Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) for 2020, 2019 and 2018 consists of the following:

	For the Years Ended
(In thousands)	2020		2019		2018
Current:
Federal	$	131,741	$	45,575	$	89,551
State	30,565		13,429		24,804
Foreign	47,577		14,929		22,009
Total current expense	209,883		73,933		136,364
Deferred:
Federal	(4,469)		30,353		31,129
State	(96)		11,747		8,144
Foreign	6,067		9,025		(4,845)
Total deferred expense	1,502		51,125		34,428
Total income tax expense	$	211,385	$	125,058	$	170,792

Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to significant portions of deferred income taxes at the end of 2020 and 2019 relate to the following:

(In thousands)	2020		2019
Deferred tax assets:
Accrued expenses	$	63,080	$	31,995
Tax credits and separate return net operating losses	17,976		19,186
Contract and service revenues and costs	9,383		—
Share-based compensation	49,650		52,643
Lease liability	23,928		29,939
Other	17,554		12,701
Gross deferred tax assets	181,571		146,464
Less: Valuation Allowance	(3,384)		—
Total deferred tax assets	178,187		146,464
Deferred tax liabilities:
Software development costs	(270,041)		(247,217)
Property and equipment	(204,568)		(171,267)
Prepaid expenses	(37,547)		(39,311)
Contract and service revenues and costs	—		(12,112)
Lease right-of-use assets	(20,639)		(28,100)
Other	(9,260)		(10,549)
Total deferred tax liabilities	(542,055)		(508,556)
Net deferred tax liability	$	(363,868)	$	(362,092)

At the end of 2020, we had net operating loss carry-forwards from foreign jurisdictions of $19 million that are available to offset future taxable income with no expiration. In addition, we had a state income tax credit carry-forward of $9 million available to offset income tax liabilities through December 31, 2030. During 2020, we recorded a valuation allowance of $3 million against the net operating loss carry-forward in a foreign jurisdiction due to a change in circumstances.

At the end of 2020, we had not provided tax on the cumulative undistributed earnings of certain foreign subsidiaries of approximately $96 million, because it is our intention to reinvest these earnings indefinitely. The unrecognized deferred tax liability relating to these earnings is approximately $5 million.

The effective income tax rates for 2020, 2019, and 2018 were 21%, 19%, and 21%, respectively. A reconciliation of the effective income tax rates to the U.S. federal statutory rate of 21% is follows:

	For the Years Ended
(In thousands)	2020		2019		2018
Tax expense at statutory rates	$	208,209	$	137,447	$	168,179
State income tax, net of federal benefit	24,234		18,561		25,321
Tax credits	(21,254)		(22,750)		(19,737)
Foreign rate differential	1,973		(6,328)		(4,851)
Share-based compensation	(1,303)		(8,090)		(1,696)
Permanent differences	(6,534)		3,278		6,224
Other, net	6,060		2,940		(2,648)
Total income tax expense	$	211,385	$	125,058	$	170,792

A reconciliation of the beginning and ending amount of unrecognized tax benefit is presented below:

(In thousands)	2020		2019		2018
Unrecognized tax benefit - beginning balance	$	19,125	$	18,688	$	15,287
Gross decreases - tax positions in prior periods	(3,964)		(2,383)		—
Gross increases - tax positions in prior periods	312		1,220		1,591
Gross increases - tax positions in current year	6,595		1,607		2,370
Settlements	—		—		(541)
Currency translation	136		(7)		(19)
Unrecognized tax benefit - ending balance	$	22,204	$	19,125	$	18,688

If recognized, $15 million of the unrecognized tax benefit will favorably impact our effective tax rate. It is reasonably possible that our unrecognized tax benefits may decrease by up to $11 million within the next twelve months. Our federal returns have been examined by the Internal Revenue Service through 2016. Our federal returns are open for examination for 2017 and thereafter. We have various state and foreign returns under examination.

The ending amounts of accrued interest and penalties related to unrecognized tax benefits were $5 million in 2020 and $4 million in 2019. We classify interest and penalties as income tax expense in our consolidated statement of operations, and our income tax expense for 2020, 2019 and 2018 each included $1 million of interest and penalties.

The foreign portion of our earnings before income taxes was $208 million, $109 million, and $89 million in 2020, 2019, and 2018 respectively, and the remaining portion was domestic.