020)		318		1,811
	$	(7,430)	$	55,625	$	2,388
Deferred:
U.S. federal	$	67,909	$	58,157	$	37,476
Outside the U.S.		(4,992)		(25,428)		39,518
State		1,799		3,222		(113)
	$	64,716	$	35,951	$	76,881
Income tax expense (benefit)	$	57,286	$	91,576	$	79,269

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

	Year Ended December 31,
	2020		2019		2018
	(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		62,751		54,060		49,375
Increase (decrease) in valuation allowance		(9,759)		32,869		38,822
Tax reserves and interest		861		1,107		(10,626)
State income taxes (benefit)		3,433		3,540		1,698
Income tax expense (benefit)	$	57,286	$	91,576	$	79,269
Effective tax rate		(8.1)%		(15.5)%		(15.3)%

The decrease in tax expense during 2020 compared to 2019 was primarily attributable to a decrease in operating income in the jurisdictions in which we operate, as well as the change in our geographic mix of our pre-tax earnings (losses). The decrease was partially offset by the gain related to our debt exchange transaction and the resulting utilization of net operating losses.

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

	December 31,
	2020		2019
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	3,618,227	$	2,834,851
Equity compensation		1,594		6,577
Deferred revenue		3,878		8,873
Tax credit and other attribute carryforwards		84,502		97,215
Insurance loss reserves		2,086		2,248
Accrued interest		—		172,120
Depreciation and amortization for tax in excess of book expense		44,837		—
Other		110,003		95,588
Subtotal		3,865,127		3,217,472
Valuation allowance		(3,602,144)		(2,813,567)
Deferred tax assets:	$	262,983	$	403,905
Deferred tax liabilities:
Depreciation and amortization for tax in excess of book expense	$	—	$	80,155
Other		17,388		21,055
Deferred tax liability	$	17,388	$	101,210
Net deferred tax assets (liabilities)	$	245,595	$	302,695
Balance Sheet Summary:
Net noncurrent deferred tax asset	$	247,171	$	305,844
Net noncurrent deferred tax liability		(1,576)		(3,149)
Net deferred tax asset (liability)	$	245,595	$	302,695

As of December 31, 2020, we had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $670.3 million, $1.2 billion and $13.8 billion, respectively. Of those amounts, $6.4 billion will expire between 2021 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 $3.4 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:

	2020		2019		2018
	(In thousands)
Balance as of January 1	$	25,770	$	25,711	$	33,203
Additions based on tax positions related to the current year		—		—		—
Additions for tax positions of prior years		1,887		1,003		308
Reductions for tax positions for prior years		(953)		(860)		(7,800)
Settlements		—		(84)		—
Balance as of December 31	$	26,704	$	25,770	$	25,711

If the unrecognized tax benefits of $26.7 million are realized, this would favorably impact the worldwide effective tax rate. As of December 31, 2020, 2019 and 2018, we had approximately $7.6 million, $7.7 million and $6.7 million, respectively, of interest and penalties related to uncertain tax positions. During 2020, 2019 and 2018, we accrued and recognized estimated interest and penalties related to uncertain tax positions of approximately ($0.6) million, $0.8 million and $1.0 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 2017 and non-U.S. income tax examinations for years before 2007.