9. Income Taxes

The Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35 percent to 21 percent, allows for immediate deductibility of certain qualified depreciable asset, other changes in the deductibility of items and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings.

At December 31, 2017, the Company had not fully completed its accounting for the tax effects of the Act; however, as described below, reasonable estimates have been made of the effects, including on existing deferred tax balances. The Company recognized a tax benefit amount of $34 million to reflect the estimated impact of the Act, which is included as a component of income tax expense. The tax benefit is the result of remeasuring certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, generally 21 percent. The Act is unclear in many respects, including executive compensation, and could be subject to potential amendments and technical corrections, as well as interpretations and implementation regulations by the Treasury and Internal Revenue Service. In addition, it is unclear how these federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. Accordingly, the Company has not yet been able to make a reasonable estimate of the impact of certain items and generally continues to account for those items based on the tax laws in effect prior to the Act. As further interpretations, clarifications and amendments to the Act are made, the Company's future financial statements could be materially impacted. In all cases, the Company will continue to refine its calculations as additional analysis is completed.

Other

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax liabilities (assets) are comprised of the following at December 31 (in thousands):

	2017			2016
Depreciation	$	86,506		$	117,625
Other		93			1,414

Gross deferred tax liabilities		86,599			119,039
Allowance for doubtful accounts		(988	)		(1,225	)
Equity-based compensation		(2,607	)		(4,538	)
Employee benefits		(5,458	)		(6,115	)
Claims and insurance		(16,929	)		(23,241	)
Other		(1,194	)		(3,721	)

Gross deferred tax assets		(27,176	)		(38,840	)

Net deferred tax liability	$	59,423		$	80,199

The Company has determined that a valuation allowance related to deferred tax assets was not necessary at December 31, 2017 or 2016 since it is more likely than not the deferred tax assets will be realized from future reversals of temporary differences or future taxable income.

The income tax provision (benefit) for continuing operations consists of the following (in thousands):

	2017			2016		2015
Current:
U.S. federal	$	17,637		$	12,127	$	20,768
State		1,761			1,988		1,759

Total current income tax provision		19,398			14,115		22,527

Deferred:
U.S. federal		(21,221	)		12,599		8,570
State		445			181		(150	)

Total deferred income tax provision		(20,776	)		12,780		8,420

Total income tax provision	$	(1,378	)	$	26,895	$	30,947

A reconciliation between income taxes at the federal statutory rate (35 percent) and the effective income tax provision is as follows (in thousands):

	2017			2016			2015
Provision at federal statutory rate		31,422		$	26,222		$	30,087
State income taxes, net		2,545			2,418			2,229
Tax Cuts and Jobs Act benefit		(33,910	)		—			—
Nondeductible business expenses (benefits)		(913	)		462			696
Tax credits		(190	)		(1,278	)		(1,532	)
Other, net		(332	)		(929	)		(533	)

Total provision	$	(1,378	)	$	26,895		$	30,947

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. For the U.S. federal jurisdiction, tax years 2015-2017 remain open to examination. The expiration of the statute of limitations related to the various state income tax returns that the Company files varies by state. In general, tax years 2008-2017 remain open to examination by the various state and local jurisdictions. However, a state could challenge certain tax positions back to the 2004 tax year.

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

	2017			2016
Gross unrecognized tax benefits at beginning of year	$	1,280		$	1,158
Gross decreases in tax positions for prior years		(7	)		—
Gross increases in tax positions for current year		171			490
Settlements		—			(100	)
Lapse of statute of limitations		(351	)		(268	)

Gross unrecognized tax benefits at end of year	$	1,093		$	1,280

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. During the year ended December 31, 2017, the Company did not record any interest related to unrecognized tax benefits. During the years ended December 31, 2016 and 2015, the Company recorded interest related to unrecognized tax benefits of approximately $0.1 million, and $0.2 million, respectively. The Company had approximately $0.1 million and $0.6 million of accrued interest and penalties at December 31, 2017 and 2016, respectively. The total amount of unrecognized tax benefits, which is recorded within claims, insurance and other liabilities on the consolidated balance sheets, that would affect the Company’s effective tax rate if recognized is $1.1 million and $1.3 million as of December 31, 2017 and 2016, respectively. The Company paid cash for income taxes of $17.0 million, $5.4 million, and $16.4 million in 2017, 2016 and 2015, respectively.

The Company does not anticipate total unrecognized tax benefits will significantly change during the next twelve months due to the settlements of audits and the expiration of statutes of limitations.

In 2017, the Company recognized a $34 million benefit related to the impact of the Act described above and a $1.7 million benefit related to excess tax benefits from stock activity recognized as a result of the Company’s adoption of ASU 2016-09 effective January 1, 2017.

As a result of legislation enacted in the fourth quarter of 2015, the Company recognized tax credits for alternative fuel usage of approximately $1.0 million in 2016.

In February 2018, US federal tax law changes were enacted that will reinstate the tax credits for alternative fuel usage for 2017. The Company will recognize the tax credit in the first quarter of 2018.