Income Taxes

12 Months Ended

Dec. 31, 2019

Note 12 – Income Taxes

The components of income before income taxes for the periods indicated were as follows (in millions):



	For the Years Ended December 31,
	2019		2018		2017
Domestic	$	452.2	$	341.1	$	334.9
Foreign	58.7		24.2		36.9
Total	$	510.9	$	365.3	$	371.8

The provision for income taxes for the periods indicated were as follows (in millions):



	For the Years Ended December 31,
	2019			2018		2017
Current:
Federal	$	77.4		$	26.7	$	(6.0	)
Foreign	6.2			9.4		11.5
State and local	15.6			10.5		(0.8		)
	$	99.2		$	46.6	$	4.7
Deferred:
Federal	$	22.4		$	43.9	$	18.2
Foreign	(2.8		)	3.3		(7.5		)
State and local	(2.0		)	12.3		7.6
	$	17.6		$	59.5	$	18.3
Provision for income taxes	$	116.8		$	106.1	$	22.9

The tax effects of significant items comprising the Company’s net deferred tax liability as of the dates indicated were as follows (in millions):



	December 31,
	2019			2018
Deferred tax assets:
Accrued insurance	$	28.6		$	25.9
Operating loss carryforwards and tax credits	70.5			67.7
Compensation and benefits	16.8			15.2
Bad debt	0.9			2.4
Other	11.5			8.4
Valuation allowance	(48.8		)	(40.6		)
Total deferred tax assets	$	79.5		$	79.0
Deferred tax liabilities:
Property and equipment	$	179.5		$	146.3
Goodwill	49.6			55.6
Other intangible assets	35.0			28.1
Gain on remeasurement of equity investee	7.0			7.1
Revenue recognition	20.6			21.6
Investments in unconsolidated entities	74.0			67.9
Other	10.1			16.1
Total deferred tax liabilities	$	375.8		$	342.7
Net deferred tax liabilities	$	(296.3	)	$	(263.7	)

In assessing the ability to realize the Company’s deferred tax assets, management considers whether it is more likely than not that some portion, or all, of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. Management considers the Company’s projected future taxable income and prudent and feasible tax planning strategies in making this assessment. The Company’s valuation allowances as of December 31, 2019 and 2018 are related primarily to foreign net operating losses and deferred tax assets.

The Company’s deferred tax assets for its state net operating loss carryforwards, which may be carried forward from 5 years to indefinitely depending on the jurisdiction, totaled approximately $11.5 million and $11.9 million as of December 31, 2019 and 2018, respectively. The Company’s deferred tax assets for its foreign net operating loss carryforwards, which are primarily related to the Company’s Canadian operations, totaled approximately $57.4 million and $50.8 million as of December 31, 2019 and 2018, respectively. The Canadian net operating loss carryforwards, which make up the majority of the foreign net operating loss carryforwards, begin to expire in 2033. The Company’s deferred tax assets for its federal net operating loss carryforwards, which begin to expire in 2022, totaled $0.1 million and $0.2 million as of December 31, 2019 and 2018, respectively.

In December 2017, the 2017 Tax Act was enacted, which includes broad tax reform that is applicable to the Company. Under the provisions of the 2017 Tax Act, the U.S. corporate tax rate decreased from 35% to 21% effective January 1, 2018. As a result, the Company initially remeasured its U.S. deferred income tax balances as of December 31, 2017 and made a provisional estimate of the effects of the 2017 Tax Act, which resulted in a non-cash tax benefit of $120.1 million for the year ended December 31, 2017. Due to the complexities involved in accounting for the enactment of the 2017 Tax Act, the SEC issued Staff Accounting Bulletin (SAB 118), which was codified in March 2018 under ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 and amended Topic 740 to provide for a measurement period of up to one year within which to finalize initial estimates of the effects of the 2017 Tax Act. The Company recognized a net tax benefit of approximately $16.4 million for the year ended December 31, 2018 related to revisions of its initial estimates under the 2017 Tax Act, primarily from finalization of its tax return for the year ended December 31, 2017, as well as from certain tax accounting method changes and other adjustments. However, since many provisions of the 2017 Tax Act still do not have final guidance issued, it may be necessary for the Company to make future adjustments based on such new guidance.

As of December 31, 2019, because of the 2017 Tax Act, the Company will generally be free of additional U.S. federal tax consequences on distributed foreign subsidiary earnings due to a dividends received deduction implemented as part of the move to a territorial tax system. The Company has generally not made a provision for income taxes on unremitted foreign earnings because such earnings are insignificant and are intended to be indefinitely reinvested outside the United States. The Company expects that domestic cash resources will be sufficient to fund its domestic operations and cash commitments in the future.

A reconciliation of the U.S. statutory federal income tax rate related to pretax income to the effective tax rate for the periods indicated is as follows:



	For the Years Ended December 31,
	2019		2018		2017
U.S. statutory federal rate applied to pretax income	21.0	%	21.0	%	35.0	%
State and local income taxes, net of federal benefit	3.2		4.2		2.0
Foreign tax rate differential	0.2		1.5		0.3
Non-deductible expenses	1.7		1.7		2.2
Goodwill and intangible assets	(0.5	)	3.6		(0.0	)
Change in tax rate	(1.5	)	(2.8	)	(32.3	)
Domestic production activities deduction	0.0		0.0		(0.2	)
Other	(1.0	)	(2.4	)	(0.7	)
Tax credits	(0.6	)	(0.4	)	(2.8	)
Stock basis adjustment	(1.8	)	0.0		0.0
Valuation allowance for deferred tax assets	2.2		2.6		2.7
Effective income tax rate	22.9	%	29.0	%	6.2	%

A reconciliation of the beginning and ending amount of uncertain tax positions including interest and penalties is as follows (in millions):



	For the Years Ended December 31,
	2019			2018			2017
Beginning balance	$	9.4		$	8.1		$	—
Additions based on tax positions related to the current year	3.7			2.7			3.2
Additions for tax positions of prior years	0.7			—			4.9
Reductions for tax positions of prior years	(0.3		)	(1.4		)	—
Ending balance	$	13.5		$	9.4		$	8.1

The Company classifies interest and penalties on uncertain tax positions as a component of income tax expense in the consolidated statements of operations. Accrued interest and penalties related to uncertain tax positions were $1.3 million and $0.8 million as of December 31, 2019 and 2018, respectively, of which $0.5 million and $0.7 million were included in income tax expense for the years ended December 31, 2019 and 2018, respectively. If the Company were to recognize its gross unrecognized tax benefits as of December 31, 2019, approximately $13.5 million, including interest and penalties, would affect the Company’s effective tax rate.

The IRS is examining the Company’s 2016 and 2017 federal income tax returns. Certain state taxing authorities are examining various years. The final outcome of these examinations is not yet determinable. With few exceptions, as of December 31, 2019, the Company is no longer subject to state examinations by taxing authorities for years before 2016.