Additional undistributed foreign earnings

[Table of Contents](#i36695dc5143241f795c32e47bf5f4b3d_7)CBRE GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Cumulative tax effects of temporary differences are shown below (dollars in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, |
|  | 2021 |  | 2020 |
| Assets: |  |  |  |
| Tax losses and tax credits | $ | 307,507  |  |  | $ | 334,303  |  |
| Operating lease liabilities | 269,960  |  |  | 358,066  |  |
| Bonus and deferred compensation | 381,408  |  |  | 295,690  |  |
| Bad debt and other reserves | 65,188  |  |  | 73,061  |  |
| Pension obligation | 5,007  |  |  | 18,026  |  |
| All other | 65,710  |  |  | 24,623  |  |
| Deferred tax assets, before valuation allowance | $ | 1,094,781  |  |  | $ | 1,103,769  |  |
| Less: Valuation allowance | (273,256) |  |  | (291,096) |  |
| Deferred tax assets | $ | 821,525  |  |  | $ | 812,673  |  |
|  |  |  |  |
| Liabilities: |  |  |  |
| Tax effect on revenue items related to Topic 606 adoption | $ | —  |  |  | $ | (16,784) |  |
| Property and equipment | (92,166) |  |  | (88,595) |  |
| Unconsolidated affiliates and partnerships | (128,170) |  |  | (59,544) |  |
| Capitalized costs and intangibles | (583,219) |  |  | (313,099) |  |
| Operating lease assets | (240,261) |  |  | (366,671) |  |
| All other | (25,935) |  |  | (936) |  |
| Deferred tax liabilities | $ | (1,069,751) |  |  | $ | (845,629) |  |
| Net deferred tax liabilities | $ | (248,226) |  |  | $ | (32,956) |  |

As of December 31, 2021, we had a U.S. federal capital loss carryforward, offset by reserves for uncertain tax position, which will expire after 2024. As of December 31, 2021, there were deferred tax assets before valuation allowances of approximately $299.1 million related to foreign net operating losses (NOLs). The majority of the foreign NOLs carryforward indefinitely. In certain foreign jurisdictions NOLs expire each year beginning in 2021. The utilization of NOLs may be subject to certain limitations under U.S. federal, state and foreign laws. We have recorded a valuation allowance for deferred tax assets where we believe that it is more likely than not that the NOLs will not be utilized.We determined that as of December 31, 2021, $273.3 million of deferred tax assets do not satisfy the realization criteria set forth in Topic 740. Accordingly, a valuation allowance has been recorded for this amount. If released, the entire amount would result in a benefit to continuing operations. During the year ended December 31, 2021, our valuation allowance decreased by approximately $17.8 million. The decrease was attributed to a reversal of the beginning of year valuation allowance of $12.3 million as certain foreign subsidiaries expect to utilize deferred tax assets before expiration as a result of current and forecasted earnings within the applicable jurisdiction, a reduction of $19.5 million due to foreign currency translation and tax rate changes, and an increase in valuation allowance of $14.0 million due to current year activities. We believe it is more likely than not that future operations will generate sufficient taxable income to realize the benefit of our deferred tax assets recorded as of December 31, 2021, net of valuation allowance.At December 31, 2021, we have undistributed earnings of certain foreign subsidiaries of approximately $4.4 billion for which we have indefinitely reinvested and not recognized deferred taxes. Estimating the amount of the unrecognized deferred tax is not practicable due to the complexity and variety of assumptions necessary to estimate the tax. In 2021, following the acquisition of Turner & Townsend, we recorded $20.4 million of deferred tax liability related to book over tax basis difference in Turner & Townsend. The deferred tax liability was offset by an increase to goodwill in purchase accounting and therefore did not impact 2021 income tax expense.The total amount of gross unrecognized tax benefits was approximately $191.9 million and $168.5 million as of December 31, 2021 and 2020, respectively. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $108.5 million as of December 31, 2021. 106
