10. INCOME TAXES
The Company’s income tax benefit from continuing and discontinued operations for the year ended December 31, 2017 is as follows:
|
|
|
2017 |
|
|
|
Income tax benefit from continuing operations |
|
$ |
35,610 |
|
|
Income tax benefit from discontinued operations |
|
|
8,203 |
|
|
Income tax benefit |
|
$ |
43,813 |
|
The Company’s loss from continuing operations before income tax from domestic and foreign continuing operations for the years ended December 31, 2017, 2016 and 2015 is as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Domestic operations |
|
$ |
(17,307 |
) |
|
$ |
(2,295 |
) |
|
$ |
(35,996 |
) |
|
Foreign operations |
|
|
(36,866 |
) |
|
|
(11,674 |
) |
|
|
27,310 |
|
|
Total loss from continuing operations before income tax |
|
$ |
(54,173 |
) |
|
$ |
(13,969 |
) |
|
$ |
(8,686 |
) |
The benefit for income taxes from continuing operations as of December 31, 2017, 2016 and 2015 is as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Federal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
(248 |
) |
|
|
260 |
|
|
$ |
— |
|
|
Deferred |
|
|
(33,592 |
) |
|
|
(5,098 |
) |
|
|
(2,355 |
) |
|
State: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
29 |
|
|
|
54 |
|
|
|
115 |
|
|
Deferred |
|
|
(1,812 |
) |
|
|
(1,153 |
) |
|
|
(673 |
) |
|
Foreign: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
13 |
|
|
|
146 |
|
|
|
416 |
|
|
Deferred |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
(35,610 |
) |
|
$ |
(5,791 |
) |
|
$ |
(2,497 |
) |
The Company’s income tax benefit from continuing operations reconciles to the provision at the statutory U.S. federal income tax rate of 35% for the years ended December 31, 2017, 2016 and 2015 as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Tax benefit at statutory U.S. federal income tax rate |
|
$ |
(18,958 |
) |
|
$ |
(4,889 |
) |
|
$ |
(3,040 |
) |
|
State income tax — net of federal income tax benefit |
|
|
(2,488 |
) |
|
|
(1,118 |
) |
|
|
(676 |
) |
|
Impact of Tax Cuts and Job Act |
|
|
(15,720 |
) |
|
|
— |
|
|
|
— |
|
|
Charitable contributions |
|
|
— |
|
|
|
— |
|
|
|
(469 |
) |
|
Adjustment to deferred tax depreciation |
|
|
— |
|
|
|
— |
|
|
|
1,135 |
|
|
Change in deferred state tax rate |
|
|
— |
|
|
|
(1,082 |
) |
|
|
— |
|
|
Research and development tax credits |
|
|
(170 |
) |
|
|
(253 |
) |
|
|
(286 |
) |
|
Purchase price adjustment |
|
|
— |
|
|
|
— |
|
|
|
393 |
|
|
Changes in unrecognized tax benefits |
|
|
10 |
|
|
|
10 |
|
|
|
(186 |
) |
|
Changes in valuation allowance |
|
|
1,152 |
|
|
|
1,031 |
|
|
|
270 |
|
|
Other |
|
|
564 |
|
|
|
510 |
|
|
|
362 |
|
|
Income tax benefit |
|
$ |
(35,610 |
) |
|
$ |
(5,791 |
) |
|
$ |
(2,497 |
) |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation referred to as the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code, including but not limited to (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT); (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
The Company completed its calculation of the income tax effect of the Tax Act for the year ended December 31, 2017. As the Company is in a net deferred tax liability position as of the date of enactment of the Tax Act, the impact to the Company is a deferred income tax benefit of $15,720, primarily as a result of the reduction in the U.S. federal income tax rate. The other changes in tax law do not materially impact the Company for the year.
At December 31, 2017 and 2016, the Company had loss carryforwards for federal income tax purposes of $207,875 and $51,158 respectively, which expire between 2034 and 2037.
At December 31, 2017 and 2016, the Company had gross net operating loss carryforwards for state income tax purposes totaling $209,877 and $128,066, respectively, which expire between 2023 and 2037. Due to changes in state tax law enacted during the year in a certain state, a valuation allowance in the amount of $767 was established in 2016 for state net operating loss carryforwards. In 2017, the valuation allowance was increased by $1,152.
The Company also has foreign gross net operating loss carryforwards of approximately $7,637 and $12,165 as of December 31, 2017 and 2016, of which $2,898 expires between 2018 and 2028. The remaining amount of $4,739 may be carried forward indefinitely. At December 31, 2017 and 2016, a full valuation allowance has been established for the deferred tax asset of $1,962 and $3,795 related to foreign net operating loss carryforwards, respectively, as the Company believes it is more likely than not that the net operating loss carryforwards will not be realized.
As of December 31, 2017 and 2016, the Company had $157 in unrecognized tax benefits, the recognition of which would have an impact of $124 on the effective tax rate.
The Company does not expect that total unrecognized tax benefits will significantly increase or decrease within the next 12 months. Below is a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of each period.
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Unrecognized tax benefits — January 1 |
|
$ |
157 |
|
|
$ |
157 |
|
|
$ |
442 |
|
|
Gross increases — tax positions in prior period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Gross increases — current period tax positions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Gross decreases — expirations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Gross decreases — tax positions in prior period |
|
|
— |
|
|
|
— |
|
|
|
(285 |
) |
|
Unrecognized tax benefits — December 31, |
|
$ |
157 |
|
|
$ |
157 |
|
|
$ |
157 |
|
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2017 and 2016, the Company had approximately $53 and $37, respectively, of interest and penalties recorded.
The Company files income tax returns at the U.S. federal level and in various state and foreign jurisdictions. U.S. federal income tax years prior to 2014 are closed and no longer subject to examination. In 2016, the Internal Revenue Service completed an examination of the Company’s 2011 and 2012 U.S. federal income tax returns. The examinations did not result in any material adjustments. With few exceptions, the statute of limitations in state taxing jurisdictions in which the Company operates has expired for all years prior to 2013. In foreign jurisdictions in which the Company operates, years prior to 2012 are closed and are no longer subject to examination.
The Company’s deferred tax assets (liabilities) at December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
$ |
8,119 |
|
|
$ |
16,194 |
|
|
Federal NOLs |
|
|
43,654 |
|
|
|
17,905 |
|
|
Foreign NOLs |
|
|
1,962 |
|
|
|
3,795 |
|
|
State NOLs |
|
|
12,382 |
|
|
|
5,989 |
|
|
Tax credit carryforwards |
|
|
1,941 |
|
|
|
5,970 |
|
|
Charitable contribution |
|
|
1,340 |
|
|
|
1,883 |
|
|
Valuation allowance |
|
|
(4,294 |
) |
|
|
(7,133 |
) |
|
Total deferred tax assets |
|
|
65,104 |
|
|
|
44,603 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(89,966 |
) |
|
|
(111,793 |
) |
|
Other liabilities |
|
|
(699 |
) |
|
|
(1,259 |
) |
|
Total deferred tax liabilities |
|
|
(90,665 |
) |
|
|
(113,052 |
) |
|
Net noncurrent deferred tax liabilities |
|
$ |
(25,561 |
) |
|
$ |
(68,449 |
) |
Deferred tax assets relate primarily to reserves and other liabilities for costs and expenses not currently deductible for tax purposes as well as net operating loss and other carryforwards. Deferred tax liabilities relate primarily to the cumulative difference between book depreciation and amounts deducted for tax purposes. The Company evaluates its ability to realize deferred tax assets by considering all available positive and negative evidence. This evidence includes the Company’s cumulative earnings or losses in recent years. The Company further considers the impact on these cumulative earnings or losses of discontinued operations and other divested operations and joint ventures, restructuring charges and other nonrecurring adjustments that are not indicative of the Company’s ability to generate taxable income in future periods. The Company also considers sources of taxable income, such as the amount and timing of realization of its deferred tax liabilities relative to the timing of expiration of loss carryforwards. When it is estimated to be more likely than not that all or some portion of deferred tax assets will not be realized, the Company establishes a valuation allowance for the amount of such deferred tax assets considered to be unrealizable. After evaluating the positive and negative evidence for future realization of deferred tax assets, the Company recorded valuation allowances for foreign net operating loss carryforwards, foreign tax credits and certain state net operating loss carryforwards to reduce the balance of these deferred tax assets at December 31, 2017 and 2016 as it was more likely than not that the balance of these tax items would not be realized. By contrast, after evaluating the positive and negative evidence, the Company concluded that it was more likely than not that the deferred federal income tax asset recorded at December 31, 2017 and 2016 would ultimately be realized and determined that no valuation allowance was required.