NOTE I – INCOME TAXES
The Company’s effective income tax rate was a benefit of (328.5)% for 2017 compared to a provision of 36.1% for 2016. The primary difference in tax rates was due to the change in U.S. tax law in 2017 as further explained below.
The components of the Company’s provision for income taxes include the following:
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Year ended December 31 |
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2017 |
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2016 |
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2015 |
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Current (benefit) provision |
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Federal |
|
$ |
(95.9 |
) |
|
$ |
19.2 |
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|
$ |
60.4 |
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State |
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4.0 |
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|
.9 |
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|
1.1 |
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|
(91.9 |
) |
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|
20.1 |
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|
61.5 |
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|
Deferred (benefit) provision |
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Federal |
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(214.2 |
) |
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28.7 |
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|
.3 |
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State |
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6.2 |
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1.5 |
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7.6 |
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(208.0 |
) |
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30.2 |
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|
7.9 |
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Total (benefit) provision for income taxes |
|
$ |
(299.9 |
) |
|
$ |
50.3 |
|
|
$ |
69.4 |
|
A reconciliation of the statutory U.S. federal tax rate to the effective income tax rate is as follows:
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Year ended December 31 |
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2017 |
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2016 |
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2015 |
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Statutory rate |
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35.0 |
% |
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|
35.0 |
% |
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|
35.0 |
% |
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Effect of: |
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Rate change on U.S. federal deferred taxes |
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|
(370.8 |
)% |
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|
|
|
|
|
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|
State |
|
|
7.3 |
% |
|
|
1.1 |
% |
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|
3.1 |
% |
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|
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|
(328.5 |
)% |
|
|
36.1 |
% |
|
|
38.1 |
% |
Cash paid for income taxes was $.1, $1.5, and $3.6 in 2017, 2016 and 2015, respectively.
On December 22, 2017, the U.S. enacted new federal income tax legislation, the Tax Cuts and Jobs Act (“the Tax Act”). The Tax Act lowered the U.S. statutory income tax rate from 35.0% to 21.0%. The Company recorded a provisional amount of $338.5 of deferred tax benefits, due to the re-measurement of net deferred tax liabilities at the new lower statutory tax rate. The provisional amount may change in 2018, as new information becomes available and the Tax Act continues to be interpreted. Once the Company finalizes certain tax positions when it files its 2017 U.S. income tax returns, it will be able to conclude whether the provisional amounts require further adjustment to the net U.S. deferred tax liability, as of December 31, 2017.
The tax effects of temporary differences representing deferred tax assets and liabilities are as follows:
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December 31 |
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|
December 31 |
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2017 |
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2016 |
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Deferred tax assets: |
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Allowance for losses on receivables |
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$ |
14.4 |
|
|
$ |
22.5 |
|
|
Other |
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|
11.1 |
|
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|
14.7 |
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|
Deferred tax liabilities: |
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|
|
|
|
|
|
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Depreciation |
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|
(621.5 |
) |
|
|
(840.8 |
) |
|
Derivative asset |
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|
(1.9 |
) |
|
|
(1.3 |
) |
|
Net deferred tax liability |
|
$ |
(597.9 |
) |
|
$ |
(804.9 |
) |