Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

9. INCOME TAXES

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted into law in response to the COVID-19 pandemic. The CARES Act lifts certain deduction limitations originally imposed by the 2017 Tax Act. Under the CARES Act, corporate taxpayers may carry back NOLs realized during 2018 through 2020 for up to five years. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018 through 2020, and increased the deductible interest expense limit, as discussed in further detail below.

On June 26, 2020, the Company entered into a Tax Refund and Indemnification Agreement (the “Tax Refund Agreement”) with SEACOR Holdings Inc. (“SEACOR Holdings”), the Company’s former parent company (see “Note 17. Related Party Transactions”). The Tax Refund Agreement enabled the Company to utilize net operating losses (“NOLs”) generated in 2018 and 2019 to claim refunds for tax years prior to the Company’s spin-off from SEACOR Holdings in 2017 (at which time the Company was included in SEACOR Holdings consolidated tax returns) that were permitted to be carried back pursuant to the provisions of the CARES Act and for which SEACOR Holdings needed to claim the refund on behalf of the Company. As a result, the Company received an aggregate amount of cash tax refunds of $32.3 million (including $1.1 million of interest paid by the Internal Revenue Service (“IRS”) in respect of refund payment delays due in part to the COVID-19 pandemic).

SEACOR Holdings retained certain of the funds to facilitate tax savings realized by SEACOR Holdings of no less than 35% of the amount of its own 2019 NOLs. Additionally, a $3.0 million transaction fee was paid to SEACOR Holdings concurrently with the signing of the agreement as consideration for its cooperation in connection with the filing of the applicable tax refund returns. The Tax Refund Agreement did not restrict the use of approximately $23.1 million of the refund and required the remaining approximately $8.1 million required to be deposited into an account to be used solely to satisfy certain of the Company’s obligations that remained guaranteed by SEACOR Holdings. As of December 31, 2021, the Company has applied all of the amount deposited to satisfy these obligations in full.

Income (loss) before income tax benefit and equity in earnings (losses) of 50% or less owned companies derived from U.S. and foreign companies for the years ended December 31 were as follows (in thousands):

	2021			2020			2019
United States	$	34,955		$	(83,560	)	$	(71,833	)
Foreign		(29,425	)		(17,748	)		(23,663	)
Eliminations		1,097			3,201			11,022
	$	6,627		$	(98,107	)	$	(84,474	)

The components of income tax expense (benefit) for the years ended December 31 were as follows (in thousands):

	2021			2020			2019
Current:
Federal	$	—		$	(30,838	)	$	(6	)
State		271			123			(78	)
Foreign		6,362			5,533			5,005
		6,633			(25,182	)		4,921
Deferred:
Federal		4,892			2,435			(12,594	)
State		(32	)		(139	)		(224	)
Foreign		—			(38	)		(72	)
		4,860			2,258			(12,890	)
	$	11,493		$	(22,924	)	$	(7,969	)

For the year ending December 31, 2020 the Company received a $1.6 million tax refund that had been withheld by the State of Qatar from vessel revenues between 2010 and 2016. Of this amount, approximately $0.3 million will be claimed as foreign tax credits by SEACOR Holdings on its U.S. tax return prior to the spin-off of SEACOR Marine in 2017. Subject to final resolution of taxes with the State of Qatar, these amounts are expected to be remitted to SEACOR Holdings Inc. The remaining amount relates to foreign taxes that were considered in computing earnings and profits and available foreign taxes of foreign subsidiaries of the Company and will require the Company to recompute its 2017 tax liability under Internal Revenue Code Section 965. The additional U.S. tax liability of the Company under Section 965 due to these refunds is expected to be approximately $0.4 million.

For the year ending December 31, 2019, the Company recorded a return to provision adjustment related to losses from a consolidated joint venture for the 2018 tax year. The resulting additional liability of $2.3 million was recorded in the Company’s financial statements during the third quarter of 2019.

The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax rate for the years ended December 31:

	2021			2020			2019
Statutory rate		21.0	%		(21.0	)%		(21.0	)%
Exclusion of foreign subsidiaries with current year losses and withholding tax		141.6	%		7.7	%		7.4	%
U.S. federal income tax law changes		—	%		(11.8	)%		—	%
Non-Deductible Expenses		0.4	%		—	%		—	%
JV equity earnings		3.8	%		(0.3	)%		—	%
Noncontrolling interests		—	%		1.3	%		1.7	%
Return to provision		0.4	%		(0.4	)%		2.8	%
State Taxes		2.7	%		(0.1	)%		(0.3	)%
Subpart F Income		2.0	%		0.3	%		—	%
Share Award Plans		1.5	%		0.3	%		—	%
Other		—	%		0.6	%		—	%
Effective Tax Rate		173.4	%		(23.4	)%		(9.4	)%

For the year ending December 31, 2021, the Company’s effective income tax rate of 173.4% was primarily due to foreign taxes not creditable against U.S. income taxes and foreign subsidiaries with current losses for which there is no current or future federal income tax benefit.

For the year ending December 31, 2020, the Company’s effective income tax rate of 23.4% was primarily due to the effect of the NOL carrybacks pursuant to the CARES Act, foreign subsidiaries with current losses for which there is no federal income tax benefit, foreign taxes not creditable against U.S. income taxes, and taxes on income attributable to noncontrolling interests.

For the year ending December 31, 2019, the Company’s effective income tax rate of 9.4% was lower than the statutory tax rate of 21% primarily due to foreign subsidiaries with current losses for which there is no federal income tax benefit, foreign taxes not creditable against U.S. income taxes, and noncontrolling interests.

The components of net deferred income tax liabilities as of December 31 were as follows (in thousands):

	2021			2020
Deferred tax liabilities:
Property and equipment	$	63,802		$	58,676
Investments in 50% or Less Owned Companies		—			2,925
Other		3,459			4,819
Total deferred tax liabilities		67,261			66,420
Deferred tax assets:
Federal Net Operating Loss Carryforwards		20,312			23,061
Other		8,803			10,073
		29,115			33,134
Valuation Allowance		(2,536	)		(2,536	)
Total deferred tax assets		26,579			30,598
Net deferred tax liabilities	$	40,682		$	35,822

The Section 163(j) interest deduction limitations were amended to limit the ability of the Company to deduct net interest expense to 30% of adjusted taxable income. The CARES Act modified the computation for 2020 to increase the limit to 50% of adjusted taxable income and to allow a deduction for 50% of partnership excess business interest from 2019. For the year ended December 31, 2021 $4.6 million of previously suspended interest was deductible. For the year ended December 31, 2020, $4.4 million of interest expense was suspended and $3.3 million of 2019 suspended interest was deductible. This results in a total interest expense amount available for carry forward of $6.7 million. This amount will be available to be deducted in future years subject to the 30% limitation.

Future utilization of NOL’s arising in tax years after December 31, 2017 are limited to 80% of taxable income and are allowed to be carried forward indefinitely. The CARES Act allowed a five-year carryback of NOL’s generated in 2018, 2019 and 2020. The 2018 and 2019 NOLs were eligible to be carried back pursuant to the CARES Act. As of December 31, 2021, the Company has $24.3 million of net operating losses generated prior to December 31, 2017 and $72.4 million of net operating losses generated after 2017. Net operating losses generated in 2017 may be carried forward 20 years (expiring in 2037). The post 2017 NOLs will be carried forward indefinitely with no expiration period but its utilization will be subject to an annual 80% of taxable income limitation.

As of December 31, 2021, the Company's valuation allowance of $2.5 million related primarily to foreign tax credit carryforwards which the Company expects to expire unutilized and Louisiana state net operating loss carryforwards.