13.INCOME TAXES

The Company’s operations are conducted through its various subsidiaries in countries throughout the world. The Company has provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned. For the years ended December 31, 2017 and 2016, Waste Connections, Inc. is the public parent corporation organized under the laws of Ontario, Canada. For the year ended December 31, 2015, Waste Connections US, Inc. (f/k/a Waste Connections, Inc.), a Delaware corporation, was the public parent corporation.

Income (loss) before provision (benefit) for income taxes consists of the following:



The provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015, consists of the following: 



The Company is organized under the laws of Ontario, Canada; however, since the proportion of U.S. revenues, assets, operating income and associated tax provisions is significantly greater than any other single taxing jurisdiction within the worldwide group, the reconciliation of the differences between the Company’s income tax provision (benefit) as presented in the accompanying Consolidated Statements of Net Income (Loss) and income tax provision (benefit) computed at the federal statutory rate is presented on the basis of the U.S. federal statutory income tax rate of 35% as opposed to the Canadian statutory rate of approximately 27% to provide a more meaningful insight into those differences and provide greater comparability to prior years.  The items shown in the following table are a percentage of pre-tax income (loss):





The comparability of the Company’s income tax provision (benefit) for the reported periods has been affected by variations in its income (loss) before income taxes. 

During the years ended December 31, 2017 and 2016, the effects of international operations are primarily due to the Company’s non-U.S. income being taxed at rates substantially lower than the U.S. federal statutory rate, as well as a portion of the Company’s income from internal financing that is either untaxed or taxed at rates substantially lower than the U.S. federal statutory rate. As a result of the enactment of the Tax Act, the Company recorded a net deferred income tax benefit of $269,804 primarily due to the reduction of the corporate income tax rate effective for tax years beginning in 2018.  Further, the Company recorded a deferred income tax expense of $62,350 associated with a portion of our U.S. earnings no longer deemed to be permanently reinvested.  Additionally, the goodwill impairment within the E&P segment and disposal of goodwill from the divesture of certain operations, resulted in the write off of goodwill that was not deductible for tax purposes resulting in an increase to tax expense of $11,825.

During the year ended December 31, 2016, non-deductible expenses incurred in connection with the Progressive Waste acquisition resulted in an increase to tax expense of $9,048.  During the year ended December 31, 2015, the Deferred income tax liability adjustments, due primarily to changes in the geographical apportionment of the Company’s state income taxes associated with the impairment of a portion of the goodwill, indefinite-lived intangible assets and property and equipment within the E&P segment, resulted in an increase to tax benefit of $3,869.  Additionally, a portion of the aforementioned goodwill impairment within the E&P segment that was not deductible for tax purposes resulted in a decrease to federal tax benefit of $15,546.    

The significant components of deferred income tax assets and liabilities, reduced by valuation allowances as applicable, as of December 31, 2017 and 2016 are presented below. 



The Company has $31,448 of Canadian tax loss carryforwards with a 20-year carryforward period which will begin to expire in 2027, as well as various state tax losses with carryforward periods up to 20 years. 

As of December 31, 2017, the Company had undistributed earnings of approximately $1,386,000 for which income taxes have not been provided on earnings of approximately $111,000.  Additionally, the Company has not recorded deferred taxes on the excess amount of financial reporting over tax basis of approximately $297,000 attributable to the Company’s non-U.S. subsidiaries which are deemed to be permanently reinvested.  It is not practical to estimate the additional tax that may become payable upon the eventual repatriation of these amounts to Canada; however, the tax impacts could result in a material increase to the Company’s effective tax rate.  These permanently reinvested amounts are considered provisional under SAB 118, which provides a measurement period for companies to complete the accounting under ASC 740.

The Company and its subsidiaries are subject to U.S. federal and Canadian income tax, which are its principle operating jurisdictions. The Company has concluded all U.S. federal income tax matters for years through 2013, except for the Progressive Waste U.S. federal income tax jurisdiction, which remains open for years subsequent to 2007.  Additionally, the Company has concluded all Canadian income tax matters for years through 2010.

The Company did not have any unrecognized tax benefits recorded at December 31, 2017, 2016 or 2015. The Company does not anticipate the total amount of unrecognized tax benefits will significantly change by December 31, 2018.  The Company recognizes interest and/or penalties related to income tax matters in income tax expense.