14.    Income Taxes



The Company’s United States and foreign components of income before income taxes are as follows (in thousands):









The provision for income taxes consisted of (in thousands):







The Company's actual provision for income taxes differs from the expected Federal income tax provision as follows (dollars in thousands):









The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were (in thousands):











On December 22, 2017, the “Tax Cuts and Jobs Act,” was signed into law. In addition to changes or limitations to certain tax deductions, including limitations on the deductibility of interest payable to related and unrelated lenders and further limiting deductible executive compensation, the Tax Cuts and Jobs Act permanently lowered the corporate tax rate to 21% from the existing maximum rate of 35%, effective for tax years commencing January 1, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. SAB 118 allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. The Company recorded a provisional tax benefit for the impact of the Tax Cuts and Jobs Act of approximately $43.1 million in its Consolidated Statement of Operations for the year ended December 31, 2017.  The $43.1 million tax benefit is net of a decrease in the valuation allowance of $34.2 million.  This tax benefit is comprised of the remeasurement of our federal net deferred tax liabilities resulting from the permanent reduction in the corporate tax rate from 35% to 21%.



The impact of the Tax Cuts and Jobs Act may differ, possible materially, from the provisional amounts due to among other things, additional analysis, changes in interpretations and assumptions made by the Company and additional regulatory guidance that may be issued. Any such revisions will be treated in accordance with the measurement period guidance outlined in SAB 118. As such, the Company expects to complete its analysis no later than December 22, 2018.

The Company evaluates its deferred tax assets to determine if valuation allowances are required.  In the evaluation, management considers net operating loss (“NOL”) carry-back availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required.  Valuation allowances are established based on the consideration of all available evidence using a more likely than not standard.  Based on the Company’s evaluations, which are discussed in further detail below, the deferred tax valuation allowances increased by $25,000 and $3.8 million for the years ended December 31, 2017 and 2016, respectively, and decreased by $127.8 million for the years ended December 31, 2015. 



At December 31, 2014, the Company had maintained a valuation allowance against deferred tax assets of $255.9 million as the Company, BCC and Bluegreen filed separate group federal and state tax returns.  A substantial portion of these deferred tax assets were attributable to federal and state net operating loss carry forwards. As a separate tax return filer, the Company maintained a full valuation allowance against certain deferred tax assets based on the Company’s determination that it was more likely than not that these deferred tax assets would not be realized. As a result of the increase in the company’s ownership interest in BCC completed on April 30, 2015, the Company currently files a consolidated group tax return with all of its U.S. subsidiaries from May 1, 2015 forward.  As a consequence, a substantial portion of the Company’s net operating losses and other deductible temporary differences were utilized in the Company’s consolidated tax returns without limitation subsequent to May 1, 2015.  



The Company will continue to evaluate the positive and negative evidence available in subsequent periods and adjust its remaining valuation allowance to reflect the amount of net deferred tax assets it determines are more likely than not to be realized.



The Company has established a valuation allowance of $102.2 million relating to the deferred tax asset of $148.7 million for federal and state NOL and tax credit carryforwards. The Company’s ability to utilize a portion of these carryforwards to reduce future tax liability income is subject to significant limitations. The following table summarizes the federal and State NOL and tax credit carryforwards and the applicable 2017 valuation allowance (in thousands):







The Company evaluated all positive and negative evidence available as of the reporting date, including tax planning strategies, the ability to file a consolidated return with its subsidiaries, the expected future reversal of existing taxable temporary differences, and expected future taxable income (primarily from Bluegreen) exclusive of reversing temporary differences and carry forwards. Based on this evaluation, the Company has determined that it is more likely than not that it will be able to realize $46.5 million of the deferred tax asset that is attributed to the Company’s federal and state NOL and credit carryforwards.



As of December 31, 2017, the Company had estimated federal and Florida NOL carryforwards of approximately $18.5 million and $73.5 million, respectively (which expire from 2030 through 2034) that are not subject to any limitation and can be applied to the taxable income of any subsidiary of the Company.  No valuation allowance is needed for these NOLs.



As of December 31, 2017, Bluegreen had non-Florida state NOL carryforwards of $240.0 million, which expire from 2018 through 2037.  These NOLs can only be utilized against Bluegreen’s (or a subsidiary of Bluegreen) income allocable to the state that the NOL was generated from.  A valuation allowance is maintained for those state NOLs where the NOL is not more likely than not realizable.



The Company had alternative minimum tax credit carryforwards of $28.6 million. The Tax Cuts and Jobs Act repealed the alternative minimum tax effective in 2018 and allows the credit to be applied to fully offset regular income taxes.  Any credits that are not used to reduce regular income tax is refundable at 50% for the years 2018 through 2020 and 100% refundable in 2021. No valuation allowance is needed for these credits.



The Company’s deferred tax asset at December 31, 2017 includes federal and Florida NOL carryforwards and federal tax credit carryforwards that can only be utilized if the separate entity that generated them has separate company taxable income (“SRLY NOL Limitation”).  These carryforwards cannot be utilized against most of the Company’s subsidiaries’ taxable income, including Bluegreen. As such, a full valuation allowance has been established for these carryforwards. 



In addition, as a result of the Company’s merger with Woodbridge in September 2009, the Company experienced a “change of ownership” as that term is defined in the Internal Revenue Code. This change of ownership resulted in a significant limitation of the amount of the Company’s pre-merger net operating losses that can be utilized by the Company annually (the “Section 382 limitation”).  The federal and Florida annual limit is approximately $788,000 and $513,000, respectively.    As a result, a valuation allowance has been established for these NOLs to the extent that they may expire before they can be utilized.



As of December 31, 2017, BBX Capital’s Canadian subsidiaries had NOL carryforwards.  As the Canadian operation have had cumulative taxable losses in recent years, a full valuation allowance has been applied to these NOL carryforwards. In addition, one of the Canadian subsidiaries has a capital loss carryforward that can only be used to reduce capital gains and the tax on Canadian capital gains is 50% of the Canadian tax rate. Canadian capital loss carryforwards do not expire.  A full valuation allowance is maintained for the Canadian capital loss carryforward as it is unlikely that the Canadian subsidiary will generate capital gains in the future.



On September 21, 2009, the Company adopted a shareholder rights agreement aimed at protecting its ability to use available NOLs to offset future taxable income.  See Note 19 for additional information regarding the Company’s rights agreement. 



The Company evaluates its tax positions based upon guidelines of ASC 740-10, Income Tax, which clarifies the accounting for uncertainty in tax positions. Based on an evaluation of uncertain tax provisions, the Company is required to measure tax benefits based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement.  There were no unrecognized tax benefits at December 31, 2017, 2016 or 2015. 



The Company is no longer subject to federal or Florida income tax examinations by tax authorities for tax years before 2014.  Several of the Company’s subsidiaries are no longer subject to income tax examinations in certain state, local and non-U.S. jurisdictions for tax years before 2012.



Certain of the Company’s state income tax filings are under routine examination.  While there is no assurance as to the results of these audits, the Company does not currently anticipate any material adjustments in connection with these examinations.