Income taxes

The provision (benefit) for income taxes from continuing operations consists of the following (in thousands):




2018	Current		Deferred		Total
Federal	$	77,795	$	15,765	$	93,560
State and other	9,527		4,280		13,807
Total	$	87,322	$	20,045	$	107,367




2017	Current		Deferred			Total
Federal	$	81,355	$	(214,539	)	$	(133,184	)
State and other	7,981		(12,043		)	(4,062		)
Total	$	89,336	$	(226,582	)	$	(137,246	)




2016	Current		Deferred			Total
Federal	$	155,558	$	(4,323	)	$	151,235
State and other	5,792		(16,856		)	(11,064		)
Total	$	161,350	$	(21,179	)	$	140,171

Income from continuing operations before income taxes attributable to TEGNA Inc. consists entirely of domestic income.

The provision for income taxes varies from the U.S. federal statutory tax rate as a result of the following differences:



	2018	2017	2016
U.S. statutory tax rate	21.0%	35.0%	35.0%
Increase (decrease) in taxes resulting from:
State taxes (net of federal income tax benefit)	2.9	2.4	2.4
Domestic manufacturing deduction	—	(3.0)	(3.3)
Uncertain tax positions, settlements and lapse of statutes of limitations	(0.3)	(0.9)	(0.5)
Net deferred tax write offs and deferred tax rate adjustments	(1.0)	(6.3)	(2.4)
Enactment of the Tax Cuts and Jobs Act	(1.1)	(70.9)	—
Non-deductible transactions costs	—	1.2	0.8
Net excess benefits on share-based payments	0.1	(0.4)	(1.4)
Other, net	(0.5)	(1.3)	0.6
Effective tax rate	21.1%	(44.2%)	31.2%

Deferred income taxes reflect temporary differences in the recognition of revenue and expense for tax reporting and financial statement purposes. Deferred tax liabilities and assets are adjusted for changes in tax laws or tax rates of the various tax jurisdictions as of the enacted date.

Pub. L. No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (Tax Act), was enacted into law as of December 22, 2017. Among other provisions, the Tax Act reduced the federal tax rate to 21% effective for us as of January 1, 2018. On the same date, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. We recognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in our consolidated financial statements for the year ended December 31, 2017. We completed our 2017 U.S. federal and state returns in 2018 and recorded measurement period adjustments for the revaluation of deferred tax assets and liabilities at the reduced 21% federal tax rate, which reduced tax expense by $5.4 million and our 2018 effective income tax rate by one percentage point. As of December 31, 2018, the accounting for the income tax effects of the Tax Act has been completed.

Deferred tax liabilities and assets were composed of the following at the end of December 31, 2018 and December 31, 2017 (in thousands):



	Dec. 31,
	2018			2017
Liabilities
Accelerated depreciation	$	43,396		$	40,568
Accelerated amortization of deductible intangibles	427,760			420,301
Other	2,655			5,255
Total deferred tax liabilities	473,811			466,124
Assets
Accrued compensation costs	13,440			15,133
Pension and other post-retirement benefits	34,679			39,769
Loss carryforwards	120,695			132,214
Other	34,044			33,116
Total deferred tax assets	202,858			220,232
Valuation allowance	125,894			136,418
Total net deferred tax (liabilities)	$	(396,847	)	$	(382,310	)

As of December 31, 2018, we had approximately $452.9 million of capital loss carryforwards for federal and state purposes which can only be utilized to the extent capital gains are recognized. Losses of $351.8 million will expire if not used in 2019, while the remaining losses will expire if not used prior to 2023. As of December 31, 2018, we also had approximately $18.6 million of state net operating loss carryovers that, if not utilized, will expire in various amounts beginning in 2019 through 2038 and $0.4 million of state interest disallowance carryovers that do not expire.

Included in total deferred tax assets are valuation allowances of approximately $125.9 million as of December 31, 2018 and $136.4 million as of December 31, 2017, primarily related to federal and state capital losses and state net operating losses available for carry forward to future years. This $10.5 million change in the valuation allowance was the result of a $14.4 million decrease primarily due to the utilization and expected utilization of capital loss deferred tax assets, and a $3.9 million increase primarily related to valuation allowance required on certain stock-based compensation. If, in the future, we believe that it is more-likely-than-not that these deferred tax assets will be realized, the valuation allowances will be reversed in the Consolidated Statement of Income.

Realization of deferred tax assets for which valuation allowances have not been established is dependent upon generating sufficient future taxable income. We expect to realize the benefit of these deferred tax assets through future reversals of our deferred tax liabilities, through the recognition of taxable income in the allowable carryback and carryforward periods, and through implementation of future tax planning strategies. Although realization is not assured, we believe it is more likely than not that all deferred tax assets for which valuation allowances have not been established will be realized.

Tax Matters Agreements

Prior to the May 31, 2017 spin-off of the Cars.com business and the June 29, 2015 spin-off of our publishing businesses, we entered into a Tax Matters Agreement with each of Cars.com Inc. and Gannett Co. Inc. that governs each company’s respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns. Each agreement provides that we will generally indemnify the spun-off business (Cars.com Inc. or Gannett Co. Inc. as applicable) against taxes attributable to assets or operations for all tax periods or portions thereof prior to the spin-off date including separately-filed U.S. federal, state, and foreign taxes.

Uncertain Tax Positions

The following table summarizes the activity related to unrecognized tax benefits, excluding the federal tax benefit of state tax deductions (in thousands):




	2018			2017			2016
Change in unrecognized tax benefits
Balance at beginning of year	$	15,043		$	17,300		$	19,491
Additions based on tax positions related to the current year	40			156			213
Additions for tax positions of prior years	2,631			11			162
Reductions for tax positions of prior years	—			(636		)	(1,214		)
Settlements	(182		)	(852		)	—
Reductions due to lapse of statutes of limitations	(4,689		)	(936		)	(1,352		)
Balance at end of year	$	12,843		$	15,043		$	17,300

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $10.6 million as of December 31, 2018, and $10.7 million as of December 31, 2017. This amount includes the federal tax benefit of state tax deductions.

We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. We also recognize interest income attributable to overpayment of income taxes and from the reversal of interest expense previously recorded for uncertain tax positions which are subsequently released as a component of income tax expense. We recognized income from interest for uncertain tax positions of $0.2 million in 2018 and $0.3 million in 2017 while recording expense of $0.7 million in 2016. The amount of accrued interest expense and penalties payable related to unrecognized tax benefits was $1.4 million as of December 31, 2018 and $1.6 million as of December 31, 2017.

We file income tax returns in the U.S. and various state jurisdictions. The 2015 through 2018 tax years remain subject to examination by the Internal Revenue Service and state authorities. Tax years before 2015 remain subject to examination by certain states due to ongoing audits.

It is reasonably possible that the amount of unrecognized benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. These changes may be the result of settlement of ongoing audits, lapses of statutes of limitations or other regulatory developments. At this time, we estimate the amount of our gross unrecognized tax positions may decrease by up to approximately $3.9 million within the next 12 months primarily due to lapses of statutes of limitations and settlement of ongoing audits in various jurisdictions.