Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We hold an economic interest of 18% in SciPlay Parent LLC subsequent to the IPO. The 82% economic interest that we do not own represents a noncontrolling interest for financial reporting purposes. SciPlay Parent LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As such, SciPlay Parent LLC is not subject to income tax in most jurisdictions, and SciPlay Parent LLC’s members, of which we are one, are liable for income taxes based on their allocable share of SciPlay Parent LLC’s taxable income. The effective income tax rates for the three and six months ended June 30, 2020 were 6.0% and 5.6%, respectively, and (2.7)% and 9.1% for the three and six months ended June 30, 2019, respectively. The effective income tax rates were determined using an estimated annual effective tax rate after considering any discrete items for such periods.

Our effective tax rate differs from the statutory rate of 21% primarily because we generally do not record income taxes for the noncontrolling interest portion of U.S. pre-tax income. Additionally, the periods prior to the IPO are presented using historical results of operations and cost basis of the assets and liabilities as if we operated on a standalone basis during those periods, and the tax provision is calculated as if we completed separate tax returns apart from our Parent (“Separate-return Method’’). Certain legal entities that are included in these financial statements under the Separate-return Method were included in tax filings of affiliated entities that are not part of these financial statements. U.S. federal, state and local income tax provision of $1.8 million and $6.5 million for the three and six months ended June 30, 2019, respectively, is included in the income tax expense under the Separate-return Method for the 2019 periods prior to the IPO.

TRA

During the three months ended June 30, 2020, payments totaling $2.5 million were made to Scientific Games pursuant to the TRA. As of June 30, 2020 and December 31, 2019, the total TRA liability was $71.3 million and $75.3 million, respectively, of which $4.0 million and $2.6 million, respectively, was included in Accrued liabilities.