Entity information:
Income Taxes
Income tax expense (benefit) from continuing operations for the years ended December 31, 2015, 2016 and 2017 consisted of the following:
(in thousands)
 
2015
 
2016
 
2017
Current income tax expense (benefit)
 
 
 
 
 
 
  State
 
$
350

 
$
896

 
$
683

  Foreign
 
(163
)
 
255

 
96

        Total current income tax expense
 
$
187

 
$
1,151

 
$
779

 
 
 
 
 
 
 
Deferred tax expense (benefit)
 
 
 
 
 
 
  Federal
 
$
6,402

 
$
13,195

 
$
(14,813
)
  State
 
1,377

 
2,677

 
1,063

  Foreign
 
(42
)
 
(41
)
 
(56
)
        Total deferred income tax expense (benefit)
 
7,737

 
15,831

 
(13,806
)
        Total income tax expense (benefit)
 
$
7,924

 
$
16,982

 
$
(13,027
)

Total income tax expense (benefit) from continuing operations differed from the amount computed by applying the federal statutory tax rate of 35.0% for the years ended December 31, 2015, 2016 and 2017 due to the following:
(in thousands)
 
2015
 
2016
 
2017
Pretax income (loss) at federal statutory rate
 
$
6,359

 
$
14,064

 
$
(7,666
)
Foreign taxes at different rates from the U.S. rate
 
77

 
(68
)
 
11

State income tax expense, net federal expense
 
1,156

 
2,315

 
1,135

Non-deductible items
 
366

 
318

 
424

Goodwill impairment
 
—

 
—

 
13,953

Purchase price adjustments
 
—

 
—

 
(819
)
Federal tax rate change adjustments
 
—

 
—

 
(19,157
)
Adjustment of prior year deferred taxes
 
(128
)
 
257

 
(832
)
Change in valuation allowance
 
94

 
106

 
(76
)
Other items
 
—

 
(10
)
 
—

     Total provision (benefit) for income taxes
 
$
7,924

 
$
16,982

 
$
(13,027
)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2016 and 2017 are presented below:
(in thousands)
2016
 
2017
Deferred tax assets:
 
 
 
    Allowance for doubtful accounts
$
402

 
$
119

    Accrued expenses and other current liabilities
684

 
330

    Stock-based compensation
16,194

 
10,877

    Prepaid rent
1,448

 
1,326

    Deferred revenue
899

 
433

    Noncurrent liabilities
337

 
94

    Net operating loss and credit carryforwards
46,030

 
38,705


65,994

 
51,884

    Less: valuation allowance
(13,705
)
 
(10,190
)
         Deferred tax assets
52,289

 
41,694

Deferred tax liabilities:
 
 
 
    Intangible assets
91,447

 
69,943

    Property and equipment
7,825

 
5,465

    Software development costs
3,924

 
3,251

        Deferred tax liabilities
103,196

 
78,659

        Net deferred tax liabilities
$
50,907

 
$
36,965


Net deferred tax liabilities as of December 31, 2017 include $0.9 million pertaining to Canadian operations.
As of December 31, 2017, the Company has federal net operating loss carryforwards of approximately $136.8 million available to offset future income which will expire in the years 2018 through 2037, of which $50.4 million is applicable to Townsquare Radio, Inc. and can only be utilized against its future earnings (subject to further limitations under Section 382 of the Internal Revenue Code) and $86.4 million applicable to post IPO operations of the Company and can be utilized against future earnings without limitation through 2037. Additionally, the Company has net operating loss carry forwards for state purposes aggregating $10.7 million as of December 31, 2017, which are subject to the foregoing limitations. The valuation allowance decrease of $3.5 million as of December 31, 2017, was primarily due to the Federal tax rate change on certain of the Company’s net operating losses.
New Tax Reform Legislation
In December 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted. The Tax Act makes significant changes in U.S. tax law including a reduction in the corporate income tax rate, repeal of the alternative minimum tax, requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries and changes to net operating loss carryforwards and carry backs. The Tax Act reduced the U.S. corporate income tax rate from the current rate of 35% to 21%. As a result of the Tax Act, the Company was required to revalue its deferred tax assets and liabilities at the enacted rate. This revaluation resulted in a benefit of $19.2 million to income tax expense and a corresponding reduction in the net deferred tax liability. The Company also computed an estimate of approximately $0.3 million of the deemed mandatory repatriation as of December 31, 2017.
The SEC issued guidance on accounting for the tax effects of the Tax Act. The Company must reflect the income tax effects of those aspects of the Tax Act for which the accounting is known. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements and the Tax Act provides a measurement period that should not extend beyond one year from the Tax Act enactment date. The Company has determined a reasonable estimate for these amounts, and based on a continued analysis of the estimates and further guidance and interpretations on the application of the law, additional revisions may occur, however the Company does not expect any material adjustments.