MEREDITH CORP

Income Taxes

The following table shows income tax expense attributable to earnings before income taxes:



Years ended June 30,	2017		2016		2015
(In thousands)
Currently payable
Federal	$	62,170	$	59,173	$	39,429
State	403		7,263		4,583
Foreign	38		30		35
	62,611		66,466		44,047
Deferred
Federal	32,961		8,297		36,314
State	5,834		1,507		5,608
	38,795		9,804		41,922
Income taxes	$	101,406	$	76,270	$	85,969

The differences between the statutory U.S. federal income tax rate and the effective tax rate were as follows:



Years ended June 30,	2017		2016		2015
U.S. statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, less federal income tax benefits	3.0		3.6		2.9
Settlements - audits / tax litigation	(2.3	)	(0.4	)	(0.1	)
Impairment of goodwill	—		29.3		—
Other	(0.8	)	1.7		0.8
Effective income tax rate	34.9	%	69.2	%	38.6	%

The Company's effective tax rate was 34.9 percent in fiscal 2017, 69.2 percent in fiscal 2016, and 38.6 percent in fiscal 2015. The fiscal 2017 effective tax rate was primarily impacted by a credit to income taxes of $6.7 million related to the resolution of certain federal and state tax uncertainties recorded in fiscal 2017. In fiscal 2016, the Company recorded an impairment of goodwill of $116.9 million, of which approximately 20 percent was deductible for income tax purposes.

The tax effects of temporary differences that gave rise to deferred tax assets and deferred tax liabilities were as follows:



June 30,	2017		2016
(In thousands)
Deferred tax assets
Accounts receivable allowances and return reserves	$	11,019	$	12,742
Compensation and benefits	47,222		45,813
Indirect benefit of uncertain state and foreign tax positions	5,068		10,598
All other assets	7,676		16,589
Total deferred tax assets	70,985		85,742
Valuation allowance	—		(905		)
Net deferred tax assets	70,985		84,837
Deferred tax liabilities
Subscription acquisition costs	86,426		88,177
Accumulated depreciation and amortization	329,826		292,871
Deferred gains from dispositions	29,820		29,804
All other liabilities	9,639		10,331
Total deferred tax liabilities	455,711		421,183
Net deferred tax liability	$	384,726	$	336,346

The Company has $8.8 million of net operating loss carryforwards for federal purposes which will expire if unused from fiscal 2029 through fiscal 2034. It is expected that all net operating loss carryforwards will be utilized prior to expiration. There are no related state net operating loss carryforwards remaining.

The Company's June 30, 2017, deferred tax assets are more likely than not to be realized.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:



Years ended June 30,	2017			2016
(In thousands)
Balance at beginning of year	$	37,966		$	35,919
Increases in tax positions for prior years	774			51
Decreases in tax positions for prior years	(3,052		)	(2,334		)
Increases in tax positions for current year	2,864			6,259
Settlements	(181		)	(97		)
Lapse in statute of limitations	(8,848		)	(1,832		)
Balance at end of year	$	29,523		$	37,966

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $18.2 million as of June 30, 2017, and $28.3 million as of June 30, 2016. The uncertain tax benefit recognized during fiscal 2017 from lapse in statute of limitations that related to income tax positions on temporary differences was $0.5 million. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties related to unrecognized tax benefits was $6.0 million and $8.6 million as of June 30, 2017 and 2016, respectively.

The total amount of unrecognized tax benefits at June 30, 2017, may change significantly within the next 12 months, decreasing by an estimated range of $6.8 million to $2.5 million. The change, if any, may result primarily from foreseeable federal and state examinations, ongoing federal and state examinations, anticipated state settlements, expiration of various statutes of limitation, the results of tax cases, or other regulatory developments.

The Company's federal tax returns for fiscal years prior to fiscal 2013 are no longer subject to further IRS examination. However, certain items from completed examinations of fiscal 2006 through fiscal 2012 are still pending final resolution as of June 30, 2017. Fiscal 2013 through fiscal 2015 are under IRS examination. The Company has various state income tax examinations ongoing and at various stages of completion, but generally the state income tax returns have been audited or closed to audit through fiscal 2005.