Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Significant components of the provision for income tax expense (benefit) are as follows:
Year Ended December 31,
2022 2021 2020
(in thousands)
Current:
  Federal $ 658  $ —  $ — 
  Foreign 83,633  8,713  7,978 
  State 4,764  (1,555) 1,024 
Total current 89,055  7,158  9,002 
Deferred:
  Federal 6,223  7,451  (16,366)
  Foreign (397) (17,434) (20,772)
  State 1,373  344  (739)
Total deferred 7,199  (9,639) (37,877)
Income tax expense (benefit) $ 96,254  $ (2,481) $ (28,875)

The domestic income (loss) before income taxes was $217.0 million, $(401.4) million and $(1.5) billion for 2022, 2021 and 2020, respectively. Foreign income (loss) before income taxes was $288.4 million, $(209.9) million and $(374.5) million for 2022, 2021 and 2020, respectively.
Significant components of our deferred tax liabilities and assets are as follows:
December 31,
2022 2021
(in thousands)
Deferred tax liabilities:
          Leases $ 217,919  $ 209,758 
          Intangible assets 297,894  265,092 
          Prepaid expenses 12,490  3,424 
          Hedge investments 10,584  — 
          Other 19,086  5,829 
Total deferred tax liabilities 557,973  484,103 
Deferred tax assets:
          Intangible assets 51,634  48,738 
          Accrued expenses 139,432  105,118 
          Net operating loss carryforwards 848,735  957,509 
          Foreign tax and other credit carryforwards 51,055  45,009 
          Equity compensation 9,452  14,602 
          Leases 250,183  237,963 
          Interest limitation 84,599  54,730 
          Capitalized R&D 35,149  — 
          Other 53,359  30,056 
Total gross deferred tax assets 1,523,598  1,493,725 
          Valuation allowance 1,240,881  1,219,496 
Total net deferred tax assets 282,717  274,229 
Net deferred tax liabilities $ (275,256) $ (209,874)

Each reporting period, we evaluate the realizability of all of our deferred tax assets in each tax jurisdiction. As of December 31, 2022, we continued to maintain a full valuation allowance against our net deferred tax assets in certain jurisdictions due to cumulative pre-tax losses. As a result of the valuation allowances, no tax benefits have been recognized for losses incurred in those tax jurisdictions in 2022, 2021 and 2020.
During 2022 and 2021, we recorded net deferred tax liabilities of $275.3 million and $103.5 million, respectively, due principally to differences in financial reporting and tax bases in assets acquired in business combinations. The increase in intangible assets deferred tax liability is primarily due to the OCESA acquisition.
As of December 31, 2022, we have United States federal, state and foreign deferred tax assets related to net operating loss carryforwards of $352.8 million, $141.5 million and $354.4 million, respectively. Based on current statutory carryforward periods, the operating loss carryforwards will expire on various dates beginning in 2025. Our federal net operating loss may be subject to statutory limitations on the amount that can be used in any given year.
The reconciliation of income tax computed at the United States federal statutory rates to income tax expense (benefit) is:
Year Ended December 31,
2022 2021 2020
(in thousands)
Income tax expense (benefit) at United States statutory rate of 21%
 $ 106,144  $ (128,366) $ (389,900)
State income taxes, net of federal tax benefits 4,893  (1,267) 713 
Differences between foreign and United States statutory rates
 14,898  (11,237) (12,794)
Non-United States income inclusions and exclusions (30,783) (1,677) 1,809 
United States income inclusions and exclusions (78,061) (22,121) (16,495)
Nondeductible items 32,907  18,413  39,861 
Tax contingencies 728  895  (1,302)
Tax expense from acquired goodwill 7,596  7,795  6,950 
Change in valuation allowance 38,811  135,908  344,161 
Other, net (879) (824) (1,878)
$ 96,254  $ (2,481) $ (28,875)
Income tax expense (benefit) is principally attributable to our earnings in foreign tax jurisdictions along with state income taxes.
Amounts included in differences between foreign and United States statutory rates are impacted by changes in the mix of international earnings subject to various tax rates which can differ greatly in their proximity to the United States statutory rate.
Amounts included in United States income inclusions and exclusions include the favorable impact of tax deductions for vesting of restricted stock awards and exercises of stock options.
Nondeductible items for all years presented include the impact of increased nondeductible expenses pursuant to the provisions of the TCJA including nondeductible executive compensation. The 2020 nondeductible expenses also include adjustments for nondeductible noncontrolling interest. The 2022 nondeductible expenses also include nondeductible items associated with our recent acquisition of OCESA.
The change in valuation allowance for each period presented resulted primarily from changes in the income (loss) within jurisdictions with full valuation allowances, including the United States.
The following table summarizes the activity related to our unrecognized tax benefits:
Year Ended December 31,
2022 2021 2020
(in thousands)
Balance at January 1 $ 21,330  $ 21,732  $ 21,723 
Additions:
          Increase for current year positions 751  524  1,689 
          Increase for prior year positions 896  335  — 
          Interest and penalties for prior years 160  36  352 
Reductions:
          Decrease for prior year positions —  —  (2,109)
          Expiration of applicable statute of limitations —  —  — 
          Settlements for prior year positions (141) (1,435) (17)
Foreign exchange —  138  94 
Balance at December 31 $ 22,996  $ 21,330  $ 21,732 
If we were to prevail on all uncertain tax positions, the net effect would be a decrease to our income tax provision of approximately $0.7 million. The remaining $22.3 million is offset by deferred tax assets that represent tax benefits that would be received in the event that we did not prevail on all uncertain tax positions. As of December 31, 2022, it is not expected that the total amounts of unrecognized tax benefits will increase or decrease materially within the next year.
We regularly assess the likelihood of additional assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations. Liabilities for income taxes are established for future income tax assessments when it is probable there will be future assessments and the amount can be reasonably estimated. Once established, liabilities for uncertain tax positions are adjusted only when there is more information available or when an event occurs necessitating a change to the liabilities. As of December 31, 2022, we believe that the resolution of income tax matters for open years will not have a material effect on our consolidated financial statements although the resolution of income tax matters could impact our effective tax rate for a particular future period.
The tax years 2009 through 2022 remain open to examination by the primary tax jurisdictions to which we are subject.