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Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The provision for income taxes is based on the earnings reported in the accompanying consolidated financial statements. The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred income tax liabilities and assets are determined based on the cumulative temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates expected to apply taxable income in years which those temporary differences are expected to be recovered or settled. Deferred income tax expense is measured by the net change in deferred income tax assets and liabilities during the year.
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Act”), a tax reform bill which, among other items, reduces the current federal income tax rate to 21% from 35%. The rate reduction is effective January 1, 2018, and is permanent.
The Act has caused the Company’s deferred income taxes to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2017, the Company recognized the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. Although the Company continues to analyze certain aspects of the Act and refine its assessment, the ultimate impact of the Act may differ from these estimates due to its continued analysis or further regulatory guidance that may be issued as a result of the Act. Pursuant to SAB 118, adjustments to the provisional amounts recorded by the Company as of December 31, 2017 that are identified within a subsequent measurement period of up to one year from the enactment date will be included as an adjustment to tax expense from continuing operations in the period the amounts are determined.
As a result of the reduction of the federal corporate income tax rate, the Company reduced the value of its net deferred tax liability by $38.4 million which was recorded as a reduction to income tax expense during the fourth quarter of 2017. The Company’s revaluation of its net deferred tax liability is subject to further refinement as additional information becomes available and further analysis is completed.
The foreign components of income before the provision for income taxes were not material as of December 31, 2017, 2016 and 2015. The components of the provision for income taxes are as follows:
 
 
2017
 
2016
 
2015
Currently payable:
 
 
 
 
 
Federal
$
133,166,194

 
$
136,124,497

 
$
129,379,597

State
3,984,000

 
3,805,000

 
2,908,000

Foreign
2,440,000

 
540,000

 
276,000

Total
139,590,194

 
140,469,497

 
132,563,597

Deferred income tax (benefit) expense:
 
 
 
 
 
Primarily federal
(14,585,412
)
 
22,500,000

 
12,558,000

Provision for income taxes
$
125,004,782

 
$
162,969,497

 
$
145,121,597


The currently payable provision is further reduced by the tax benefits associated with the exercise, vesting or disposition of stock under the stock plans described in Note 5. These reductions totaled approximately $8.3 million, $11.8 million and $5.0 million in 2017, 2016 and 2015, respectively. As a result of the implementation of ASU 2016-09 in first quarter 2017, as further discussed in Note 1, this reduction was recognized through income tax expense in 2017, whereas the reductions were recognized as an adjustment of additional paid-in capital for the years 2016 and 2015.
The effective income tax rates are different from the statutory federal income tax rates for the following reasons:
 
2017
 
2016
 
2015
Statutory federal income tax rate
35.00
 %
 
35.00
 %
 
35.00
 %
State income taxes, net of federal income tax benefit
0.50

 
0.50

 
0.40

Domestic production exclusion
(2.80
)
 
(2.70
)
 
(2.80
)
Research tax credit
(0.80
)
 
(0.80
)
 
(0.80
)
Increase (Reduction) in Reserve for Uncertain Tax Provisions
0.10

 
(0.20
)
 
(0.60
)
Change in Tax Rate on Deferred Taxes
(7.20
)
 

 

Foreign Tax Credit
(0.80
)
 

 

Other
(0.50
)
 
0.10

 
0.10

Effective income tax rate
23.50
 %
 
31.90
 %
 
31.30
 %


The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at    December 31, 2017 and 2016, are as follows: 
 
December 31,
 
2017
 
2016
Assets:
 
 
 
Accruals not currently deductible
$
4,546,767

 
$
4,282,470

Stock based compensation
8,594,640

 
18,701,361

Other
3,679,680

 
3,924,945

Total deferred income tax assets
16,821,087

 
26,908,776

Liabilities:
 
 
 
Excess tax over book depreciation
(46,123,681
)
 
(65,642,206
)
Goodwill
(18,972,334
)
 
(23,225,969
)
Unrealized gain on investments
(2,093,105
)
 
(1,435,322
)
Intangible assets
(4,172,726
)
 
(5,368,886
)
Other
(4,347,885
)
 
(2,449,012
)
Net deferred income taxes
$
(58,888,644
)
 
$
(71,212,619
)

Net current and non-current tax assets and liabilities are included in the consolidated balance sheets as follows:
 
 
December 31,
 
 
2017
 
2016
Long-term assets
 
16,821,087

 
26,908,776

Long-term liabilities
 
(75,709,731
)
 
(98,121,395
)
Total deferred tax liability
 
$
(58,888,644
)
 
$
(71,212,619
)

Income taxes paid in cash were approximately $126.0 million, $144.1 million and $138.0 million in 2017, 2016 and 2015, respectively.
The Tax Cuts and Jobs Act, along with reducing the federal income tax rate to 21% from 35%, implements a modified territorial system that provides for an exemption for foreign dividends. However, a one-time transition tax is payable in respect of cumulative retained earnings of foreign subsidiaries at a rate of 15.5% for earnings represented by cash or cash equivalents and 8.0% for the balance of such earnings. The Company does not anticipate the one-time transition tax, the provisional estimate of which is $1.2 million, to be material.
The Company follows the provisions of the Financial Accounting Standards Codification 740 (“ASC 740”), “Income Taxes.” A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
2017
 
2016
 
2015
Beginning of year
$
3,408,000

 
$
5,375,000

 
$
8,288,000

Additions based on tax positions related to the current year
941,000

 
756,000

 
1,765,000

Additions for tax positions in prior years
289,000

 
487,000

 
428,000

Reductions for tax positions in prior years
(63,000
)
 
(2,949,000
)
 
(336,000
)
Reductions as a result of completed audit examinations

 

 
(4,162,000
)
Reductions as a result of a lapse of the applicable statute of limitations
(140,000
)
 
(261,000
)
 
(608,000
)
End of year
$
4,435,000

 
$
3,408,000

 
$
5,375,000


If recognized, unrecognized tax benefits would affect the effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits through the provision for income taxes. The Company has accrued approximately $433,000 and $277,000 for interest as of December 31, 2017 and 2016, respectively. Interest recorded during 2017, 2016 and 2015 was not considered significant.
The Company is also subject to periodic and routine audits in both domestic and foreign tax jurisdictions, and it is reasonably possible that the amounts of unrecognized tax benefits could change as a result of an audit.
Based on the current audits in process, the payment of taxes as a result of audit settlements, and the completion of tax examinations, the Company does not expect these to have a material impact on the Company’s financial position or results of operations.
For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2012.