14. INCOME TAXES
For the years ended December 31, 2017, 2016 and 2015, the (benefit from) provision for income taxes is comprised of the following:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Current income tax (benefit) provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(66 |
) |
|
$ |
(72 |
) |
|
$ |
(78 |
) |
|
State |
|
|
1,525 |
|
|
|
442 |
|
|
|
494 |
|
|
Foreign |
|
|
12 |
|
|
|
23 |
|
|
|
36 |
|
|
Total current income tax provision |
|
|
1,471 |
|
|
|
393 |
|
|
|
452 |
|
|
Deferred income tax (benefit) provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(74,312 |
) |
|
|
5,169 |
|
|
|
25,210 |
|
|
State |
|
|
(12,165 |
) |
|
|
3,768 |
|
|
|
(1,964 |
) |
|
Total deferred income tax (benefit) provision |
|
|
(86,477 |
) |
|
|
8,937 |
|
|
|
23,246 |
|
|
Total income tax (benefit) provision |
|
$ |
(85,006 |
) |
|
$ |
9,330 |
|
|
$ |
23,698 |
|
The deferred income tax (benefit) provision represents the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Cash paid for income taxes totaled $515, $819 and $1,062, for the years ended December 31, 2017, 2016 and 2015, respectively.
The components of deferred income tax assets and liabilities as of December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
|
Acquisition and debt related costs |
|
$ |
5,557 |
|
|
$ |
15,899 |
|
|
Net operating losses |
|
|
201,604 |
|
|
|
294,986 |
|
|
Goodwill impairment |
|
|
54,207 |
|
|
|
— |
|
|
Self-insurance |
|
|
6,992 |
|
|
|
9,766 |
|
|
Deferred revenue |
|
|
2,627 |
|
|
|
4,696 |
|
|
Cash flow hedge |
|
|
2,282 |
|
|
|
9,114 |
|
|
Restricted stock |
|
|
4,097 |
|
|
|
3,374 |
|
|
Tax credits |
|
|
7,922 |
|
|
|
6,882 |
|
|
Other |
|
|
7,263 |
|
|
|
9,165 |
|
|
Total deferred income tax assets |
|
|
292,551 |
|
|
|
353,882 |
|
|
Valuation allowance |
|
|
(2,762 |
) |
|
|
(584 |
) |
|
Net deferred tax assets |
|
|
289,789 |
|
|
|
353,298 |
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
(201,019 |
) |
|
|
(326,320 |
) |
|
Amortization - Goodwill |
|
|
(37,291 |
) |
|
|
(49,493 |
) |
|
Amortization - Other Intangibles |
|
|
(15,193 |
) |
|
|
(20,877 |
) |
|
Other |
|
|
(3,466 |
) |
|
|
(4,527 |
) |
|
Total deferred income tax liabilities |
|
|
(256,969 |
) |
|
|
(401,217 |
) |
|
Net deferred income tax assets (liabilities) |
|
$ |
32,820 |
|
|
$ |
(47,919 |
) |
The Company files federal, state and provincial income tax returns in various jurisdictions with varying statute of limitation expiration dates. Under the tax statute of limitations applicable to the Internal Revenue Code of 1986, as amended (the “Code”), the Company is no longer subject to U.S. federal income tax examinations by the Internal Revenue Service for years before 2013. However, because the Company is carrying forward income tax attributes, such as net operating losses and tax credits from 2009 and subsequent years, these attributes can still be audited when utilized on returns filed in the future. The Company has determined that there are no positions currently taken that would rise to a level requiring an amount to be recorded or disclosed as an unrecognized tax benefit. If such positions do arise, it is the Company’s intent that any interest or penalty amount related to such positions will be recorded as a component of the income tax provision in the applicable period.
The Company has federal tax net operating loss carryforwards of approximately $693,000 as of December 31, 2017 and state net operating loss carryforwards spread across various jurisdictions with a combined total of approximately $1,075,000 as of December 31, 2017. These net operating loss carryforwards, if not used to reduce taxable income in future periods, will begin to expire in 2029, for both federal and state tax purposes.
Realization of the deferred income tax assets, primarily arising from these net operating loss carryforwards and charitable contribution carryforwards, is dependent upon generating sufficient taxable income prior to expiration of the carryforwards, which may include the reversal of deferred tax liability components.
On October 18, 2017, the Pennsylvania Supreme Court held in Nextel Communications of Mid-Atlantic, Inc. v. Commonwealth that the net loss carryover deduction allowed for purposes of the Pennsylvania corporate net income tax violates the Uniformity Clause of the Pennsylvania Constitution. As a result, the current law in Pennsylvania that places a fixed dollar limitation on the net loss carryover deduction was struck down, while retaining a percentage limitation on the net loss carryover deduction. The Company has assessed the impact of this case on available positive and negative evidence, including tax planning strategies, to determine whether sufficient future taxable income in Pennsylvania will be generated to permit use of the existing deferred tax assets related to Pennsylvania net loss carryover.
The Company believes it is more likely than not that the benefit from certain state net operating loss carryforwards will not be realized. Due to the uncertainty of realizing the benefit from the deferred tax asset recorded for state net operating loss carryforwards, the Company has recorded a valuation allowance of approximately $2,800 and $600, net of federal tax benefit, on the deferred tax assets related to those state net operating losses as of December 31, 2017 and 2016, respectively. As of December 31, 2017, the Company had approximately $400 of charitable contributions which expired unused.
During 2017, an ownership shift of more than 50 percent as defined by the Internal Revenue Code (“IRC”) Section 382 occurred. The Company determined that, while an ownership shift occurred and limits were determined under Section 382 and the regulations and guidance thereunder, the applicable limits would not impair the value or anticipated use of the Company’s federal and state net operating losses. Although realization is not assured, management believes it is more likely than not that any limitation under IRC Section 382 will not impair the realizability of the deferred income tax assets related to federal and state tax net operating loss carryforwards.
The reconciliation between the statutory income tax rate and the Company’s effective income tax (benefit) provision rate for the years ended December 31, 2017, 2016 and 2015, is as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
|||
|
Income tax rate at federal statutory rates |
|
|
35.00 |
|
% |
|
35.00 |
|
% |
|
35.00 |
|
% |
|
Federal net operating loss and tax credit adjustments |
|
|
— |
|
|
|
24.40 |
|
|
|
(0.68 |
) |
|
|
State taxes, net of federal benefit |
|
|
2.02 |
|
|
|
(58.42 |
) |
|
|
0.56 |
|
|
|
State net operating loss revaluation |
|
|
(0.15 |
) |
|
|
(19.74 |
) |
|
|
(2.51 |
) |
|
|
Nondeductible equity-based compensation |
|
|
(1.01 |
) |
|
|
(275.10 |
) |
|
|
0.15 |
|
|
|
Tax credits |
|
|
0.25 |
|
|
|
21.17 |
|
|
|
(1.73 |
) |
|
|
Nondeductible expenses |
|
|
(0.15 |
) |
|
|
(17.15 |
) |
|
|
0.53 |
|
|
|
Charitable contribution carryforward valuation allowance |
|
|
— |
|
|
|
— |
|
|
|
2.01 |
|
|
|
Charitable contribution carryforward expiration |
|
|
(0.18 |
) |
|
|
— |
|
|
|
— |
|
|
|
State net operating loss carryforward valuation allowance |
|
|
(0.59 |
) |
|
|
— |
|
|
|
— |
|
|
|
Goodwill impairment |
|
|
(6.12 |
) |
|
|
— |
|
|
|
— |
|
|
|
Remeasurement of deferred income tax liabilities resulting from Tax Cuts and Jobs Act |
|
|
0.63 |
|
|
|
— |
|
|
|
— |
|
|
|
Other |
|
|
(0.12 |
) |
|
|
(1.63 |
) |
|
|
(0.79 |
) |
|
|
Income tax rate |
|
|
29.58 |
|
% |
|
(291.47 |
) |
% |
|
32.54 |
|
% |
The (benefit from) provision for income taxes for the years ended December 31, 2017, 2016 and 2015 differs from the amount computed by applying the U.S. federal statutory income tax rate to the Company’s income before income taxes primarily due to state income taxes, nondeductible expenses, and federal tax credits. In addition, for the year ended December 31, 2017, the rate differs from the amount computed due to the remeasurement of deferred tax assets and liabilities for enacted changes in tax laws.
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes significant modifications to the provisions of the Internal Revenue Code, including but not limited to a corporate tax rate decrease from 35% to 21% effective as of January 1, 2018. The Company’s net deferred tax assets and liabilities were revalued at the newly enacted U.S. corporate rate in the year of enactment. The adjustment related to the remeasurement of the deferred tax assets and liability balances, including the revaluation of amounts originally reported in other comprehensive income, is a tax benefit of $1,808 and is reported as part of the benefit from income taxes in the accompanying consolidated statement of comprehensive loss for the year ended December 31, 2017.
For the year ended December 31, 2017, the Company realized a tax expense of $2,901 related to certain nondeductible equity compensation awards and a tax expense of $17,584 related to goodwill impairment.
For the year ended December 31, 2016, the Company realized a tax expense of $8,806 related to certain nondeductible equity compensation awards and a tax expense of $632 related to the revaluation of certain state net operating loss carryforwards as a result of a restructuring, both of which impacted the state effective rate. In addition, for the year ended December 31, 2016 federal net operating loss and tax credit adjustments also impacted the provision for income taxes.
For the year ended December 31, 2015, the Company realized a tax benefit of $1,817 related to the revaluation of certain state net operating loss carryforwards as a result of a restructuring, which also impacted the state effective rate. In addition, for the year ended December 31, 2015, certain equity compensation awards and a valuation allowance related to certain state net operating losses and charitable contribution carryforwards impacted the provision for income taxes.