Income Taxes

The Company's effective tax rate is based on expected income, statutory rates and tax planning opportunities available to it. For interim financial reporting, the Company estimates its annual tax rate based on projected taxable income (or loss) for the full year and records a quarterly tax provision in accordance with the anticipated annual rate. Income tax expense included in the Company’s Consolidated Statements of Operations were as follows (in thousands, except percentages):



	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
Income tax (benefit) expense	$	(3,071	)	$	(1,666	)	$	78		$	(4,309	)
Effective tax rate	32.6		%	24.9		%	108.3		%	32.1		%

The effective rate for the three and nine months ended September 30, 2018 differed from the Company's statutory federal rate of 21% driven by the non-deductibility of certain permanent items, such as incentive stock compensation expense, return to provision adjustment and the $2.2 million of unamortized debt issuance costs for the extinguishment of debt, which was treated as a discrete item and tax effected at a rate of 23%. For the nine months ended September 30, 2018, the Company recorded a $5.4 million gain related to the settlement of a legal matter. The gain was also treated as a discrete item and tax effected at a rate of 23%.

The effective tax rate for the three and nine months ended September 30, 2017 differed from the Company’s statutory federal rate of 35% primarily due to state income taxes, the non-deductibility of certain permanent items, and stock compensation expense items treated as discrete.

The Company assessed the realizability of its deferred tax assets at September 30, 2018, and considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets depends upon the generation of future taxable income, which includes the reversal of deferred tax liabilities related to depreciation, during the periods in which these temporary differences become deductible.

The Company does not expect that unrecognized tax benefits as of September 30, 2018 for certain federal income tax matters will significantly change due to any settlement and/or expiration of statutes of limitations over the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. The Company's uncertain tax benefits, if recognized, would affect its effective tax rate.

Enactment of Tax Reform

The Act made broad and complex changes to the U.S. tax code that significantly affected the Company's income tax rate. The Act, among other things, reduced the U.S. federal corporate income tax rate from 35% to 21%; limited the use of foreign tax credits to reduce U.S. income tax liability; repealed the corporate alternative minimum tax ("AMT") and changed how existing AMT credits can be realized; allowed immediate expensing for qualified assets; created a new limitation on deductible interest expense; repealed the domestic production activities deduction; and limited the deductibility of certain executive compensation and other deductions.

In accordance with Staff Accounting Bulletin 118 (“SAB 118”), the Company recognized provisional tax impacts related to the re-measurement of its net deferred tax liabilities and the addition of a partial valuation allowance recorded against existing foreign tax credit carryforwards not expected to be utilized in future tax years during the year ended December 31, 2017. As of September 30, 2018, the Company has not made any measurement-period adjustments that materially impacted its 2018 effective tax rate. Such adjustments may be necessary in future periods due to additional guidance that may be issued, changes in assumptions made and the finalization of U.S. income tax positions with the filing of the Company's 2017 U.S. income tax return which will allow for the ability to conclude whether any further adjustments are necessary to its deferred tax assets and liabilities. Any adjustments to these provisional amounts will be reported as a component of income tax expense (benefit) in the reporting period in which any such adjustments are identified but no later than the fourth quarter of 2018. The Company will continue to analyze the Act in order to finalize any related impacts within the measurement period.