Income Taxes

12 Months Ended

Dec. 31, 2019

INCOME TAXES

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was enacted on December 22, 2017, and lowered the federal corporate income tax rate to 21% from 35% effective January 1, 2018. In accounting for income taxes, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using the enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. As a result of the reduction of the federal corporate income tax rate under the Tax Act, the Company revalued its ending net deferred income tax liabilities at December 31, 2017 and recognized a provisional $110.5 million income tax benefit.

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 in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company recognized the provisional tax impact related to the revaluation of deferred income tax assets and liabilities and included the amount in its consolidated financial statements for the year ended December 31, 2017. During third quarter 2018, the Company filed its 2017 Federal Income Tax Return which resulted in an immaterial adjustment to the deferred tax liability and the tax expense. Accordingly, the Company’s accounting for the federal rate reduction under the Tax Act was completed in 2018.

Income tax expense consisted of the following (in thousands):



	Years Ended December 31,
	2019			2018		2017
Current:
Federal	$	29,102		$	7,428	$	38,535
State	9,547			9,841		3,979
Foreign	(88		)	770		102
	38,561			18,039		42,616
Deferred:
Federal	15,094			37,284		(104,573		)
State	1,307			410		3,625
	16,401			37,694		(100,948		)
Total income tax expense (benefit)	$	54,962		$	55,733	$	(58,332	)

The effective income tax rate differs from the federal corporate tax rate of 21% in 2019 and 2018 and 35% in 2017 as follows (in thousands):



	Years Ended December 31,
	2019			2018			2017
Tax at statutory rate	$	46,600		$	47,015		$	50,595
Change in federal income tax rate	—			—			(110,508		)
State income taxes, net of federal tax benefits	8,575			8,098			4,943
Non-deductible meals and entertainment	1,117			1,044			1,495
Income tax credits	(1,600		)	(1,800		)	(1,780		)
Equity compensation	(207		)	(312		)	(820		)
Other, net	477			1,688			(2,257		)
Total income tax expense (benefit)	$	54,962		$	55,733		$	(58,332	)

At December 31, deferred income tax assets and liabilities consisted of the following (in thousands):



	December 31,
	2019		2018
Deferred income tax assets:
Insurance and claims accruals	$	48,537	$	47,031
Compensation-related accruals	8,067		7,413
Allowance for uncollectible accounts	3,690		3,628
Other	1,863		1,896
Gross deferred income tax assets	62,157		59,968
Deferred income tax liabilities:
Property and equipment	305,575		287,061
Prepaid expenses	4,928		4,772
Other	1,323		1,585
Gross deferred income tax liabilities	311,826		293,418
Net deferred income tax liability	$	249,669	$	233,450

Deferred income tax assets are more likely than not to be realized as a result of future taxable income and reversal of deferred income tax liabilities.

We recognized a $31 thousand decrease in the net liability for unrecognized tax benefits for the year ended December 31, 2019, and a $240 thousand decrease for the year ended December 31, 2018. We accrued interest expense of $0.1 million during 2019 and 2018, excluding from both years the reversal of accrued interest related to the adjustment of uncertain tax positions. If recognized, $2.0 million of unrecognized tax benefits as of December 31, 2019 and 2018 would impact our effective tax rate. Interest of $0.4 million as of December 31, 2019 and 2018 has been reflected as a component of the total liability. We expect no other significant increases or decreases for uncertain tax positions during the next twelve months. The reconciliations of beginning and ending gross balances of unrecognized tax benefits for 2019 and 2018 are shown below (in thousands).



	December 31,
	2019			2018
Unrecognized tax benefits, beginning balance	$	2,577		$	2,883
Gross increases – tax positions in prior period	127			106
Gross decreases – tax positions in prior period	—			—
Gross increases – current-period tax positions	222			444
Settlements	(385		)	(856		)
Unrecognized tax benefits, ending balance	$	2,541		$	2,577

We file U.S. federal income tax returns, as well as income tax returns in various states and several foreign jurisdictions. The years 2016 and forward are open for examination by the U.S. Internal Revenue Service (“IRS”), and various years are open for examination by state and foreign tax authorities. State and foreign jurisdictional statutes of limitations generally range from three to four years.