Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes The components of income tax benefit attributable to the Company for the year ended December 31, 2021, 2020 and 2019, respectively, are as follows (in thousands):
Year Ended December 31,
2021 2020 2019
U.S. current income tax expense (benefit) $ 290  $ (6,931) $ 386 
U.S. deferred income tax benefit (23,740) (12,330) (21,761)
Foreign current income tax expense 8,852  6,948  30,172 
Foreign deferred income tax (benefit) expense (8,265) 144  (20,878)
Total $ (22,863) $ (12,169) $ (12,081)
A reconciliation of the statutory federal income tax amount to the recorded expense is as follows (in thousands):
Year Ended December 31,
2021 2020 2019
Loss before income taxes $ (124,293) $ (119,776) $ (91,125)
Statutory income tax rate 21  % 21  % 21  %
Expected income tax (benefit) expense (26,102) (25,153) (19,136)
Change in tax rate —  (161) — 
Change in uncertain tax positions 1,043  —  — 
Foreign income tax rate differential (282) 2,556  9,387 
Foreign (loss) earnings not in reported income (336) 3,252  12,581 
Foreign tax credits (7,749) (7,133) (26,141)
Withholding taxes (49) 1,019  3,635 
Goodwill impairment 52  11,544  6,506 
Other permanent differences 426  1,290  1,873 
State tax expenses (2,449) (1,664) 2,364 
CARES act —  (2,378) — 
Return to provision 390  894  (15,156)
Change in valuation allowance 12,193  3,765  12,006 
Total $ (22,863) $ (12,169) $ (12,081)

The Company’s effective tax rate was 18.4% for the year ended December 31, 2021 compared to 10.2% for the year ended December 31, 2020 and 13.3% for the year ended December 31, 2019.

The effective tax rate for the year ended December 31, 2021 differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico as well as changes in the valuation allowance. Additionally, the Company recorded an unrecognized tax benefit of $1.0 million during the year ended December 31, 2021 related to the 2020 tax year returns in Puerto Rico.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted and signed into U.S. law in response to the COVID-19 pandemic, and among other things, permits the carryback of certain net operating losses. As a result of the enacted legislation, the Company recognized a $2.4 million net tax benefit during the year ended December 31, 2020, which consisted of a $7.0 million current tax benefit and a $4.6 million deferred tax expense. This impact, along with the rate impact from non-deductible goodwill impairment and the change in valuation allowance, was the primary driver for the difference between the statutory rate of 21% and the effective tax rate for the years ended December 31, 2020.

The effective tax rate for the year ended December 31, 2019 differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico. For the year ended December 31, 2019, the Company recognized a loss in the United States, which was partially offset by earnings from its operations in Puerto Rico, which has a higher statutory rate compared to the United States. Additionally, during the year ended December 31, 2019, the Company recorded a benefit related to return to provision adjustments, which was partially offset by changes in the valuation allowance.
Deferred tax liabilities attributable to the Company consisted of the following (in thousands):
Year Ended December 31,
2021 2020
Deferred tax assets:
Allowance for doubtful accounts $ 1,241  $ 1,541 
Lease asset 4,432  6,060 
Intangible assets 1,070  — 
Accrued liabilities 12,833  740 
Net operating loss carryover 13,447  613 
Foreign tax credits 83,780  80,615 
Other 1,652  1,919 
Valuation allowance (71,612) (67,888)
Deferred tax assets 46,843  23,600 
Deferred tax liabilities:
Property and equipment $ (28,126) $ (39,057)
Intangible assets —  (450)
Lease liability (4,392) (6,030)
Other (7,096) (2,804)
Deferred tax liabilities (39,614) (48,341)
Net deferred tax asset (liability) $ 7,229  $ (24,741)
Reflected in accompanying balance sheet as:
Deferred income tax asset $ 8,094  $ — 
Deferred income tax liability (865) (24,741)
Total $ 7,229  $ (24,741)

During the years ended December 31, 2021 and 2020, the Company recorded changes in its valuation allowance of $12.2 million and $3.8 million, respectively, related to excess foreign tax credits that are not expected to be utilized. The Company has foreign tax credits carryforwards of $83.8 million as of December 31, 2021. These credits have a 10 year carryforward period and begin to expire in 2028.

The Company maintains a partial valuation allowance related to U.S. foreign tax credit carryforwards, as it cannot objectively assert that these deferred tax assets are more likely than not to be realized. All available positive and negative evidence was weighed to determine whether a valuation allowance was necessary. The more significant evidential matter is the higher foreign tax rate applied to foreign source income in comparison to the U.S. Federal tax rate of 21%. As a result, the Company’s has foreign tax credits in excess of the corresponding U.S. income tax liability for which the foreign tax credits are allowed as an offset and, therefore, are not likely to be realized.

At December 31, 2021, the Company had undistributed earnings in its Puerto Rico foreign branch. The distribution of these undistributed earnings is subject to a withholding tax in Puerto Rico and since the Company intends to make these distributions in the future, the withholding tax has been accrued.

A reconciliation of the beginning and ending amounts of liabilities associated with uncertain tax positions for the year ended December 31, 2021 is as follows ($ in thousands):

Balance, January 1, 2021 $ — 
Additions for tax positions of prior years 1,043 
Balance, December 31, 2021 $ 1,043 
The Company recorded an unrecognized tax benefit of $1.0 million during the year ended December 31, 2021 related to the 2020 tax year returns in Puerto Rico. It is the Company’s policy to recognize interest and applicable penalties related to uncertain tax positions in income tax expense. The Company did not have any uncertain tax positions for the years ended December 31, 2020 and 2019.The Company’s U.S. federal tax returns for tax years 2017 through 2021 remain subject to examination by the tax authorities. The Company’s state and local income tax returns for tax years 2016 through 2021 remain subject to examination, with few exceptions, by the respective tax authorities. Puerto Rico tax returns for tax years 2017 through 2021 and Canada tax returns for the tax years 2015 through 2021 remain open to examination by the respective tax authorities.