Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

Income Taxes

13.  INCOME TAXES

The Company’s US and foreign pre-tax income (loss) is summarized in the table below:

Amounts in thousands	2022		2021		2020
Income (loss) before taxes:
US	$	(10,142)	$	29,715	$	(45,927)
Foreign		16,152		(1,566)		2,639
Total income (loss) before taxes	$	6,010	$	28,149	$	(43,288)

The Company’s (benefit) provision for income taxes is summarized as follows:

	For the year ended December 31,
Amounts in thousands		2022		2021		2020
US - Current	$	3,176	$	5,160	$	270
US - Deferred		(14,981)		—		973
(Benefit) provision for US income taxes	$	(11,805)	$	5,160	$	1,243
Foreign - Current	$	4,291	$	866	$	1,130
Foreign - Deferred		(146)		345		2,475
Provision for foreign income taxes	$	4,145	$	1,211	$	3,605
Total (benefit) provision for income taxes	$	(7,660)	$	6,371	$	4,848

The Company’s effective income tax rate differs from the statutory federal income tax rate as follows:

Amounts in thousands	2022	2021	2020
US federal income tax statutory rate	21.0%	21.0%	(21.0%)
Foreign tax rate differential	18.6%	(0.5%)	(5.8%)
State income tax (net of federal benefit)	0.9%	3.0%	(3.8%)
Meals, entertainment, gifts and giveaways	3.7%	0.4%	—
Statutory to US GAAP adjustments, including foreign currency	(3.7%)	2.6%	(1.8%)
Valuation allowance	(173.5%)	(4.6%)	41.0%
Unrecognized tax benefit	(4.7%)	(0.3%)	—
Stock options	7.0%	1.3%	(0.1%)
Global Intangible Low-Taxed Income ("GILTI"), net foreign tax credits	2.5%	—	—
Permanent and other items	0.7%	(0.3%)	2.7%
Total provision for income taxes	(127.5%)	22.6%	11.2%

The Company’s effective income tax rate for the year ended December 31, 2022 was (127.5%). The comparison of pre-tax income of $6.0 million for the year ended December 31, 2022 compared to pre-tax income of $28.1 million for the year ended December 31, 2021 should be considered when comparing tax rates year-over-year. The federal corporate income tax rate in the United States for 2022 was 21%; additionally, the Company is subject to Colorado, Missouri and West Virginia state jurisdictions that had corporate tax rates ranging from 4.0% to 6.5% in 2022. The Company’s effective tax rate in the United States for 2022 was 116.4%, primarily due to the release of the valuation allowance on its deferred tax assets in 2022, as well as other permanent items such as nondeductible stock compensation, lobbying costs and GILTI. The effective tax rate of 36.9% in Canada, which has a 23.0% income tax rate, was due to various permanent addbacks and movement in the valuation allowance on Century Mile’s deferred tax assets. The effective tax rate of 20.7% related to 2022 earnings in Poland, which has a 19.0% income tax rate, was due to nondeductible payments to certain governing authorities as well as nondeductible meals, entertainment, gifts and giveaways. The effective tax rate of 0.0% related to 2022 losses in Mauritius, which has a 15.0% income tax rate, was primarily due to movement in the valuation allowance on deferred tax assets, which was established in 2021. The effective tax rate of 1.7% related to 2022 income in Austria, which has a 25.0% income tax rate, was due to various permanent addbacks, including the change in the valuation allowance recorded on the Company’s deferred tax assets during 2020. The movement of exchange rates for intercompany loans denominated in US dollars further impacts the effective income tax rate because foreign currency gains and losses generally are not taxed until realized. Therefore, the overall effective income tax rate can be impacted by foreign currency gains or losses in the future.

The Tax Cuts and Jobs Act (the “Tax Act”) created requirements that certain income, such as GILTI, earned by a controlled foreign corporation (“CFC”) must be included currently in the gross income of the CFC’s US shareholder, effective in 2018. Under US GAAP, the Company is allowed to make an accounting policy election of either (1) treating taxes due on future US inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has elected to account for GILTI in the year the tax is incurred as a current period expense and recorded a tax expense, net of foreign tax credits, of $0.1 million for the year ended December 31, 2022. There was no net tax expense related to GILTI for the years ended December 31, 2021 and 2020.

The Company records deferred tax assets and liabilities based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted statutory tax rate in effect for the year these differences are expected to be taxable or reversed. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. The recorded deferred tax assets are reviewed for impairment on a quarterly basis by reviewing the Company’s internal estimates for future taxable income. The Company assesses the need for a valuation allowance based on its ability to realize the benefits of the Company’s deferred tax assets.

The Company determined it is more-likely-than-not that the remaining deferred tax assets in the United States would be utilized and released the valuation allowance previously recorded, which resulted in a ($10.2) million tax benefit recognized during 2022.

‎

The Company’s deferred income taxes at December 31, 2022 and 2021 are summarized as follows:

Amounts in thousands		2022		2021
Deferred tax assets (liabilities) - US Federal and state:
Deferred tax assets
Amortization of goodwill for tax	$	8,101	$	7,902
Financing obligation to VICI Properties, Inc. subsidiaries		69,356		68,342
Operating and finance leases		462		329
Disallowed interest expense		3,588		—
Accrued liabilities and other		1,040		861
		82,547		77,434
Valuation allowance		—		(10,236)
	$	82,547	$	67,198
Deferred tax liabilities
Property and equipment	$	(66,062)	$	(66,616)
Operating and finance leases		(444)		(313)
Prepaid expenses		(342)		(269)
Other		(718)		—
	$	(67,566)	$	(67,198)
Long-term deferred tax asset	$	14,981	$	—
Deferred tax assets (liabilities) - foreign
Deferred tax assets
Property and equipment	$	276	$	704
NOL carryforward		7,464		6,331
Accrued liabilities and other		984		1,018
Operating and finance leases		8,415		8,615
Subsidiary liquidation		2,810		3,802
Exchange rate gain		926		992
		20,875		21,462
Valuation allowance		(9,907)		(10,088)
	$	10,968	$	11,374
Deferred tax liabilities
Property and equipment	$	(3,823)	$	(4,071)
Exchange rate loss		(4)		(158)
Intangibles		(1,037)		(1,110)
Operating and finance leases		(7,726)		(7,894)
Others		(592)		(501)
	$	(13,182)	$	(13,734)
Long-term deferred tax liability	$	(2,214)	$	(2,360)

The Company has analyzed filing positions in all of the US federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its US federal tax return, its state tax returns in Colorado, Missouri and West Virginia and its foreign tax returns in Canada and Poland as “major” tax jurisdictions, as defined by the Internal Revenue Code.

The Company is not currently under an income tax audit in any US or foreign jurisdiction. However, any adjustment made by a taxing authority in the future could impact the effective tax rate.

The Company’s income tax returns for the following periods are currently subject to examination:

Jurisdiction	Periods
US Federal	2017(1), 2019-2021
US State - Colorado	2018-2021
US State – Missouri	2019-2021
US State – West Virginia	2019-2021
Canada	2008-2021
Mauritius	2019-2021
Poland	2017-2021
Austria	2017-2021

(1)The 2017 tax period subject to examination only applies to the Company’s transition tax liability in the United States.

The Company had income tax net operating loss carryforwards related to its domestic and international operations of approximately $32.9 million as of December 31, 2022. The Company had recorded $7.5 million of deferred tax assets related to the net operating loss carryforwards, excluding the impact of the adjustments of valuation allowances and unrecognized tax benefits. The deferred tax assets expire as follows:

Amounts in thousands
2022 - 2032	$	176
2033 - 2042		6,424
No expiration		864
Total deferred tax assets	$	7,464

Certain net operating loss carryforwards in the Company’s filed income tax returns include unrecognized tax benefits. The deferred tax assets recognized for those net operating loss carryforwards are presented net of these unrecognized tax benefits.

As of December 31, 2022, the Company has accumulated undistributed earnings generated by its foreign subsidiaries that significantly exceed the approximately $37.1 million of cash and cash equivalents held by its foreign subsidiaries. Because substantially all of these accumulated undistributed earnings have previously been subject to the one-time transition tax on foreign earnings required by the Tax Act or have been subject to tax under the GILTI regime, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of the Company’s foreign investments would generally be limited to foreign and state taxes. The determination of the additional deferred taxes that would be provided for undistributed earnings has not been determined because the hypothetical calculation is not practicable. The Company intends, however, to indefinitely reinvest these earnings and expects its future US cash generation to be sufficient to meet its future US cash needs.

As of December 31, 2022, the Company’s unrecognized tax benefit totaled $0.5 million. The net decrease in the current year unrecognized tax benefit is due to a change in foreign exchange rates as well as a lapse of statute of limitations related to the Company’s ability to utilize pre-acquisition net operating losses. A portion of this adjustment has been recorded as a component of taxes payable in the accompanying consolidated balance sheet as of December 31, 2022. It is anticipated that certain tax positions related to the Company’s ability to utilize pre-acquisition net operating losses will decrease the Company’s balance of unrecognized tax benefits by approximately $0.5 million in 2023, due to lapse of statute of limitations. The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. The Company’s total amount of unrecognized tax benefit and changes to unrecognized tax benefit during the years ended December 31, 2022 and 2021 are summarized in the table below:

Amounts in thousands	2022		2021
Unrecognized tax benefit - January 1	$	777	$	835
Gross increases - tax positions in prior period		0		3
Gross decreases - tax positions in prior period		(31)		—
Gross increases - tax positions in current period		—		—
Settlements		—		—
Lapse of statute of limitations		(218)		(61)
Unrecognized tax benefit - December 31	$	528	$	777

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued penalties and interest of less than $0.1 million during 2022 and 2021. The $0.5 million balance of unrecognized tax benefits, if recognized, would affect the effective tax rate.