12. Income Taxes

For the years ended December 31, 2017,  2016 and 2015, the effective tax rate on income from continuing operations was 49.0%, 36.4% and 33.4%, respectively.

The components of our tax provision are as follows:







Within the current foreign tax provision for the years ended December 31, 2017,  2016 and 2015 is $8,453,  $7,460 and $6,860, respectively, of foreign withholding taxes paid on income included within the US pre-tax book income below. The federal deferred tax provision for the year ended December 31, 2017 includes a charge of $10,878 associated with the remeasurement of our deferred tax assets due to the revised corporate tax rate as a result of the Tax Act, as defined below.

Components of income before income taxes are as follows:







The following sets forth the difference between the provision/(benefit) for income taxes computed at the U.S. federal statutory income tax rate of 35% and that reported for financial statement purposes:







The tax effects of temporary differences and net operating losses that give rise to significant portions of the deferred tax assets and deferred tax liabilities consisted of the following:







The temporary differences described above represent differences between the tax basis of assets or liabilities and amounts reported in the consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. The Company received tax deductions from the vesting of restricted stock units and performance stock units of $21,457,  $13,301 and $7,694 in 2017,  2016 and 2015, respectively.



As of December 31, 2017, we had $18,984 of deferred tax assets, net, included in Non-current income tax assets in our Consolidated Balance Sheet. As of December 31, 2016, we had $32,556 of deferred tax assets, net, included in Non-current income tax assets in our Consolidated Balance Sheet. The decrease in our deferred tax asset balance was driven by the remeasurement of our deferred tax assets and liabilities due to tax reform and activity in prepaid royalties relating to television contracts.



The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred and included a variety of other changes. During the fourth quarter of 2017, the Company recorded a charge of $10,878 associated with the remeasurement of its net deferred tax assets due to the tax rate decreasing from 35% to 21%, which reduced the future benefit the Company will realize associated with these assets. Additionally, the Company recorded a charge of $406 in the fourth quarter of 2017 related to the one-time transition tax on mandatory repatriation of undistributed foreign earnings and profits per the Tax Act.



The adjustments to net deferred tax assets and the charge related to the one-time transition tax are provisional amounts estimated based on information available as of December 31, 2017 and a preliminary review of the Tax Act. These amounts are subject to revision as we obtain information necessary to complete the calculations. We will recognize any changes to the provisional amounts as we refine our estimates of our cumulative temporary differences, finalize the calculation of the total post-1986 earnings and profits of our foreign subsidiaries and complete our interpretations of the application of the Tax Act.

As of December 31, 2017 and 2016, we had valuation allowances of $1,195 and $1,160 respectively, to reduce our deferred tax assets to an amount more likely than not to be recovered. This valuation allowance relates to foreign income taxes and the resulting net operating losses in foreign jurisdictions where we have ceased operations.

The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is required to reduce the net deferred tax assets to the amount that is more likely than not to be realized in future periods. The Company believes that based on past performance, expected future taxable income and prudent and feasible tax planning strategies, it is more likely than not that the net deferred tax assets will be realized. Changes in these factors may cause us to increase our valuation allowance on deferred tax assets, which would impact our income tax expense in the period we determine that these factors have changed.

We are subject to periodic audits of our various tax returns by government agencies which could result in possible tax liabilities. Although the outcome of these matters cannot currently be determined, we believe the outcome of these audits will not have a material effect on our financial statements.

Unrecognized Tax Benefits

For the year ended December 31, 2017, we recognized $189 of previously unrecognized tax benefits. This primarily relates to the statute of limitations expiring in certain state and local jurisdictions. Included in the amount recognized was $70 of potential interest and penalties related to uncertain tax positions. For the year ended December 31, 2016, we recognized $284 of previously unrecognized tax benefits relating to the statute of limitations expiring in certain state and local jurisdictions. Included in the amount recognized was $28 of potential interest and penalties related to uncertain tax positions. The recognition of these amounts contributed to our effective tax rate of 49.0% for the year ended December 31, 2017 as compared to 36.4% for the year ended December 31, 2016.

At December 31, 2017,  we had $389 of unrecognized tax benefits, which if recognized, would affect our effective tax rate, which is classified in Non-current income tax liabilities. At December 31, 2016, we had $487 of unrecognized tax benefits, which is classified in Non-current income tax liabilities. 

Unrecognized tax benefit activity is as follows:







We recognize potential accrued interest and penalties related to uncertain tax positions in income tax expense. We have $84 of accrued interest and $45 of accrued penalties related to uncertain tax positions as of December 31, 2017 classified in Non-current income tax liabilities. At December 31, 2016, we had $192 of accrued interest and $45 of accrued penalties related to uncertain tax positions classified in Non-current income tax liabilities.

Based upon the expiration of statutes of limitations and possible settlements in several jurisdictions, we believe it is reasonably possible that the total amount of previously unrecognized tax benefits may decrease by $127 within 12 months after December 31, 2017.  

We file income tax returns in the United States and various state, local, and foreign jurisdictions. During 2017 and 2016, the Company settled audits with various state and local jurisdictions. We are generally subject to examination by the IRS for years ending on or after December 31, 2014. We are also subject to examination by various state and local jurisdictions for years ending on or after December 31, 2014.