Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The (benefit from) provision for income taxes is comprised of:
For the Year Ended December 31,
2021 2020 2019
Current tax (benefit) expense
Federal
 $ (528) $ (28,872) $ 1,358 
State and local
 309  1,264  5,328 
Foreign
 —  178  149 
Total current tax (benefit) expense
 (219) (27,430) 6,835 
Deferred tax (benefit) expense
Federal
 (135,789) (82,700) 8,040 
State and local
 (8,252) (17,181) (4,258)
Foreign
 4,100  (29) (346)
Total deferred tax (benefit) expense
 (139,941) (99,910) 3,436 
Non-current benefit
 (184) (198) (191)
(Benefit from) provision for income taxes
 $ (140,344) $ (127,538) $ 10,080 
The amount of deferred tax (benefit) expense differs from the change in the year-end deferred tax balances due to the tax effect of other comprehensive income, additional paid-in capital items or change in state effective tax rates and foreign currency exchange rates.
On March 27, 2020, Congress enacted the CARES Act to provide certain relief as a result of the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits for employee retention, deferment of the employer’s portion of social security tax payments, net operating loss carrybacks, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. An income tax benefit of $13.4 million was recognized as a result of the favorable federal tax rate differential from the net operating loss carrybacks under the CARES Act. The favorable federal tax rate differential is due to net operating losses generated in tax years with a federal tax rate of 21% whereas the losses were carried back to tax years with a federal tax rate of 35%.
The reconciliation between our effective tax rate on income before income taxes and the statutory tax rate is as follows:
For the Year Ended December 31,
2021 2020 2019
Income tax (benefit) provision at federal statutory rate
 $ (151,582) $ (102,424) $ 8,427 
State and local income taxes, net of federal tax benefit
 (20,575) (23,357) 880 
Goodwill impairment
 —  —  688 
CARES Act
 (1,283) (12,157) — 
Loss on debt extinguishment
 8,609  —  — 
Change in valuation allowance
 16,933  9,538  65 
Other, net
 7,554  862  20 
(Benefit from) provision for income taxes
 $ (140,344) $ (127,538) $ 10,080 
Deferred income taxes are the result of provisions of the tax laws that either require or permit certain items of income or expense to be reported for tax purposes in different periods than they are reported for financial reporting. The tax effect of temporary differences that gives rise to the net deferred tax liability are as follows:
December 31,
2021 2020
Deferred tax assets:
Lease-related liabilities
 $ 504,049  $ 457,882 
Accrued equity compensation
 76,603  75 
Accrued expenses
 14,221  14,114 
Deferred revenue
 1,491  4,147 
Net operating loss
 147,478  125,379 
Business interest
 34,185  765 
Other
 7,914  7,835 
Valuation allowance
 (29,994) (12,957)
Total deferred tax assets
 755,947  597,240 
Deferred tax liabilities:
Property and equipment
 (280,816) (304,900)
Intangibles
 (41,053) (39,136)
Operating and finance lease right-of-use assets
 (477,414) (435,681)
Partnership interest
 (1,710) (1,694)
Debt issuance costs
 —  (2,410)
Prepaid expenses
 (9,002) (5,638)
Costs related to deferred revenue
 (1,046) (2,526)
Other
 (119) (377)
Total deferred tax liabilities
 (811,160) (792,362)
Net deferred tax liability
 $ (55,213) $ (195,122)
We recognize a tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. We adjust our liability for unrecognized tax benefits in the period in which an uncertain tax position is effectively settled, that statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. Unrecognized tax benefits were not significant in any of the periods presented.
We are subject to taxation in the U.S., Canada and various states. Our tax years 2020, 2019, and 2018 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state or local examinations by tax authorities for years before 2018.
As of December 31, 2021, we had a federal income tax net operating loss carryforward related to our U.S. operations of approximately $554.4 million ($116.4 million tax effected), of which approximately $75.8 million ($15.9 million tax effected) expires in 2038 and approximately $478.6 million ($100.5 million tax effected) can be carried forward indefinitely. As of December 31, 2021, we also had state net operating loss carryforwards totaling approximately $436.1 million ($25.4 million tax effected), of which approximately $356.4 million ($19.8 million tax effected) expires between 2026 and 2042 and approximately $79.7 million ($5.6 million tax effected) can be carried forward indefinitely. As it relates to our Canada operations, we had an income tax net operating loss carryforward of approximately $21.4 million ($5.7 million tax effected) as of December 31, 2021, which is subject to expiration between tax years 2032 and 2042.
As of December 31, 2020, we had a federal income tax net operating loss carryforward related to our U.S. operations of approximately $481.7 million ($101.1 million tax effected), of which approximately $75.8 million ($15.9 million tax effected) expires in 2038 and approximately $405.9 million ($85.2 million tax effected) can be carried forward indefinitely. As of December 31, 2020, we also had state net operating loss carryforwards totaling approximately $311.1 million ($18.1 million tax effected), of which approximately $242.0 million ($15.1 million tax effected) expires between 2026 and 2041 and
approximately $69.1 million ($3.0 million tax effected) can be carried forward indefinitely. As it relates to our Canada operations, we had an income tax net operating loss carryforward of approximately $23.0 million ($6.1 million tax effected) as of December 31, 2020, which was subject to expiration between tax years 2032 and 2041.
As of December 31, 2021, we had a business interest carryforward of approximately $133.5 million ($34.2 million tax effected) that can be carried forward indefinitely. As of December 31, 2021, we also had a general business credit carryforward of approximately $2.0 million that can be used to offset future U.S. federal tax liabilities and expires between tax years 2036 and 2041.
As of December 31, 2020, we had a business interest carryforward of approximately $3.1 million ($0.8 million tax effected) that can be carried forward indefinitely. As of December 31, 2020, we also had a general business credit carryforward of approximately $1.6 million that can be used to offset future U.S. federal tax liabilities and expires between tax years 2036 and 2040.
We considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations to determine the extent to which we believe net deferred tax assets will more likely than not be realized. Based on this assessment, as of December 31, 2021, a valuation allowance of $20.4 million has been recorded to reduce the deferred tax asset associated with the state net operating loss carryforwards and other deferred tax assets. As of December 31, 2021, a valuation allowance of approximately $8.4 million has been recorded to reduce the deferred tax asset associated with the Canadian net operating loss carryforward and other deferred tax assets. As of December 31, 2021, we had a foreign tax credit carryforward of approximately $1.1 million that can be used to offset future U.S. federal tax liabilities on foreign-sourced income. We project that our foreign sourced income will not be sufficient to fully utilize the credit carryforward. As a result, a valuation allowance of $1.1 million has been recorded as of December 31, 2021 to reduce the deferred tax asset associated with the foreign tax credit carryforward.
As of December 31, 2020, a valuation allowance of $7.2 million was recorded to reduce the deferred tax asset associated with the state net operating loss carryforwards and other deferred tax assets. As of December 31, 2020, a valuation allowance of approximately $4.1 million was recorded to reduce the deferred tax asset associated with the Canadian net operating loss carryforward and other deferred tax assets. As of December 31, 2020, we had a foreign tax credit carryforward of approximately $1.7 million that can be used to offset future U.S. federal tax liabilities on foreign-sourced income. We project that our foreign sourced income will not be sufficient to fully utilize the credit carryforward. As a result, a valuation allowance of $1.7 million has been recorded as of December 31, 2020, in order to reduce the deferred tax asset associated with the foreign tax credit carryforward.
We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We have not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes on undistributed earnings of foreign subsidiaries indefinitely invested outside the United States.