INCOME TAXES

12 Months Ended

Dec. 31, 2020

The components of earnings (loss) from continuing operations before income taxes and the provision for (benefit from) income taxes from continuing operations were as follows:


	Years ended December 31,
	2020		2019		2018
	(In thousands)
Earnings (loss) from continuing operations before income taxes:
United States	$	(126,537)	$	(44,668)	$	371,925
Foreign	(3,823)		2,397		17,544
Total	$	(130,360)	$	(42,271)	$	389,469

Provision for (benefit from) income taxes from continuing operations:
Current tax expense (benefit) from continuing operations:
Federal (1)	$	(642)	$	(1,065)	$	(23,333)
State	9,523		9,187		6,862
Foreign	5,620		5,210		10,123
	14,501		13,332		(6,348)
Deferred tax expense (benefit) from continuing operations:
Federal	(27,534)		(8,228)		113,764
State	(10,263)		(18,790)		1,250
Foreign	4,932		(5,313)		(6,119)
	(32,865)		(32,331)		108,895
Total	$	(18,364)	$	(18,999)	$	102,547

_______________

(1) The current federal tax benefit in 2018 included $22 million of alternative minimum tax refunds generated by the 2017 Tax Cuts and Jobs Act.

A reconciliation of the federal statutory tax rate with the effective tax rate from continuing operations follows:


	Years ended December 31,
	2020		2019		2018
	(Percentage of pre-tax earnings)
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
Impact of one-time deemed repatriation	—	%	—	%	6.2	%
Impact on deferred taxes for changes in tax rates	0.9	%	20.5	%	(3.3)	%
Additional deferred tax adjustments	0.8	%	—	%	(1.5)	%
State income taxes, net of federal income tax benefit	(3.4)	%	(19.2)	%	3.7	%
Foreign rates varying from federal statutory tax rate	1.3	%	3.1	%	0.1	%
Tax contingencies	5.5	%	15.7	%	(0.9)	%
Tax credits	1.7	%	11.3	%	0.2	%
Other permanent book-tax differences	(3.3)	%	(8.6)	%	0.8	%
Change in foreign valuation allowance	(11.9)	%	—	%	—	%
Other	1.5	%	1.1	%	—	%
Effective tax rate	14.1	%	44.9	%	26.3	%

Tax Reform Impact

On December 22, 2017, the 2017 Tax Cuts and Jobs Act of 2017 (2017 Tax Reform) was signed into law. The 2017 Tax Reform made broad and complex changes to the U.S. tax code which have had a significant impact on our earnings. During 2018, we completed our analyses on the impact of the 2017 Tax Reform and recorded an additional $10 million benefit for the re-measurement of our net deferred tax liability and an additional $24 million expense for the transition tax.

Deferred Income Taxes

The components of the net deferred income tax liability were as follows:


	December 31,
	2020		2019
	(In thousands)
Deferred income tax assets:
Self-insurance accruals	$	104,346	$	94,690
Net operating loss carryforwards	381,585		619,314

Accrued compensation and benefits	46,321		31,402

Pension benefits	75,466		78,004
Deferred revenue	170,958		146,383
Other, including federal benefit on state tax positions	35,104		30,750
	813,780		1,000,543
Valuation allowance	(41,153)		(17,577)
	772,627		982,966
Deferred income tax liabilities:
Property and equipment basis differences	(1,888,112)		(2,121,842)
Other	(5,379)		(5,386)
	(1,893,491)		(2,127,228)
Net deferred income tax liability (1)	$	(1,120,864)	$	(1,144,262)

_______________

(1)Deferred tax assets of $5 million and $17 million have been included in "Sales-type leases and other assets" as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, we have undistributed earnings of foreign subsidiaries of $813 million. We plan to continue to reinvest foreign earnings overseas indefinitely. With respect to the undistributed earnings as of December 31, 2020, $635 million was included in the transition tax. The determination of the amount of any additional unrecognized deferred tax liability is not practicable because of the complexities associated with the hypothetical calculations used in evaluating whether we will maintain the indefinite reinvestment assertion.

As of December 31, 2020, we had U.S. federal tax effected net operating loss carryforwards, before unrecognized tax benefits, of $311 million, of which $8 million is expected to expire beginning 2034 and the remaining portion has an indefinite carryforward period. Various U.S. subsidiaries had state tax effected net operating loss carryforwards, before unrecognized tax benefits and valuation allowances, of $72 million that will begin to expire as follows: $4 million in 2021, $0.4 million in 2022, and $63 million in 2023 and thereafter. The remaining portion has an indefinite carryforward period. To the extent that we do not generate sufficient state taxable income through viable planning strategies within the statutory carryforward periods to utilize the loss carryforwards in these states, the loss carryforwards will expire unused. We also had foreign tax effected net operating loss carryforwards of $30 million that are available to reduce future income tax payments in several countries, subject to varying expiration rules. We assess the realizability of our deferred tax assets and record a valuation allowance to the extent it is determined that they are not more-likely-than-not to be realized. Due to our assessment of future sources of taxable income in various states and foreign jurisdictions, we have a cumulative valuation allowance of $41 million against our deferred tax assets as of December 31, 2020. This includes a $24 million valuation allowance against our U.K. deferred tax assets recorded in 2020, of which $13 million was a discrete item recorded in the first quarter of 2020. The valuation allowance is subject to change in future years based on the availability of future sources of taxable income.

Uncertain Tax Positions

In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes these open tax years by jurisdiction:



Jurisdiction						Open Tax Year

United States (Federal)						2011, 2013 - 2015, 2017 - 2020
Canada						2013 - 2020
Mexico						2015 - 2020
United Kingdom						2019 - 2020
Brazil (in discontinued operations)						2015 - 2020

The following table summarizes the activity related to unrecognized tax benefits (excluding the federal benefit received from state positions):


	December 31,
	2020		2019		2018
	(In thousands)
Balance at January 1	$	48,918	$	58,819	$	62,288
Additions based on tax positions related to the current year	2,225		1,422		3,885


Reductions due to lapse of applicable statutes of limitation	(8,356)		(11,323)		(7,354)
Gross balance at December 31	42,787		48,918		58,819
Interest and penalties	4,491		4,772		4,594
Balance at December 31	$	47,278	$	53,690	$	63,413

Of the total unrecognized tax benefits as of December 31, 2020, $39 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. Unrecognized tax benefits related to federal, state and foreign tax positions may decrease by $6 million by December 31, 2021, if audits are completed or tax years close during 2021.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details