Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As discussed in Note 2, the Company operates in compliance with REIT requirements for federal income tax purposes. It is management’s intention to adhere to these requirements and maintain the Company’s REIT status. Most states where we operate conform to the federal rules recognizing REITs. The Operating Partnership is a regarded partnership under federal tax law, and the Operating Partnership’s accompanying consolidated financial statements include the related provision balances for federal income taxes. A provision for taxes of the TRSs and of foreign branches of the REIT is included in our consolidated financial statements.

The unremitted earnings and basis of certain foreign subsidiaries are indefinitely reinvested, except principally in Canada. The Company changed its assertion for its Canadian subsidiaries in 2018 to begin repatriating its unremitted earnings to the U.S. starting in 2018. If our plans change in the future or if we elect to repatriate the unremitted earnings of our foreign subsidiaries, we would be subject to additional income taxes which could result in a higher effective tax rate. With respect to the foreign subsidiaries owned directly or indirectly by the REIT or Operating Partnership, any unremitted earnings would not be subject to additional U.S. income tax because the REIT would distribute 100% of such earnings or would receive a participation exemption.

The GILTI provisions of the TCJA impose a tax on the income of certain foreign subsidiaries in excess of a specified return on tangible assets used by the foreign companies. The Company continues to account for the GILTI inclusion as a period cost and thus has not recorded any deferred tax liability associated with GILTI. There was no taxable deemed dividend estimated or recorded for the Company for 2022 and 2021. The taxable deemed dividend recorded for the Company for the 2020 tax year is $6.8 million. Also, as a result of IRS guidance issued during the third quarter of 2018, the Company now includes any GILTI as REIT qualified income.

Following is a summary of the income before income taxes in the U.S. and foreign operations:

	2022		2021		2020
	(In thousands)
U.S.	$	37,040	$	(8,046)	$	5,673
Foreign	(75,350)		(23,832)		11,955
Pre-tax (loss) income	$	(38,310)	$	(31,878)	$	17,628

The benefit (expense) for income taxes for the years ended December 31, 2022, 2021 and 2020 is as follows:

	2022		2021		2020
	(In thousands)
Current
U.S. federal	$	290	$	38	$	1,085
State	(620)		(236)		(447)
Foreign	(3,395)		(7,380)		(7,443)
Total current portion	(3,725)		(7,578)		(6,805)
Deferred
U.S. federal	(3,895)		5,884		8,588
State	360		1,220		2,929
Foreign	26,096		2,043		2,215
Total deferred portion	22,561		9,147		13,732
Total income tax benefit	$	18,836	$	1,569	$	6,927

Income tax benefit attributable to income before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate of 21% to income before income taxes. The reconciliation between the statutory rate and reported amount is as follows:

	2022		2021		2020
	(In thousands)
Income tax benefit (expense) at statutory rates	$	8,045	$	6,692	$	(3,702)
Earnings from REIT - not subject to tax	7,742		(3,599)		2,681
State income taxes, net of federal income tax benefit	(524)		(836)		(446)
Foreign income taxed at different rates	1,296		(983)		(2,366)
Change in valuation allowance	1,307		6,198		9,506
Non-deductible expenses	(4,379)		4,398		387
Change in status of investment	6,503		—		—
Change in enacted tax rate	—		(11,802)		—
Other	(1,154)		1,501		867
Total	$	18,836	$	1,569	$	6,927

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 31, 2022 and 2021 are as follows:

	2022		2021
	(In thousands)
Deferred tax assets:
Net operating loss and credits carryforwards	$	54,372	$	43,483
Accrued expenses	33,404		28,511
Share-based compensation	3,192		6,872
Lease obligations	21,552		19,388
Other assets	1,680		2,892
Total gross deferred tax assets	114,200		101,146
Less: valuation allowance	(84)		(1,034)
Total net deferred tax assets	114,116		100,112
Deferred tax liabilities:
Intangible assets and goodwill	(74,541)		(79,480)
Property, buildings and equipment	(145,936)		(165,905)
Lease right-of-use assets	(21,811)		(18,507)
Other liabilities	(5,889)		(4,875)
Total gross deferred tax liabilities	(248,177)		(268,767)
Net deferred tax liability	$	(134,061)	$	(168,655)

As of December 31, 2022, the U.S. TRS has gross U.S. federal net operating loss carryforwards of approximately $46.3 million, of which $13.8 million was generated prior to 2018 and will expire between 2032 and 2036. The remaining $32.5 million in losses have no expiration, but can only be used to offset up to 80% of future taxable income annually. These losses are subject to an annual limitation under IRC section 382 as a result of our IPO and a subsequent ownership change that occurred in March of 2019; however, the limitation should not impair the Company’s ability to utilize the losses. The Company has $80.3 million in REIT U.S. federal net operating loss carryforwards which were obtained through acquisitions. These losses are also subject to an annual limitation under IRC section 382; no deferred tax value has been recorded as they can only be used to reduce required distributions to stockholders, of which none has been used for this purpose.

The Company has gross state net operating loss carryforwards of approximately $46.1 million from its TRSs, of which $35.8 million will expire at various times between 2024 and 2042. The remaining $10.3 million was generated after 2017 and have no expiration.

The Company has gross foreign net operating loss carryforwards of approximately $100.0 million, of which $36.0 million will expire at various times between 2023 and 2041. The remaining $64.0 million can be carried forward indefinitely.

Annually we consider whether it is more-likely-than-not that the deferred tax assets will be realized. In making this assessment, we consider recent operating results, the expected scheduled reversal of deferred tax liabilities, projected future taxable benefits and tax planning strategies.

The Company’s policy is to accrue for interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 31, 2022, the Company is generally no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2018. However, for U.S. income tax purposes, the 2012, 2013, and 2016 remain open, to the extent that net operating losses were generated in those years and continue to be subject to adjustments from taxing authorities in the tax year they are utilized.