“Income before provision for income taxes” as shown in the accompanying Consolidated Statements of Income is comprised of the following (in thousands):

Components of the “Provision for income taxes” in the accompanying Consolidated Statements of Income consist of the following (in thousands):

The provision for income taxes attributable to Holdings includes all U.S. federal and state income taxes on Holdings’ proportionate share of RMCO’s net income. The provision for income taxes attributable to entities other than Holdings represents taxes imposed directly on RMCO and its subsidiaries, primarily foreign taxes that are allocated to the non-controlling interest.

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:

(a)	Reflects additional impact of non-controlling interest adjustment being on a larger base of income that includes the gain on reduction in TRA liability.

(b)	Reflects the impact of gain on TRA liability reduction, which is not taxable.

(c)	Reflects reduction in deferred tax assets and resulting increase in deferred tax expense due to U.S. Federal rate declining from 35% to 21%.

In December 2017, the Tax Cut and Jobs Act (the “TCJA”) was enacted, which included a significant reduction in the U.S. corporate income tax rate from 35% to 21% along with several changes to taxation of foreign derived income. In 2017, the Company recorded a $42.8 million charge to “Provision for income taxes” in the accompanying Consolidated Statements of Income for the reduction in the value of its deferred tax assets related to this tax rate change (reflected in the rate reconciliation table above as a 49.0% adjustment in 2017). Correspondingly, the TRA liabilities were reduced because of the rate change, resulting in a benefit to operating income of $32.7 million. The net effect of these two adjustments was a reduction to 2017 net income of $10.1 million. When the aforementioned adjustments were recorded in 2017, the Company was still evaluating several aspects of the TCJA, most notably around foreign derived income.

In 2018, the Company completed its evaluation of the impacts to its foreign derived income, particularly the tax credits received for foreign taxes and deductions allowed under the newly created foreign-derived intangible income deduction. The SEC staff issued Staff Accounting Bulletin 118 and later ASU 2018-05, which provided all companies through December of 2018 to finalize provisional estimates of the impacts of the TCJA.

Starting with tax year 2018, the Company has foreign tax credit limitation due to the U.S. federal tax rate being lower than many foreign jurisdictions, particularly Canada. Certain of the tax basis step-ups, described in Note 4, Non-controlling interest, are related to intangible assets from the Company’s Western Canada operations. The deductions expected to be taken from these tax basis step-ups are no longer expected to be realized by the Company due to now being subject to a foreign tax credit limitation. As a result, the Company recognized a $6.3 million valuation allowance against the related deferred tax assets and an increase in “Provision for income taxes” in the accompanying Consolidated Statements of Income (reflected in the rate reconciliation table above as a 9.5% adjustment in 2018). The loss in value of the step-up, along with other less significant changes, also reduced the value of the TRA liabilities, resulting in a $6.1 benefit to operating income. The net impact of these items was insignificant to net income. In addition, the Company is now limited on the amount of foreign tax credit that can be claimed in its U.S. return.

The Company will continue to evaluate tax planning opportunities as well as monitor any changes that might be contained in the final regulations related to foreign derived income. Such remaining final regulations are expected in 2020.

Income taxes (payable) receivable, net were ($4.3) million and $0.3 million at December 31, 2019 and 2018, respectively.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the accompanying Consolidated Balance Sheets.

These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands):


	As of December 31,
	2019		2018
Long-term deferred tax assets
Goodwill, other intangibles and other assets	$	42,800	$	48,427
Imputed interest deduction pursuant to tax receivable agreements		2,651		2,719
Operating lease liabilities		1,618		1,845
Compensation and benefits		3,043		2,131
Allowance for doubtful accounts		1,629		944
Motto contingent liability		783		748
Deferred revenue		3,706		3,939
Foreign tax credit carryforward		1,862		1,259
Net operating loss		2,641		—
Other		950		1,435
Total long-term deferred tax assets		61,683		63,447
Valuation allowance ^(a)		(7,184)		(7,051)
Total long-term deferred tax assets, net of valuation allowance		54,499		56,396
Long-term deferred tax liabilities
Property and equipment and other long lived assets		(1,494)		(2,944)
Other		(703)		—
Total long-term deferred tax liabilities		(2,197)		(2,944)
Net long-term deferred tax assets		52,302		53,452
Total deferred tax assets and liabilities	$	52,302	$	53,452

(a)	Includes a valuation allowance on deferred tax assets for goodwill and intangibles in the Company’s Western Canada operations, as well as foreign tax credit carryforwards.

As of December 31, 2019, the Company generated $1.1 million in unutilized foreign tax credits. These credits may be carried back one year and carried forward for 10 years until utilized. This amount is included in the valuation allowance as of December 31, 2019.

Net deferred tax assets are recorded related to differences between the financial reporting basis and the tax basis of Holdings’ proportionate share of the net assets of RMCO. Based on the Company’s historical taxable income and its expected future earnings, management evaluates the uncertainty associated with booking tax benefits and determines whether the deferred tax assets are more likely than not to be realized, including evaluation of deferred tax liabilities and the expectation of future taxable income. If not expected to be realized, a valuation allowance is recognized to offset the deferred tax asset.

The Company and its subsidiaries file, or will file, income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. Holdings will file its 2019 income tax returns by October 15, 2020. RMCO is not subject to domestic federal income taxes as it is a flow-through entity; however, RMCO is still required to file an annual U.S. Return of Partnership Income. With respect to state and local jurisdictions and countries outside of the U.S., the Company and its subsidiaries are typically subject to examination for three to four years after the income tax returns have been filed. As such, income tax returns filed since 2015 are subject to examination.

Uncertain Tax Positions

In 2019, the Company corrected immaterial errors to recognize uncertain tax position liabilities, and related tax expense for certain foreign tax matters, along with deferred tax assets for amounts of such foreign taxes expected to be creditable

in the U.S. The Company concluded that the omission of tax expense for these matters from prior period financials was immaterial to each of the affected reporting periods and therefore amendment of previously filed reports was not required. However, the Company corrected those amounts in the prior years included herein. These adjustments resulted in an increase in “Provision for income taxes” of $0.5 million for each of the years ended December 31, 2018, and 2017, respectively. In addition, the Company recognized an uncertain tax position liability of $5.8 million (including interest and penalties), an income tax receivable of $1.4 million, a deferred tax asset of $0.2 million and a resulting reduction in “Total stockholders’ equity” of $4.2 million as of December 31, 2018 in the Consolidated Balance Sheets. The Company recognized a $3.7 million reduction in “Total stockholders’ equity” in the Consolidated Statements of Stockholders’ Equity as of December 31, 2017 in relation to this correction.

While the Company believes the liabilities recognized for uncertain tax positions are adequate to cover reasonably expected tax risks, there can be no assurance that an issue raised by a tax authority will be resolved at a cost that does not exceed the liability recognized. Interest and penalties are accrued on uncertain tax positions and included in the “Provision for income taxes” in the accompanying Consolidated Statements of Income.

Uncertain tax position liabilities represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the consolidated financial statements and are recognized in “Income taxes payable” in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount, excluding interest and penalties is as follows:


	As of December 31,
	2019			2018
Balance, January 1	$	4,278	$	3,703
Increase related to current period tax positions		532		575
Balance, December 31^(a)	$	4,810	$	4,278

(a)	Excludes accrued interest and penalties of $1.9 million and $1.5 million for the years ended December 31, 2019 and 2018, respectively. These related interest and penalties are recognized in “Income taxes payable” within the Consolidated Balance Sheets.

The Company’s uncertain tax position has a reasonable possibility of being paid within the next 12 months.