Income Taxes

12 Months Ended

Dec. 31, 2018

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



	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Current:
Federal	$	(2,178	)	$	(68,601	)	$	60,079
State and local	410			515			6,322
Foreign	4,692			2,742			2,034
Total current expense (benefit)	2,924			(65,344		)	68,435
Deferred:
Federal	42,246			(9,349		)	81,682
State and local	4,057			8,857			3,657
Total deferred expense (benefit)	46,303			(492		)	85,339
Total income tax expense (benefit)	$	49,227		$	(65,836	)	$	153,774

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



	Year Ended December 31,
	2018		2017		2016
Expected provision at federal statutory tax rate	21.0	%	35.0	%	35.0	%
State tax expense, net of federal benefit	1.7	%	1.7	%	1.6	%
Revaluation of deferred taxes	—	%	(56.3	)%	—	%
Other	1.3	%	0.7	%	0.3	%
Total income tax expense (benefit)	24.0	%	(18.9	)%	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, 2018 and 2017, the significant components of the Company's deferred taxes consisted of the following:



	December 31,
	2018			2017
	(in thousands)
Deferred tax assets:
Income tax credits	$	10,004		$	5,980
Net operating losses	155,670			871
Deferred revenue	6,824			5,957
Nondeductible accruals	14,691			10,107
Deferred manufacturing credits	—			258
Accrued maintenance	2,168			1,991
Equity compensation	2,592			2,392
Other	5,262			4,684
Valuation allowance	(254		)	(454		)
Deferred tax assets	196,957			31,786
Deferred tax liabilities:
Deferred gain (loss) on leases, net	1,672			1,605
Accrued rent	6,068			12,055
Prepaid expenses	793			754
Property, plant and equipment	481,847			298,703
Deferred financing costs	189			225
Accrued aircraft and engine maintenance	61,529			27,258
Deferred tax liabilities	552,098			340,600
Net deferred tax assets (liabilities)	$	(355,141	)	$	(308,814	)

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 reduction in net deferred tax liabilities of $196.0 million upon enactment of the TCJA. As of December 31, 2018, the Company has completed its accounting for all of the enactment date income tax effects of the TCJA.

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. As of December 31, 2018 and 2017, the Company had a valuation allowance of $0.3 million and $0.5 million, respectively, against certain deferred tax assets related to equity compensation for executives due to changes in tax law resulting from the TCJA.

At December 31, 2018, the Company had $8.6 million of foreign tax credits and $1.4 million of general business tax credits, $703.0 million of federal net operating loss and $114.5 million of state net operating loss available, that may be applied against future tax liabilities. The foreign tax credits will begin to expire in 2025, the state net operating losses will begin to expire in 2027, the general business credits will begin to expire in 2038 and there is no expiration of federal net operating losses. In addition, as of December 31, 2018, the Company had $1.1 million of alternative minimum tax credits, which were recorded within other long-term assets on the balance sheet.

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, 2018 and 2017, $0.4 million and $0.5 million of income tax deficiency related to share-based compensation was included within income tax expense, respectively. 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 for the tax year ended December 31, 2016.

For tax years ended December 31, 2018, 2017 and 2016, the Company did not recognize any liabilities for uncertain tax positions nor any interest and penalties on unrecognized tax benefits.

For tax years 2018, 2017 and 2016, all income 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 2015 through 2017 tax years are still subject to examination in the U.S. Various state and foreign jurisdiction tax years also remain open to examination. The Company believes that any potential assessment would be immaterial to its financial statements.