Note

– Income Taxes

The provision for income taxes is comprised of the following components:

	Year Ended December 31,
	2016		2015			2014
	(in thousands)
Current Tax Provision
Federal	$	24,012	$	29,322		$	30,235
State		661		3,568			3,095
		24,673		32,890			33,330
Deferred Tax Provision
Federal		4,208		(532	)		(1,172	)
State		788		(227	)		(334	)
		4,996		(759	)		(1,506	)
Income Tax Provision	$	29,669	$	32,131		$	31,824

The deferred tax assets and liabilities, consisting of temporary differences tax effected at the respective income tax rates, are as follows:

	December 31,
	2016			2015
	(in thousands)
Deferred tax assets:
Allowance for doubtful accounts receivable	$	2,077		$	2,055
Accrued risk reserves		2,277			2,648
Accrued expenses		8,907			8,420
Financial reporting depreciation in excess of tax depreciation		8,642			9,142
Stock based compensation		387			3,511
Non-refundable entrance fees		211			163
Refundable entrance fees		1,923			1,830
Obligation to provide future services		1,262			1,342
Deferred revenue		3,942			4,258
Total deferred tax assets	$	29,628		$	33,369

Deferred tax liabilities:
Unrealized gains on marketable securities	$	(41,264	)	$	(33,079	)
Deferred gain on sale of assets (net)		(3,135	)		(3,135	)
Book basis in excess of tax basis of intangible assets		(1,481	)		(945	)
Book basis in excess of tax basis of securities		(2,416	)		(2,344	)
Long–term investments		(3,404	)		(2,962	)
Total deferred tax liabilities	$	(51,700	)	$	(42,465	)

Net deferred tax liability	$	(22,072	)	$	(9,096	)

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows:

	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Tax provision at federal statutory rate	$	28,072		$	29,846		$	29,818

Increase (decrease) in income taxes resulting from:
State, net of federal benefit		1,783			1,767			2,207
Nondeductible expenses		156			351			363
Insurance expense		27			6			27
Other, net		283			(372	)		439
Unrecognized tax benefits		716			2,674			512
Expiration of statute of limitations		(1,368	)		(2,141	)		(1,542	)
		1,597			2,285			2,006
Effective income tax expense	$	29,669		$	32,131		$	31,824

The exercise of non–qualified stock options results in state and federal income tax benefits to the Company related to the difference between the market price at the date of exercise and the option exercise price. During

2016,

2015

and

2014,

$(1,096,000),

$1,942,000,

and

$201,000,

respectively, attributable to the tax (expense) benefit of stock options exercised and restricted stock vested, was recorded to capital in excess of par value.

Our deferred tax assets have been evaluated for realization based on historical taxable income, tax planning strategies, the expected timing of reversals of existing temporary differences and future taxable income anticipated. Our deferred tax assets are more likely than not to be realized in full due to the existence of sufficient taxable income of the appropriate character under the tax law. As such, there is no need for a valuation allowance.

Uncertain tax positions

may

arise where tax laws

may

allow for alternative interpretations or where the timing of recognition of income is subject to judgment. We believe we have adequate provisions for unrecognized tax benefits related to uncertain tax positions. However, because of uncertainty of interpretation by various tax authorities and the possibility that there are issues that have not been recognized by management, we cannot guarantee we have accurately estimated our tax liabilities. We believe that our liabilities reflect the anticipated outcome of known uncertain tax positions in conformity with ASC Topic

740

Income Taxes

. Our liabilities for unrecognized tax benefits are presented in the consolidated balance sheets within other noncurrent liabilities.

Also under ASC Topic

740,

tax positions are evaluated for recognition using a more–likely–than–not threshold, and those tax positions requiring recognition are measured at the largest amount of tax benefit that is greater than

percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

In accordance with current guidance, the Company has established a liability for unrecognized tax benefits, which are differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured. Generally a liability is created for an unrecognized tax benefit because it represents a company’s potential future obligation to a taxing authority for a tax position that was not recognized per above.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Deferred Tax Asset			Liability For Unrecognized Tax Benefits			Liability For Interest and Penalties			Liability Total
Balance, January 1, 2014	$	8,598		$	12,453		$	2,072		$	14,525
Additions based on tax positions related to the current year		−			2,008			216			2,224
Additions for tax positions of prior years		2,032			1,218			706			1,924
Reductions for statute of limitation expirations		(1,523	)		(2,059	)		(603	)		(2,662	)
Balance, December 31, 2014		9,107			13,620			2,391			16,011
Additions based on tax positions related to the current year		−			1,595			308			1,903
Additions for tax positions of prior years		490			498			1,298			1,796
Reductions for statute of limitation expirations		(1,779	)		(2,551	)		(865	)		(3,416	)
Balance, December 31, 2015		7,818			13,162			3,132			16,294
Additions based on tax positions related to the current year		1,249			1,249			-			1,249
Additions for tax positions of prior years		481			718			934			1,652
Reductions for statute of limitation expirations		(1,525	)		(2,164	)		(729	)		(2,893	)
Balance, December 31, 2016	$	8,023		$	12,965		$	3,337		$	16,302

During the year ended

December

31,

2016,

we have recognized a

$2,164,000

decrease in unrecognized tax benefits and an accompanying

$729,000

decrease of related interest and penalties due to the effect of statute of limitations lapse. The favorable impact on our tax provision was

$1,368,000.

Unrecognized tax benefits of

$5,616,000,

net of federal benefit at

December

31,

2016,

attributable to permanent differences, would favorably impact our effective tax rate if recognized. We do not expect significant increases or decreases in unrecognized tax benefits within the

twelve

months beginning

December

31,

2016,

except for the effect of decreases related to the lapse of statute of limitations estimated at

$2,345,000.

During the year ended

December

31,

2015,

we have recognized a

$2,551,000

decrease in unrecognized tax benefits and an accompanying

$865,000

decrease of related interest and penalties due to the effect of statute of limitation lapse. The favorable impact on our tax provision was

$2,141,000.

During the year ended

December

31,

2014,

we have recognized a

$2,059,000

decrease in unrecognized tax benefits and an accompanying

$603,000

decrease of related interest and penalties due to the effect of statute of limitations lapse. The favorable impact on our tax provision was

$1,542,000.

Interest and penalties expense related to U.S. federal and state income tax returns are included within income tax expense. Interest and penalties expense was

$205,000,

$740,000,

and

$319,000

for the years ended

December

31,

2016,

2015,

and

2014,

respectively.

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before

2013

(with few state exceptions).