10. Income Taxes
The components of the Company’s (benefit from)/provision for income taxes were as follows (in thousands):
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2016 | | 2015 | | 2014 |
Current: | | | | | |
Federal | $ | (23,500 | ) | | $ | 10,931 |
| | $ | 14,922 |
|
Foreign, state and local | 660 |
| | 3,627 |
| | 2,854 |
|
Deferred: | | | | | |
Federal | (39,695 | ) | | 1,874 |
| | 2,388 |
|
Foreign, state and local | (3,746 | ) | | 880 |
| | 79 |
|
(Benefit from) provision for income taxes | $ | (66,281 | ) | | $ | 17,312 |
| | $ | 20,243 |
|
The Company’s income tax (benefit)/provision varied from the amounts calculated by applying the U.S. statutory income tax rate to the pretax (loss)/income as shown in the following reconciliations (in thousands):
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2016 | | 2015 | | 2014 |
Statutory federal rate | $ | (149,310 | ) | | $ | 15,026 |
| | $ | 18,534 |
|
Meals and entertainment | 324 |
| | 287 |
| | 247 |
|
State income taxes — net of federal benefit | (5,368 | ) | | 1,294 |
| | 1,348 |
|
Goodwill impairment | 86,776 |
| | — |
| | — |
|
Contingent purchase obligation adjustments | (860 | ) | | (955 | ) | | (408 | ) |
Change in valuation allowance | 1,624 |
| | 99 |
| | 126 |
|
Other | 533 |
| | 1,561 |
| | 396 |
|
Total | $ | (66,281 | ) | | $ | 17,312 |
| | $ | 20,243 |
|
The Company recorded assets for refundable current federal and state income taxes of $40.8 million and $20.7 million as of December 31, 2016 and 2015, respectively. These are classified in the consolidated balance sheets as income tax receivable.
The tax rate effects of temporary differences that give rise to significant elements of deferred tax assets and deferred tax liabilities as of December 31 were as follows (in thousands):
|
| | | | | | | |
| 2016 | | 2015 |
Current deferred income tax assets: | | | |
Accounts receivable | $ | — |
| | $ | 5,701 |
|
Accrued expenses and other current liabilities | — |
| | 15,190 |
|
Total | $ | — |
| | $ | 20,891 |
|
Noncurrent deferred income tax assets (liabilities): | | | |
Accounts receivable | $ | 7,140 |
| | $ | — |
|
Accrued expenses and other current liabilities | 18,823 |
| | — |
|
Prepaid expenses and other current assets | (6,572 | ) | | — |
|
Net operating losses | 3,358 |
| | 726 |
|
Goodwill and intangible assets | (20,005 | ) | | (64,747 | ) |
Property and equipment | (45,711 | ) | | (41,187 | ) |
Deferred compensation | 746 |
| | 449 |
|
Total | $ | (42,221 | ) | | $ | (104,759 | ) |
Valuation allowance | (1,953 | ) | | (329 | ) |
Total, net of valuation allowance | $ | (44,174 | ) | | $ | (105,088 | ) |
The Company had $21.5 million of current deferred tax assets and $0.6 million of current deferred tax liabilities as of December 31, 2015. As discussed in Note 1, the Company is adopting the amendments of ASU 2015-17 on a prospective basis, as of December 31, 2016. Therefore, there is no current asset as of December 31, 2016 classified as deferred income taxes in the consolidated balance sheet. A net current deferred tax asset of $20.9 million as of December 31, 2015 was classified as deferred income taxes in the consolidated balance sheet. The Company had $0.8 million of noncurrent deferred tax assets (net of valuation allowance) and $105.9 million of noncurrent deferred tax liabilities as of December 31, 2015. The net noncurrent deferred income tax liability of $44.2 million (net of current deferred tax assets and valuation allowance) as of December 31, 2016 and $105.1 million as of December 31, 2015 (net of valuation allowance) is classified in the consolidated balance sheets as long-term deferred tax liabilities.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets, including through reversals of existing cumulative temporary differences. With respect to separate state and local tax returns filed by certain subsidiaries, a significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2016. Such objective evidence limits the ability to consider other subjective evidence, such as the Company's projections for future growth. On the basis of the Company's evaluation, the Company has recorded a valuation allowance of $2.0 million and $0.3 million as of December 31, 2016 and 2015, respectively, primarily related to net operating loss carryforwards and other deferred tax assets that will not “more likely than not” be realized in the future on separately filed state and local tax returns. Federal net operating loss carryforwards (some of which are subject to annual Section 382 limitations) expire between 2030 and 2036. State net operating loss carryforwards expire between 2019 and 2036.
There was an immaterial liability for unrecognized tax benefits recorded as of December 31, 2016 and 2015. It is the Company’s policy to recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Income tax related interest and penalties were immaterial as of December 31, 2016 and 2015. The Company is subject to federal tax examinations for all tax years subsequent to December 31, 2012, and state tax examinations for tax years subsequent to December 31, 2011. The Internal Revenue Service (“IRS”) is currently reviewing the Company's 2013 amended federal tax return and 2014-2016 originally filed federal tax returns. Although the pre-2013 and pre-2012 years are no longer subject to examinations by the IRS and various state taxing authorities, respectively, certain state net operating loss carryforwards generated in those years were used by the Company during 2015 and may still be adjusted upon examination by state taxing authorities if they were used after 2011 or will be used in a future period.