Current income tax expense represents the amounts expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and

liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2019 for domestic operations. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future taxable income. For the year ended December 31, 2019, the Company remained in a cumulative loss over the past three-year period.

On the basis of this evaluation, for the year ended December 31, 2017, a valuation allowance of $221.6 million was established domestically on the Company’s net deferred tax assets and considering indefinite-lived intangibles. The amount of deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income is reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as the Company’s projections for future taxable income. For the years ended December 31, 2019 and December 31, 2018, the Company maintained its domestic valuation allowance.

An international valuation allowance previously established against deferred tax assets held in Spain was released in the fourth quarter of 2019 resulting in a $41.5 million benefit to income tax expense. A significant piece of objective positive evidence evaluated was a cumulative income position over a three-year period. Statutory taxable earnings that permit the use of these deferred tax assets, primarily net operating loss carryforwards, have stabilized to a profit position with significant improvement in 2019. Strategic initiatives have provided sufficient positive evidence that has resulted in the Company concluding the realization of these deferred tax assets is more likely than not.

On December 22, 2017, the President of the United States signed into law H.R. 1 (the “Tax Reform Act”). The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, limiting the amount of deductible interest expense, limiting executive compensation, implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax assets and related valuation allowance at December 31, 2017. As a result, the Company recognized a tax benefit of $121.8 million in the consolidated statement of operations for the year ended December 31, 2017. This tax benefit is comprised of $88.6 million of deferred tax expense associated with the revaluation of the Company’s net deferred tax assets, as reflected in the rate reconciliation, and $210.4 million of deferred tax benefit associated with the partial release of the Company’s valuation allowance as a result of the Tax Reform Act.

The Company has assessed the deemed mandatory repatriation provisions of the Tax Reform Act, and is projecting no impact to current year domestic taxable income as it relates to undistributed earnings of its foreign subsidiaries. The Company does not intend to distribute earnings in a taxable manner, and therefore intends to limit distributions to earnings previously taxed in the U.S., or earnings that would qualify for the 100 percent dividends received deduction provided for in the Tax Reform Act, and earnings that would not result in any significant foreign taxes. As a result, the Company has not recognized a deferred tax liability on its investment in foreign subsidiaries.

While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.

The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company does not expect it will be subject to this tax in the current and prior year and therefore has not included any tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2019 and December 31, 2018.

The BEAT provisions in the Tax Reform Act eliminates the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax in the current and prior year and therefore has not included any tax impacts of BEAT in its consolidated financial statements for the years ended December 31, 2019 and December 31, 2018.

The income tax provision (benefit) reflected in the consolidated statements of operations consists of the following components:

The Company generated alternative minimum taxes for the year ended December 31, 2017, which fully offset the taxes due to the utilization of tax credits. Under the Tax Reform Act, alternative minimum tax credit will be refundable in the future. The Company has reclassed the alternative minimum tax credits from deferred tax assets to an income tax receivable.

The difference between the effective tax rate on earnings (loss) from continuing operations before income taxes and the U.S. federal income tax statutory rate is as follows:

The valuation allowance expense reflected in the 2017 tax rate reconciliation of $220.6 million consists of the initial domestic recognition of $432.0 million, net of domestic reductions due to the tax reform act of $(210.4) million and changes due to international operations of $(1.0) million.

The significant components of deferred income tax assets and liabilities as of December 31, 2019 and December 31, 2018 are as follows:

A rollforward of the Company’s valuation allowance for deferred tax assets is as follows:

(1)

Primarily relates to amounts resulting from the Company’s changes in deferred tax assets and associated valuation allowance that are not related to income statement activity as well as amounts charged to other comprehensive income. In 2019, this includes $(28.6) million of valuation allowance associated with the sale of the Austria theatres.

The Company has federal income tax net operating loss carryforwards of $380.9 million. Approximately $290.9 million will begin to expire in 2020, and will completely expire in 2036, and will be limited annually due to certain change in ownership provisions of the Internal Revenue Code. Approximately $90.0 million can be used indefinitely. The Company’s foreign net operating losses of $487.2 million can be used indefinitely except for approximately $6.2 million, which will expire in various amounts between years 2022 and 2028. The Company also has state income tax loss carryforwards of $380.4 million. Approximately $374.0 million may be used over various periods ranging from 1 to 20 years. Approximately $6.4 million can be used indefinitely.

A reconciliation of the change in the amount of unrecognized tax benefits was as follows:


	Year Ended
(In millions)	December 31, 2019		December 31, 2018		December 31, 2017
Balance at beginning of period	$	22.0	$	15.3	$	12.7
Gross increases—current period tax positions		10.5		7.3		3.2
Gross decreases—prior period tax positions		(1.5)		(0.6)		0.3
Impact of legislation change		—		—		(0.9)
Balance at end of period	$	31.0	$	22.0	$	15.3

The Company recognizes income tax-related interest expense and penalties as income tax expense and general and administrative expense, respectively. No interest expense related to federal uncertain tax positions have been recognized for the years ended December 31, 2019, December 31, 2018, and December 31, 2017.

The Company analyzed and reviewed the remaining state uncertain tax positions to determine the necessity of accruing interest and penalties. For the years ended December 31, 2019 and December 31, 2018, the Company determined it is not necessary to accrue additional interest and penalties. The total amount of accrued interest and penalties for state uncertain tax positions at December 31, 2019 and December 31, 2018 related to prior years was $0.1 million and $0.1 million, respectively.

The total amount of net unrecognized tax benefits at December 31, 2019 and December 31, 2018 that would impact the effective tax rate, if recognized, would be $12.2 million and $15.2 million, respectively. There are currently, unrecognized tax benefits which the Company anticipates will be resolved in the next 12 months; however, the Company is unable at this time to estimate what the impact on its unrecognized tax benefits will be.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. An IRS examination of the tax year March 29, 2012 is currently ongoing. Generally, tax years beginning after March 28, 2002 are still open to examination by various taxing authorities. Additionally, as discussed above, the Company has net operating loss (“NOL”) carryforwards for tax years ended December 31, 2001 through December 31, 2019, in the U.S. and various state jurisdictions which have carryforwards of varying lengths of time. These NOLs are subject to adjustment based on the statute of limitations applicable to the return in which they are utilized, not the year in which they are generated. Various state, local and foreign income tax returns are also under examination by taxing authorities. The Company does not believe that the outcome of any examination will have a material impact on its consolidated financial statements.