Income Taxes

12 Months Ended

Dec. 31, 2019

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



	Year Ended December 31,
	2019			2018			2017
	(in thousands)
Current:
Federal	$	(22,429	)	$	(2,178	)	$	(68,601	)
State and local	1,218			410			515
Foreign	6,693			4,692			2,742
Total current expense (benefit)	(14,518		)	2,924			(65,344		)
Deferred:
Federal	106,703			42,246			(9,349		)
State and local	8,986			4,057			8,857
Total deferred expense (benefit)	115,689			46,303			(492		)
Total income tax expense (benefit)	$	101,171		$	49,227		$	(65,836	)

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



	Year Ended December 31,
	2019		2018		2017
Expected provision at federal statutory tax rate	21.0	%	21.0	%	35.0	%
State tax expense, net of federal benefit	1.8	%	1.7	%	1.7	%
Revaluation of deferred taxes	(2.1	)%	—	%	(56.3	)%
Other	2.5	%	1.3	%	0.7	%
Total income tax expense (benefit)	23.2	%	24.0	%	(18.9	)%

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, 2019 and 2018, the significant components of the Company's deferred taxes consisted of the following:



	December 31,
	2019			2018
	(in thousands)
Deferred tax assets:
Income tax credits	$	9,632		$	10,004
Net operating losses	13,604			155,670
Deferred revenue	8,824			6,824
Nondeductible accruals	14,133			14,691
Deferred manufacturing credits	2,813			—
Accrued maintenance	1,668			2,168
Equity compensation	2,851			2,592
Operating lease liability	305,161			—
Other	482			5,262
Valuation allowance	(1,746		)	(254		)
Deferred tax assets	357,422			196,957
Deferred tax liabilities:
Deferred gain (loss) on leases, net	—			1,672
Accrued rent	—			6,068
Prepaid expenses	1,120			793
Property, plant and equipment	430,523			481,847
Deferred financing costs	154			189
Accrued aircraft and engine maintenance	84,479			61,529
Right-of-use asset	310,438			—
Deferred tax liabilities	826,714			552,098
Net deferred tax assets (liabilities)	$	(469,292	)	$	(355,141	)

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 IRS issued new regulations for TCJA in 2019. The new regulations allowed the Company to generate additional net operating losses in 2017, of which a portion was utilized as a carryback to the prior years with the remainder as a carryforward into 2018. As a result, the Company changed its bonus depreciation policy in 2018 to elect out of bonus depreciation on its 2018 income tax return. The change to the bonus depreciation election for 2018 reduced the net operating loss carryforward deferred tax asset as of December 31, 2019.

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, 2019 and 2018, the Company had a valuation allowance of $1.7 million and $0.3 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, 2019, the Company had $8.2 million of foreign tax credits and $1.4 million of general business tax credits, $37.7 million of federal net operating loss and $109.4 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 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, 2019 and 2018, $1.4 million income tax benefit and $0.4 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.

For tax years ended December 31, 2019, 2018 and 2017, the Company did not recognize any liabilities for uncertain tax positions nor any interest and penalties on unrecognized tax benefits.

For tax years 2019, 2018 and 2017, 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 2016 through 2018 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.