Entity information:
Income Taxes

New tax legislation, commonly referred to as The Tax Cuts and Jobs Act (the “Tax Act”), was enacted on December 22, 2017. The Tax Act significantly revised U.S. corporate income tax law to, among other things, reduce the federal corporate income tax rate, impose a new minimum tax on global intangible low-taxed income and implement a modified territorial tax system that included a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The global intangible low-taxed income and the one-time transition tax on deemed repatriated earnings of foreign subsidiaries did not significantly impact the Company upon enactment.

ASC Topic 740, Income Taxes (“ASC 740”), requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions, January 1, 2018. Given the significance of the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118, which allows registrants to record provisional amounts during a one-year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.

To the extent a reasonable estimate could be made, we have accounted for the impact of the Tax Act for the year ended December 31, 2017. We will continue to refine our estimates throughout the measurement period or until the accounting is complete, and the impact of the Tax Act may differ from these estimates, possibly materially, due to, among other things, changes in estimates and assumptions we have made. As noted above, the Tax Act permanently reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, which required, in part, a revaluation of our deferred tax assets and liabilities as of December 31, 2017. The Tax Act also granted indefinite carry-forward of net operating losses generated on or after January 1, 2018. As a result of the revaluation of our deferred tax assets and liabilities, the change in the net operating loss carry-forward rules, and other provisions of the Tax Act, during the year ended December 31, 2017, we recorded a one-time tax benefit of $21.5 million.

The Spin-Off described in Note 2, “Spin-Off, Merger and Master Lease,” was a taxable transaction whereby a gain was recognized for tax purposes and the tax bases of the operating assets were stepped up to fair market value at the time of the transaction. Pursuant to ASC 740, the tax impact directly related to the transaction amongst stockholders was recorded to equity, consistent with the overall accounting treatment of the transaction. All changes in tax bases of assets and liabilities caused by the transactions were recorded to additional paid-in capital. Furthermore, as previously noted, the gaming facilities leased from GLPI are presented on the Company’s Consolidated Balance Sheets at historical cost, net of accumulated depreciation, and the Master Lease is accounted for as a financing obligation. However, for federal and state income tax purposes, the Master Lease is considered an operating lease. As such, the Company does not recognize any tax bases in the leased gaming facilities, which creates basis differences that give rise to deferred income taxes.
The composition of our income tax benefit (expense) from continuing operations for the years ended December 31, 2017, 2016 and 2015, was as follows:
 
Current
 
Deferred
 
Total
 
 
 
 
 
 
 
(in millions)
Year ended December 31, 2017:
 
 
 
 
 
U.S. Federal
$
1.7

 
$
17.3

 
$
19.0

State
(1.8
)
 
(2.6
)
 
(4.4
)
 
$
(0.1
)
 
$
14.7

 
$
14.6

Year ended December 31, 2016:
 
 
 
 
 
U.S. Federal
$
(1.6
)
 
$
43.4

 
$
41.8

State
(4.4
)
 
(9.4
)
 
(13.8
)
 
$
(6.0
)
 
$
34.0

 
$
28.0

Year ended December 31, 2015:
 
 
 
 
 
U.S. Federal
$
5.3

 
$
(10.3
)
 
$
(5.0
)
State
(1.9
)
 
(7.7
)
 
(9.6
)
 
$
3.4

 
$
(18.0
)
 
$
(14.6
)

The following table reconciles our effective income tax rate from continuing operations to the federal statutory tax rate:
 
2017
 
2016
 
2015
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions, except tax rates)
Federal income tax benefit (expense) at the statutory rate
35.0
 %
 
$
(16.5
)
 
35.0
 %
 
$
170.1

 
35.0
 %
 
$
(19.8
)
State income taxes, net of federal tax benefits
9.3

 
(4.4
)
 
(2.4
)
 
(11.8
)
 
5.3

 
(3.0
)
Acquisition costs
5.9

 
(2.8
)
 
(0.4
)
 
(1.9
)
 
8.6

 
(4.9
)
Impairment of goodwill and other intangible assets
—

 
—

 
(23.1
)
 
(112.5
)
 
—

 
—

Reserves for unrecognized tax benefits
0.2

 
(0.1
)
 
0.2

 
1.2

 
(9.3
)
 
5.3

Credits
(7.0
)
 
3.3

 
0.4

 
1.7

 
(3.8
)
 
2.1

Change in valuation allowance
(9.8
)
 
4.7

 
(3.2
)
 
(15.6
)
 
(10.8
)
 
6.1

Excess tax benefits related to share-based compensation
(24.2
)
 
11.4

 
—

 
—

 
—

 
—

Non-deductible expenses and other
5.3

 
(2.5
)
 
(0.7
)
 
(3.2
)
 
0.7

 
(0.4
)
Tax Act
(45.7
)
 
21.5

 
—

 
—

 
—

 
—

Income tax benefit (expense) from continuing operations
(31.0
)%
 
$
14.6

 
5.8
 %
 
$
28.0

 
25.7
 %
 
$
(14.6
)
The following table shows the allocation of income tax benefit (expense) between continuing operations and discontinued operations:
 
For the year ended December 31,
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
(in millions)
Income (loss) from continuing operations before income taxes
$
47.1

 
$
(485.9
)
 
$
56.7

Income tax benefit (expense) allocated to continuing operations
14.6

 
28.0

 
(14.6
)
Income (loss) from continuing operations
61.7

 
(457.9
)
 
42.1

Income from discontinued operations before income taxes
—

 
0.4

 
5.7

Income tax benefit (expense) allocated to discontinued operations
—

 
0.0

 
(0.2
)
Income from discontinued operations, net of income taxes
—

 
0.4

 
5.5

Net income (loss)
$
61.7

 
$
(457.5
)
 
$
47.6


As of December 31, 2017 and 2016, the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were:
 
December 31,
 
2017
 
2016
 
 
 
 
 
(in millions)
Deferred tax assets:
 
 
 
Workers’ compensation insurance reserve
$
2.2

 
$
4.1

Allowance for doubtful accounts
3.8

 
4.8

Legal and merger costs
3.4

 
4.6

Federal tax credit carry-forwards
3.3

 
—

Federal net operating loss carry-forwards
8.6

 
0.4

State net operating loss carry-forwards
6.5

 
0.1

Deferred compensation
0.4

 
0.2

Pre-opening expenses capitalized for tax purposes
1.2

 
—

Share-based compensation expense—book cost
5.5

 
7.4

Intangible assets
123.3

 
212.8

Master Lease
798.4

 
1,249.6

Accruals, reserves and other
9.7

 
16.3

Less: valuation allowance
(422.7
)
 
(646.7
)
Total deferred tax assets
543.6

 
853.6

Deferred tax liabilities:
 
 
 
Prepaid expenses
(7.5
)
 
(6.1
)
Land, buildings, vessels and equipment, net
(534.6
)
 
(860.7
)
Total deferred tax liabilities
(542.1
)
 
(866.8
)
Net deferred tax assets (liabilities)
$
1.5

 
$
(13.2
)
The following table summarizes the total deferred tax assets and total deferred tax liabilities provided in the previous table:
 
December 31,
 
2017
 
2016
 
 
 
 
 
(in millions)
Total deferred tax assets
$
966.3

 
$
1,500.3

Less: valuation allowance
(422.7
)
 
(646.7
)
Less: total deferred tax liabilities
(542.1
)
 
(866.8
)
Net deferred tax assets (liabilities)
$
1.5

 
$
(13.2
)


As of December 31, 2017, we continue to provide a full valuation allowance against deferred tax assets for all jurisdictions except for certain states, where the deferred tax assets are more likely than not to be realized. In evaluating the need for a valuation allowance, we consider all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, forecasts of future taxable income, and tax planning strategies. We have a cumulative U.S. pretax accounting loss for the years 2015 through 2017. Considering all available evidence both positive and negative, and in light of the cumulative losses in recent years, we determined that a full valuation allowance was appropriate.

As of April 29, 2016, the Company became a new taxpayer as a result of the Spin-Off and Merger. As a result, all tax attributes carried over from the year ended December 31, 2015 were either utilized during the pre-transaction period of January 1, 2016 through April 28, 2016, or acquired by GLPI. As of December 31, 2017, our tax filings reflected available General Business Credit (“GBC”) carry-forwards of $3.3 million. The GBC credit carry-forwards will begin to expire in 2036. As of December 31, 2017, we had $41.1 million of federal net operating loss carry-forwards, which begin to expire in 2036, and $101.4 million of state net operating loss carry-forwards, predominantly in Louisiana and Pennsylvania, which begin to expire in 2026.

As of December 31, 2017 and December 31, 2016, we had $4.2 million and $4.5 million, respectively, of uncertain tax benefits that, if recognized, would impact the effective tax rate. Authoritative guidance requires companies to accrue interest and related penalties, if applicable, on all tax positions for which reserves have been established consistent with jurisdictional tax laws. We recognize accrued interest and penalties related to uncertain tax benefits as a component of income tax benefit (expense). During the year ended December 31, 2017, there was a net decrease in accrued interest of $0.1 million related to unrecognized tax benefits. We had $0.3 million of cumulative interest accrued as of December 31, 2017. No penalties were accrued in any of the years ended December 31, 2017, 2016 or 2015.

The following table summarizes the activity related to uncertain tax benefits, excluding any interest or penalties:
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
(in millions)
Balance as of January 1
$
4.5

 
$
28.4

 
$
37.7

Gross increases - tax positions in prior periods
—

 
0.1

 
0.1

Gross decreases - tax positions in prior periods
(0.3
)
 
(21.0
)
 
(6.2
)
Gross increases - tax positions in current period
—

 
—

 
1.2

Gross decreases - tax positions in current period
—

 
—

 
(1.5
)
Settlements
—

 
(3.0
)
 
(2.9
)
Balance as of December 31
$
4.2

 
$
4.5

 
$
28.4