NOTE 15 – INCOME TAXES

The benefit from income taxes from continuing operations consists of the following:


	For the Year Ended December 31,
	2019		2018		2017
	(in thousands)
Federal:
Current provision	$	-	$	-	$	-
Deferred provision		(7,751)		(2,670)		(52,878)
		(7,751)		(2,670)		(52,878)
Foreign:
Current provision		57		84		134
Deferred provision		-		-		-
		57		84		134
State:
Current provision		-		30		178
Deferred provision		(1,001)		612		8,143
		(1,001)		642		8,321
Benefit from income taxes	$	(8,695)	$	(1,944)	$	(44,423)

The difference between the benefit from income taxes and the expected income tax provision determined by applying the statutory federal and state income tax rates to pre-tax income are as follows:


	For the Year Ended December 31,
	2019		2018		2017
Federal statutory rate	21.0	%	21.0	%	35.0	%
State taxes, net of federal tax benefit	1.6		2.0		—
Goodwill impairment	—		—		(32.2)
Noncontrolling interest	(2.6)		8.3		0.5
Valuation allowance	—		(7.3)		5.3
Nondeductible compensation	(1.6)		(5.7)		(0.1)
Foreign taxes	(0.1)		(0.5)		—
Other	(0.6)		(3.1)		(0.7)
Tax Cuts and Jobs Act	—		—		5.6
Change in state tax rates	—		(0.8)		—
	17.7	%	13.9	%	13.4	%

The Tax Cuts and Jobs Act

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the taxation of multinational corporations. The Tax Act includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The Tax Act also includes a permanent reduction in the corporate tax rate to 21%, repeal of the corporate alternative minimum tax, expensing of capital investment, and limitation of the deduction for interest expense. Furthermore, as part of the transition to the new tax system, a one-time transition tax is imposed on a U.S. shareholder’s historical undistributed earnings of foreign affiliates. Although the Tax Act was generally effective as of January 1, 2018, GAAP required recognition of the tax effects of new legislation during the reporting period that included the enactment date, which was December 22, 2017.

The components of the Company’s consolidated deferred income tax balances as of December 31, 2019 and 2018 are as follows:


	December 31,
	2019		2018
	(in thousands)
Deferred income tax assets
Net operating loss carryforwards	$	32,565	$	51,042
Capital loss carryforwards		2,997		4,417
Intangible assets - finite life		3,137		3,261
Stock-based compensation		286		439
Property and equipment		-		3,649
Deferred rent		-		799
Credits carryforward		1,148		1,281
Deferred revenue		1,939		2,755
Deferred interest expense		9,984		8,644
Deferred compensation		-		1,053
Operating lease liability		13,215		-
Other		4,791		3,585
		70,062		80,925
Deferred income tax liability - long-term
Intangible assets - indefinite-lived		(57,343)		(130,818)
Right-of-use asset - operating leases		(11,625)		-
Property and equipment		(193)		-
		(69,161)		(130,818)
Less: Valuation allowance		(15,252)		(17,109)
Net deferred income tax liability - long-term	$	(14,351)	$	(67,002)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items and tax provisions under the Tax Act, primarily the new limitation on interest expense deductions, management determined that enough certainty existed to warrant the release of the valuation allowance recorded against substantially all the Company’s deferred tax assets as of December 31, 2017. As of December 31, 2019 and 2018, a valuation allowance of $15.3 million and $17.1 million, respectively, has been recognized for deferred income taxes that may not be realized by the Company in future periods. The valuation allowance at December 31, 2019 and 2018 primarily relates to state net operating losses and capital loss carryforwards.

The Company has federal NOLs available to carryforward to future periods of $107.8 million as of December 31, 2019 which begin expiring in 2029. The Company has state NOLs available to carryforward to future periods of $179.0 million as of December 31, 2019 which begin expiring in 2020. The Company has foreign tax credits available to carryforward to future periods of $0.5 million as of December 31, 2019 which begin expiring in 2020. The Company has experienced several changes of ownership under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which places various limitations on the NOLs. The limitations on NOLs are based upon a formula provided under Section 382 of the Code that is based on the fair market value of the Company and prevailing interest rates at the time of the ownership change. An “ownership change” is generally a 50% increase in ownership over a three-year period by stockholders who directly or indirectly own at least five percent of a company’s stock. The limitations on the use of the NOLs under Section 382 could affect the Company’s ability to offset future taxable income.

The Company currently files U.S. federal tax returns and various state tax returns. Tax years that remain open for assessment for federal and state purposes include years ended December 31, 2016 through December 31, 2019.

The Company recognizes interest and penalties related to unrecognized tax benefits in the tax provision. The Company has no unrecognized tax benefits at December 31, 2019 and 2018.