Income Taxes

12 Months Ended

Dec. 31, 2017

Significant components of the provision for income taxes from continuing operations are as follows:



	Year Ended December 31,
	2017			2016		2015
	(in thousands)
Current:
Federal	$	(68,601	)	$	60,079	$	21,632
State and local	515			6,322		6,702
Foreign	2,742			2,034		1,235
Total current expense (benefit)	(65,344		)	68,435		29,569
Deferred:
Federal	(10,370		)	82,455		149,583
State and local	8,760			3,691		6,031
Total deferred expense (benefit)	(1,610		)	86,146		155,614
Total income tax expense (benefit)	$	(66,954	)	$	154,581	$	185,183

The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:



	Year Ended December 31,
	2017		2016		2015
Expected provision at federal statutory tax rate	35.0	%	35.0	%	35.0	%
State tax expense, net of federal benefit	1.7	%	1.6	%	1.7	%
Income tax credits	—	%	—	%	—	%
Revaluation of deferred taxes	(56.3	)%	—	%	—	%
Other	0.7	%	0.3	%	0.2	%
Total income tax expense (benefit)	(18.9	)%	36.9	%	36.9	%

The Company accounts for income taxes using the asset and liability method. Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. At December 31, 2017 and 2016, the significant components of the Company's deferred taxes consisted of the following:



	December 31,
	2017			2016
	(in thousands)
Deferred tax assets:
Foreign tax credits	$	5,980		$	—
Deferred revenue	1,631			3,057
Nondeductible accruals	10,107			20,547
Deferred manufacturing credits	258			910
Accrued maintenance	1,991			1,854
Equity compensation	2,392			3,882
Other	5,555			4,026
Valuation allowance	(454		)	—
Deferred tax assets	27,460			34,276
Deferred tax liabilities:
Deferred gain (loss) on leases, net	1,605			2,435
Accrued rent	12,055			14,025
Prepaid expenses	754			1,217
Property, plant and equipment	298,703			278,872
Deferred financing costs	225			5,358
Accrued aircraft and engine maintenance	27,258			40,512
Deferred tax liabilities	340,600			342,419
Net deferred tax assets (liabilities)	$	(313,140	)	$	(308,143	)

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted. The TCJA reduces the statutory federal tax rate from 35.0% to 21.0% effective for tax year 2018 in addition to various other tax law changes that impact the Company. Pursuant to ASC 740, the Company is required to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities upon enactment. The Company reasonably estimated and recorded a provisional reduction in net deferred tax liabilities of $196.0 million upon enactment of the TCJA as written. In addition, the Company generated $6.3 million of alternative minimum tax credits, which are recorded within other long-term assets on the balance sheet. These provisional amounts may be affected as the Company gains a more thorough understanding of the tax law, including those related to the deductibility of acquired assets, state tax treatment and amounts related to employee compensation.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. In evaluating the Company’s ability to utilize its deferred tax assets, it considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis. The Company recorded a valuation allowance of $0.5 million against certain deferred tax assets related to equity compensation for executives due to changes in tax law resulting from the TCJA.

At December 31, 2017, the Company has $6.0 million of foreign tax credits and $14.8 million of state net operating losses available, that may be applied against future tax liabilities. The foreign tax credits will start to expire in 2025 and the state net operating losses will start to expire in 2027.

In accordance with ASU No. 2016-09, excess income tax benefits and deficiencies related to share-based compensation are now included within income tax expense rather than additional paid in capital. For the twelve months ended December 31, 2017, $0.5 million of income tax deficiency related to share-based compensation was included within income tax expense. Prior to the adoption of ASU No. 2016-09, the excess tax benefit/(deficiency) was recorded as a reduction/(increase) to income tax payable and a corresponding entry to additional paid in capital. The Company recognized an excess tax deficiency of $0.5 million and an excess tax benefit of $8.9 million for tax years ended December 31, 2016 and 2015, respectively.

The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of selling, general and administrative expenses. For tax years ended December 31, 2017, 2016 and 2015, the Company did not recognize any liabilities for uncertain tax positions nor any interest and penalties on unrecognized tax benefits.

For tax years 2017, 2016 and 2015, the entire income before income taxes for the Company is subject to domestic income taxes.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company's federal income tax returns for 2014 through 2016 tax years are still subject to examination in the U.S. Various state and foreign jurisdiction tax years remain open to examination. The Company believes that any potential assessment would be immaterial to its financial statements.