|12 Months Ended|
Dec. 31, 2020
|Income Tax Disclosure [Abstract]|
|INCOME TAXES||INCOME TAXES
Significant components of the provision for income tax expense (benefit) are as follows:
The domestic income (loss) before income taxes was $(1.5) billion, $36.1 million and $43.5 million for 2020, 2019 and 2018, respectively. Foreign income (loss) before income taxes was $(374.5) million, $149.0 million and $87.6 million for 2020, 2019 and 2018, respectively.
Significant components of our deferred tax liabilities and assets are as follows:
Each reporting period, we evaluate the realizability of all of our deferred tax assets in each tax jurisdiction. As of December 31, 2020, 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 2020, 2019 and 2018.
During 2020 and 2019, we recorded net deferred tax liabilities of $35.3 million and $43.3 million, respectively, due principally to differences in financial reporting and tax bases in assets acquired in business combinations.
As of December 31, 2020, we have United States federal, state and foreign deferred tax assets related to net operating loss carryforwards of $393.9 million, $148.2 million and $413.1 million, respectively. The increase in net operating loss carryforwards is primarily attributed to increases in loss carryforwards during 2020. The majority of the increase in net operating loss carryforwards are in jurisdictions for which we maintain a full valuation allowance against net deferred tax assets. 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:
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. The differences between statutory rates is also impacted by our Luxembourg affiliates and tax rulings which include the application of a reduced Luxembourg effective rate to the net income before tax resulting from our financing activities in Luxembourg.
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 partially offset in 2019 and 2018 by unfavorable inclusions for GILTI under the provisions associated with the TCJA.
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.
Nondeductible items in 2018 includes our goodwill impairment for Artist Services (non-management) which was not deductible for income tax purposes.
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 the Company’s unrecognized tax benefits:
In February 2019, the Company reached a settlement agreement with the Canadian taxing authority regarding existing uncertain tax positions. The gross liability for unrecognized tax benefits primarily decreased in 2019 due to this settlement.
If we were to prevail on all uncertain tax positions, the net effect would be a decrease to our income tax provision of approximately $0.5 million. The remaining $21.2 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, 2020, 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, 2020, 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 2020 remain open to examination by the primary tax jurisdictions to which we are subject.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef