11.INCOME TAXES

 

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 percent to 21 percent. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Tax Act; however, as described below, the Company made a reasonable estimate of the effects on its existing deferred tax balances. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.

 

For existing deferred tax balances for which the Company was able to determine an impact and those which the Company was able to determine a reasonable estimate including the provisional amounts discussed below, the Company recognized an income tax benefit of $7,828, which is included as a component of income tax benefit for the year ended December 31, 2017. The Company re-measured these deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future.

 

Provisional amounts were provided for deferred tax assets and liabilities for which reasonable estimates were available associated with the Company’s 2017 acquisitions (Note 3); certain equity interest; and deferred assets impacted by cash payments after December 31, 2017. The Company re-measured these deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The provisional amount recorded related to the re-measurement of these deferred tax balances was an income tax benefit of $9,069, which is included in the Company’s Tax Act effect of $7,828.

 

Significant components of the benefit (expense) for income taxes for the years ended December 31, 2017, 2016 and 2015 are as follows:

 

 

The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax benefit (expense) is as follows:

 

 

Significant components of deferred tax assets and liabilities are as follows:

 

 

At December 31, 2017, the Company had $53,148 of state and local gross net operating loss carry-forwards. The state and local gross net operating loss carry-forwards expire at various times through 2036.

 

The Company prepares and files tax returns based on interpretations of tax laws and regulations. In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain income tax positions unless it is determined to be more likely than not that such tax positions would be sustained upon examination, based on their technical merits. That is, for financial reporting purposes, the Company only recognizes a tax benefit taken on its tax return if it believes it is more likely than not that such tax position would be sustained. There is considerable judgment involved in determining whether it is more likely than not that such tax positions would be sustained.

 

As of both December 31, 2017 and 2016, the Company had unrecognized tax benefits of $268; all of which, if recognized, would reduce both tax expense and the effective tax rate.

 

The Company would adjust its tax reserve estimates periodically because of ongoing examinations by, and settlements with, varying taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated tax provision of any given year includes adjustments to prior year income tax accruals and related estimated interest charges that are considered appropriate. The Company’s 2016, 2015 and 2014 C corporation tax returns are open to examination by U.S. federal, state and local taxing authorities. The Company’s 2014 and 2015 tax years are currently under examination by the U.S. federal tax authority. To date, no material adjustments have been proposed.