INCOME TAXES
The components of the provision for income taxes for the years ended December 31, 2017, 2016 and 2015 are as follows:
|
| | | | | | | | | | | |
($ in thousands) | 2017 | | 2016 | | 2015 |
Federal: | | | | | |
Current | $ | (376 | ) | | $ | — |
| | $ | (1,092 | ) |
Deferred | 3,634 |
| | (29,082 | ) | | (22,177 | ) |
| 3,258 |
| | (29,082 | ) | | (23,269 | ) |
State: | | | | | |
Current | 74 |
| | — |
| | (350 | ) |
Deferred | (204 | ) | | 1,110 |
| | (1,769 | ) |
| (130 | ) | | 1,110 |
| | (2,119 | ) |
Total expense (benefit) | $ | 3,128 |
| | $ | (27,972 | ) | | $ | (25,388 | ) |
Reconciliation between the amounts determined by applying the federal statutory rate of 35% to income tax benefit is as follows:
|
| | | | | | | | | | | |
($ in thousands) | 2017 | | 2016 | | 2015 |
Tax at federal statutory rate | $ | 5,510 |
| | $ | (28,392 | ) | | $ | (24,935 | ) |
State taxes, net of federal benefit | 176 |
| | (216 | ) | | (885 | ) |
Permanent differences | 1,582 |
| | 498 |
| | 579 |
|
Stock-based compensation | (655 | ) | | — |
| | — |
|
Valuation allowance | 273 |
| | 879 |
| | — |
|
Effect of change in enacted Tax Act | (3,448 | ) | | — |
| | — |
|
Other | (310 | ) | | (741 | ) | | (147 | ) |
Total provision | $ | 3,128 |
| | $ | (27,972 | ) | | $ | (25,388 | ) |
Deferred tax assets and liabilities are recognized for estimated future tax effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. The significant items giving rise to deferred tax assets (liabilities) at December 31, 2017 and 2016, respectively, are as follows:
|
| | | | | | | |
($ in thousands) | 2017 | | 2016 |
Deferred Income Tax Assets | | | |
Accrued liabilities | $ | 1,264 |
| | $ | 334 |
|
Allowance for doubtful accounts | 94 |
| | 195 |
|
Goodwill and other intangible assets | 5,304 |
| | 10,953 |
|
Stock‑based compensation | 2,960 |
| | 1,692 |
|
Net operating losses | 56,788 |
| | 49,267 |
|
Other | 69 |
| | 389 |
|
Noncurrent deferred tax assets | 66,479 |
| | 62,830 |
|
Total deferred tax assets | 66,479 |
| | 62,830 |
|
Valuation allowance | (1,151 | ) | | (879 | ) |
Total deferred tax assets — net | 65,328 |
| | 61,951 |
|
Deferred Income Tax Liabilities | | | |
Property and equipment | (68,811 | ) | | (60,958 | ) |
Prepaid expenses | (965 | ) | | (1,506 | ) |
Other | (131 | ) | | (635 | ) |
Noncurrent deferred tax liabilities | (69,907 | ) | | (63,099 | ) |
Net deferred tax liability | $ | (4,579 | ) | | $ | (1,148 | ) |
At December 31, 2017, the Company had approximately $261.0 million of federal net operating loss carryforwards that will begin to expire in 2032 and state net operating losses of approximately $47.0 million that will begin to expire in 2024. Utilization of net operating loss carryforwards may be limited due to past or future ownership changes. As of December 31, 2017, we had a net valuation allowance of $1.2 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.
The Company’s U.S. federal income tax returns for the years ended December 31, 2014 through December 31, 2016 remain open to examination by the Internal Revenue Service under the applicable U.S. federal statute of limitations provisions. The various states in which the Company is subject to income tax are generally open to examination for the tax years ended after December 31, 2013.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“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) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (3) creating a new limitation on deductible interest expense, (4) changes to bonus depreciation, and (5) changing rules related to use and limitations of net operating loss carryforwards for tax years beginning after December 31, 2017. The only material items that impacted the Company’s consolidated financial statements in 2017 were bonus depreciation and the corporate rate reduction. While the corporate rate reduction is effective January 1, 2018, we accounted for this anticipated rate change during the year ended December 31, 2017, the year of enactment. Consequently, we recorded a $3.4 million decrease to the net deferred tax liability, with a corresponding net adjustment to deferred tax benefit.
In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (subsequently codified as ASC 740‑10, Income Taxes, Under FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162). ASC 740‑10 prescribes a comprehensive model for recognizing, measuring, presenting, and disclosing in the consolidated financial statements tax positions taken or expected to be taken on a tax return, including a decision to file or not to file in a particular jurisdiction.
The Company evaluated all tax positions and determined that the aggregate exposure under ASC 740‑10 did not have a material effect on the consolidated financial statements during the year ended December 31, 2017, 2016 and 2015. Therefore, no adjustments have been made to the consolidated financial statements related to the implementation of ASC 740‑10. The Company will continue to evaluate its tax positions in accordance with ASC 740‑10 and will recognize any future effect as a charge to income in the applicable period.
Income tax penalties and interest assessments recognized under ASC 740‑10 are accrued as a tax expense in the period that the Company’s taxes are in an uncertain tax position. Any accrued tax penalties or interest assessments will remain until the uncertain tax position is resolved with the taxing authorities or until the applicable statute of limitations has expired.