Entity information:
Income Taxes
The components of income tax expense for the years ended December 31, 2015, 2016 and 2017 were as follows (in thousands):
 
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
Current income tax expense:
 
 

 
 

 
 

Federal
 
$
17,910

 
$
13,518

 
$
11,989

State
 
2,322

 
1,877

 
1,998

 
 
20,232

 
15,395

 
13,987

Deferred tax expense:
 
 

 
 

 
 

Federal
 
(241
)
 
(424
)
 
(2,810
)
State
 
81

 
(31
)
 
316

 
 
(160
)
 
(455
)
 
(2,494
)
 Income Tax Expense
 
$
20,072

 
$
14,940

 
$
11,493


    
The tax effects of principal temporary differences are as follows (in thousands):
 
 
2016
 
2017
 
 
 
Deferred tax assets
 
 

 
 

Stock option compensation expense
 
$
1,057

 
$
415

Allowance for doubtful accounts
 
3,079

 
1,569

Accrued vacation and severance
 
798

 
679

Deferred rent
 
—

 
67

Restricted stock
 
1,874

 
922

 Investment
 
168

 
—

Total deferred tax assets
 
6,976

 
3,652

Deferred tax liabilities
 
 

 
 

Income tax deductible capitalized software development costs
 
(10,886
)
 
(6,066
)
Goodwill
 
(941
)
 
(1,284
)
Property and equipment
 
(2,208
)
 
(1,489
)
Prepaid expenses
 
(1,716
)
 
(1,017
)
Investment
 
—

 
(77
)
Total deferred tax liabilities
 
(15,751
)
 
(9,933
)
Deferred tax liabilities, net
 
$
(8,775
)
 
$
(6,281
)

Income tax expense differs from the amount of tax determined by applying the United States Federal income tax rates to pretax income and loss due to the application of state apportionment laws, permanent tax differences, and the impact of the change in the federal statutory rate as follows (in thousands):
 
 
2015
 
2016
 
2017
 
 
Amount
 
%
 
Amount
 
%
 
Amount
 
%
 
 
 
 
 
 
 
 
 
 
 
Tax expense at statutory rate
 
$
18,370

 
35.00
 %
 
$
13,683

 
35.00
 %
 
$
11,415

 
35.00
 %
State taxes, net
 
1,590

 
3.03
 %
 
1,278

 
3.27
 %
 
1,626

 
4.98
 %
Permanent differences
 
278

 
0.53
 %
 
221

 
0.56
 %
 
2,060

 
6.31
 %
Change in statutory rate
 
—

 
—
 %
 
—

 
—
 %
 
(3,741
)
 
(11.47
)%
Other
 
(166
)
 
(0.32
)%
 
(242
)
 
(0.62
)%
 
133

 
0.42
 %
 
 
$
20,072

 
38.24
 %
 
$
14,940

 
38.21
 %
 
$
11,493

 
35.24
 %

On December 22, 2017 the U.S. Tax Cuts and Jobs Act, or Tax Act, was enacted by the U.S. government. Among other provisions, the Tax Act reduced the federal corporate tax rate to 21% from the existing maximum rate of 35%, effective January 1, 2018. The Company recorded a tax benefit of $3.7 million related to the revaluation of the its net deferred tax liabilities for the year ended December 31, 2017. The Company anticipates that its effective tax rate, prior to discrete tax benefits, may range from approximately 27% to 29%. While the Company is able to make reasonable estimates of the impact of the reduction in its effective tax rate, the final impact of the Tax Act may differ from these estimates.
Permanent differences in the table above are mainly attributable to minority investment earnings and/or losses including other-than-temporary impairment charges, stock compensation, nondeductible meals and entertainment expenses, and non-deductible employer contributions to the American Public Education, Inc. Employee Stock Purchase Plan, or ESPP.
The Company is subject to U.S. federal income taxes as well as income tax of multiple state jurisdictions. For U.S. federal and state tax purposes, tax years 2014-2016 remain open to examination.