Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

For income tax purposes, the components of loss from continuing operations before taxes were as follows:



	Years Ended December 31,
	2019			2018			2017
Domestic	$	(93,487	)	$	11,477		$	(75,143	)
Foreign	(33,004		)	(82,953		)	(68,830		)
	$	(126,491	)	$	(71,476	)	$	(143,973	)

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) were as follows:



	Years Ended December 31,
	2019			2018			2017
Current:
Federal	$	873		$	(7,670	)	$	(21,859	)
State	4,460			356			(3,938		)
Foreign	7,181			11,132			9,550
	12,514			3,818			(16,247		)
Deferred:
Federal	(40,429		)	23,991			27,289
State	(914		)	319			702
Foreign	11,993			(4,252		)	2,719
Provision for (reversal of) valuation allowance on deferred tax assets	32,470			(23,347		)	(29,979		)
	3,120			(3,289		)	731
Total	$	15,634		$	529		$	(15,516	)

Schedule of Effective Income Tax Reconciliation

Income tax expense differs from the amounts computed by applying the U.S. Federal corporate income tax rate as follows:



	Years Ended December 31,
	2019			2018			2017
Expected income tax expense (benefit) at statutory rate (1)	$	(26,563	)	$	(15,010	)	$	(50,391	)
Differences between expected and actual income tax expense (2):
Bargain purchase gain disallowance	80			(13,448		)	—
Revaluation of deferred tax assets related to legal entity mergers	(25,509		)	—			—
Reduction in tax attributes for Section 382 & 383 limitations	—			55,668			—
U.S. Tax Reform - Change in Federal rate	—			(10,666		)	62,758
U.S. Tax Reform - Transition Tax	—			14,412			34,846
U.S. Tax Reform - BEAT Tax	(555		)	1,076			—
U.S. Tax Reform - GILTI inclusion	11,859			—			—
Foreign tax differential including effectively connected income (3)	15,979			22,990			(12,140		)
Provision for (reversal of) liability for uncertain tax positions	4,198			(3,987		)	(16,925		)
Provision for (reversal of) valuation allowance on deferred tax assets (4)	32,470			(23,347		)	(29,979		)
Provision for liability for intra-entity transactions (5)	—			—			2,484
State tax, after Federal tax benefit	(784		)	675			(3,938		)
Excess tax benefits from share-based compensation	381			(356		)	(3,701		)
Other permanent differences	66			122			(267		)
Foreign tax credit (generation) utilization	263			(25,601		)	—
Executive compensation disallowance	1,344			959			221
Subpart F income	—			3,222			2,824
Other provision to return differences	1,242			(6,559		)	221
Other	1,163			379			(1,529		)
Actual income tax expense (benefit)	$	15,634		$	529		$	(15,516	)


(1)	The U.S. Federal corporate income tax rate is 21% beginning January 1, 2018 and was 35% until December 31, 2017.


(2)	ASC 740-10-50 and SEC Regulation S-X, Rule 4-08(h) require the disclosure of significant reconciling items in the effective tax rate reconciliation schedule. We have prepared the 2019 effective tax rate reconciliation consistent with prior years, taking into account the materiality of reconciling items, comparability with prior years and the usefulness of the information.

(3)

The foreign tax differential includes expense recognized in 2019 and a benefit recognized in 2018 and 2017 for taxable income or losses earned by Ocwen Mortgage Servicing, Inc. (OMS) prior to the merger of OMS into OVIS in 2019 as disclosed below, which are taxable in the U.S. as effectively connected income (ECI). The impact of ECI to income tax expense (benefit) for 2019, 2018 and 2017 was $2.6 million, $(3.3) million and $(28.5) million, respectively.


(4)	The benefit recorded for the provision for valuation allowance in 2017 relates primarily to the reduction in the valuation allowance necessary as a result of revaluing our deferred tax assets due to U.S. tax reform and the reduction in the corporate tax rate. This benefit is partially offset by an increase in valuation allowance necessary for current year losses.

(5)

ASU 2016-16 requires an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs. Previously, recognition of current and deferred income taxes for an intra-entity transfer was prohibited until the asset had been sold to an outside party. We adopted this standard on a modified retrospective basis on January 1, 2018 by recording a cumulative-effect reduction of $5.6 million to retained earnings.

Schedule of Deferred Tax Assets and Liabilities

Net deferred tax assets were comprised of the following:



	December 31,
	2019			2018
Deferred tax assets
Net operating loss carryforwards - federal and foreign	$	64,817		$	31,587
Net operating loss carryforwards and credits - state and local	70,254			—
Reserve for servicing exposure	7,711			10,331
Accrued other liabilities	6,377			8,966
Foreign deferred assets	3,620			7,142
Partnership losses	7,029			6,681
Stock-based compensation expense	5,297			5,610
Interest expense disallowance	12,423			4,773
Intangible asset amortization	4,946			4,579
Accrued incentive compensation	5,063			4,527
Accrued legal settlements	6,028			4,350
Bad debt and allowance for loan losses	2,530			3,498
Tax residuals and deferred income on tax residuals	2,885			2,905
Foreign tax credit	94			357
Lease liabilities	5,459			580
Deferred income	8,493			—
Other	8,708			8,252
	221,734			104,138
Deferred tax liabilities
Mortgage servicing rights amortization	16,358			27,860
Foreign undistributed earnings	1,615			2,059
Other	1,151			804
	19,124			30,723
	202,610			73,415
Valuation allowance	(200,441		)	(68,126		)
Deferred tax assets, net	$	2,169		$	5,289

Schedule of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of the total unrecognized tax benefits for uncertain tax positions, which are included in the Liability for uncertain tax positions in Other liabilities, is as follows:



	Years Ended December 31,
	2019			2018			2017
Beginning balance	$	9,622		$	2,281		$	16,994
Additions - PHH acquisition	—			13,108			—
Additions for tax positions of current year	207			412			—
Additions for tax positions of prior years	3,110			1,354			2,281
Reductions for tax positions of prior years	—			(236		)	—
Reductions for settlements	(1,293		)	(3,188		)	(387		)
Lapses in statute of limitations	(1,057		)	(4,109		)	(16,607		)
Ending balance	$	10,589		$	9,622		$	2,281