Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income tax related to continuing operations consisted of the following (in thousands):

	Years Ended December 31,
	2021		2020		2019
Current:
Federal	$	22,368	$	5,831	$	9,079
State	1,445		923		3,772
Foreign	9,496		17,756		9,944
Total current	33,309		24,510		22,795
Deferred:
Federal	(4,902)		(151)		99
State	3,575		762		(1,771)
Foreign	7,928		4,922		(54,260)
Total deferred	6,601		5,533		(55,932)
Total provision	$	39,910	$	30,043	$	(33,137)

A reconciliation of the statutory federal income tax rate with Consensus’ effective income tax rate is as follows:

	Years Ended December 31,
	2021		2020		2019
Statutory tax rate	21	%	21	%	21	%
State income taxes, net	2.9		0.9		0.5
Foreign rate differential	(0.1)		(2.8)		(5.0)
Foreign income inclusion	4.9		4.3		1.6
Foreign tax credit	(4.0)		(3.5)		(1.7)
Reserve for uncertain tax positions	0.5		0.1		(8.3)
Intra-entity tax benefit	—		—		(31.7)
Tax credits and incentives	(0.1)		(0.1)		(0.9)
Executive compensation	0.2		—		—
Return to provision adjustments	—		1.3		—
Other	(0.5)		(1.4)		1.6
Effective tax rates	24.8	%	19.8	%	(22.9)	%

The effective tax rate for the year ended December 31, 2021 differs from the federal statutory rate primarily due to an increase in the net reserve for uncertain tax positions during 2021 driven by an increase in expenses incurred that are not deductible for tax. The effective tax rate for the year ended December 31, 2020 differs from the federal statutory rate primarily due to impacts of the jurisdictional mix of income and the disallowance of certain expenses. The effective tax rate for the year ended December 31, 2019 differs from the federal statutory rate primarily due to a net tax benefit recognized as a result of an intra-entity transfer. In December 2019, the Company completed an intra-entity asset transfer between two of its foreign subsidiaries as part of the reorganization of its international operating structure.

Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows (in thousands):

	Years Ended December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	48	$	49
Tax credit carryforwards	173		—
Accrued expenses	2,669		2,179
Allowance for bad debt	860		609
Share-based compensation expense	245		—
Basis difference in property and equipment	30,887		36,139
Impairment of investments	—		48
Deferred revenue	—		423
Operating lease	4,196		—
State taxes	135		175
Other	2,674		4,773
	41,887		44,395
Less: valuation allowance	(45)		(45)
Total deferred tax assets	$	41,842	$	44,350
Deferred tax liabilities:
Basis difference in property and equipment	$	(3,304)	$	(1,869)
ROU asset	(1,773)		—
Prepaid insurance	(312)		(203)
Other	(638)		(3,320)
Total deferred tax liabilities	(6,027)		(5,392)
Net deferred tax assets	$	35,815	$	38,958

The Company had approximately $35.8 million and $39.0 million in net deferred tax assets as of December 31, 2021 and 2020, respectively, related primarily to basis difference between tangible and intangible assets. Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax asset will not be realized. If necessary, the Company records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The deferred tax assets should be realized through future operating results and the reversal of temporary differences.

As of December 31, 2021 and 2020, the Company has interest expense limitation carryovers of $4.9 million and zero, respectively, which last indefinitely.

As of December 31, 2021 and 2020, the Company had $0.2 million and zero foreign tax credit carryforward, respectively. In addition, as of December 31, 2021 and 2020, the Company had state research and development tax credits of $0.1 million and zero, respectively, which can be carried forward indefinitely.

The Company has not provided deferred taxes on approximately $244.2 million of undistributed earnings from foreign subsidiaries as of December 31, 2021. The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes. Because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted.

Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the Consolidated Balance Sheet. The Company’s prepaid tax payments were zero and $0.3 million at December 31, 2021 and 2020, respectively.

Income from continuing operations before income taxes included income from domestic operations of $80.7 million, $49.7 million and $81.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, and income from foreign operations of $80.4 million, $102.8 million and $64.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Uncertain Income Tax Positions

Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets.

As of December 31, 2021, the total amount of unrecognized tax benefits was $3.7 million, of which $3.7 million, if recognized, would affect the Company’s effective tax rate. As of December 31, 2020, the total amount of unrecognized tax benefits was $3.1 million, of which $3.1 million, if recognized, would affect the Company’s effective tax rate. As of December 31, 2019, the total amount of unrecognized tax benefits was $3.0 million, of which $3.0 million, if recognized would affect the Company’s effective tax rate.

The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2021, 2020 and 2019, is as follows (in thousands):

	Years Ended December 31,
	2021		2020		2019
Beginning balance	$	3,050	$	3,015	$	10,429
Decreases related to tax positions taken during a prior year	—		—		(7,441)
Increases related to tax positions taken in the current year	685		35		79
Decreases related to expiration of statute of limitations	—		—		(52)
Ending balance	$	3,735	$	3,050	$	3,015

The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of December 31, 2021, 2020 and 2019, the total amount of interest and penalties accrued was $1.0 million, $0.9 million and $0.8 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets. In connection with tax matters, the Company recognized interest and penalty expense (benefit) in 2021, 2020 and 2019 of $0.2 million, $0.2 million and $(4.4) million, respectively.

Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income tax audits and expiration of statutes of limitations. At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reserves for uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months. In addition, the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits. As a result of ongoing federal, state and foreign income tax audits (discussed below), it is reasonably possible that the Company’s entire reserve for uncertain income tax positions for the periods under audit will be released. It is also reasonably possible that the Company’s reserves will be inadequate to cover the entire amount of any such income tax liability.

Income Tax Audits:

The Company files tax returns in the US, Ireland, Netherlands, France, Canada, Japan and Hong Kong. As of December 31, 2021, the Company is not under audit in any jurisdiction that it operates within. The Company has not filed any tax returns for the post spin periods, however it does have some international subsidiaries who have previously filed tax returns in their local jurisdictions. In respect to these international subsidiaries, tax returns filed for the years from 2017 onwards are still open to examination by tax authorities