NOTE 13. INCOME TAXES

 

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our consolidated financial statement carrying amount of assets and liabilities and their respective tax bases. We measure these deferred tax assets and liabilities using enacted tax rates expected to apply in the years in which these temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. We have calculated our best estimate of the impact of the Act in our year end income tax provision in accordance with our understanding of the Act and guidance available as of the date of this filing.

 

 

 

Consolidated deferred tax assets and liabilities consist of the following:

 

		As of December 31,
		2016			2017
		(Dollars in thousands)
Deferred tax assets:
Financial statement accruals not currently deductible		$	9,324		$	6,220
Net operating loss, AMT credit and other carryforwards			71,215			55,720
State taxes			87			103
Other			740			2,191
Total deferred tax assets			81,366			64,234
Valuation allowance for deferred tax assets			(4,487)			(6,154)
Net deferred tax assets		$	76,879		$	58,080
Deferred tax liabilities:
Excess of net book value of property and equipment and software for financial reporting purposes over tax basis		$	2,096		$	1,218
Excess of net book value of intangible assets for financial reporting purposes over tax basis			128,988			89,898
Interest rate swap			(193)			—
Unrecognized tax benefits			—			—
Other			—			45
Total deferred tax liabilities			130,891			91,161
Net deferred tax liabilities		$	(54,012)		$	(33,081)

The following table reconciles the above net deferred tax liabilities to the financial statements:

 

		As of December 31,
		2016			2017
		(Dollars in thousands)
Deferred income tax asset per balance sheet		$	9,411		$	1,070
Deferred income tax liability per balance sheet			(63,423)			(34,151)
		$	(54,012)		$	(33,081)

 

A reconciliation of the statutory federal income tax rate to the provision for income tax is as follows:

 

		Year Ended December 31,
		2015			2016			2017
		(Dollars in thousands)
Statutory federal income tax rate (at 35%)		$	6,246		$	4,706		$	1,321
Effect of state taxes, net of federal			458			(486)			(1,207)
Permanent items			445			266			458
State rate change			23			(1,664)			(179)
Valuation allowance			(181)			1,763			1,667
Tax Cuts and Jobs Act of 2017			—			—			(23,000)
Other, net			(296)			(13)			70
Provision for income taxes		$	6,695		$	4,572		$	(20,870)

 

 

The amortization of our indefinite-lived intangible assets for tax purposes but not for book purposes creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (1) become impaired; or (2) are sold, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods exclusive of any impairment losses in future periods. These deferred tax liabilities and net operating loss carryforwards result in differences between our provision for income tax and cash paid for taxes.