Income Taxes

The components of the provision for income taxes are as follows:



	Years Ended December 31,
	2017		2016		2015
($ in thousands)
Current
Federal	$	15,670	$	12,790	$	28,077
State	1,985		1,855		2,539
Total current tax expense (benefit)	17,655		14,645		30,616
Deferred
Federal	20,895		5,489		4,339
State	1,940		910		2,017
Total deferred tax expense (benefit)	22,835		6,399		6,356
Total expense (benefit) for income taxes	$	40,490	$	21,044	$	36,972

The following presents a reconciliation of the provision (benefit) for income taxes computed at the federal statutory rate to the provision (benefit) for income taxes recognized in the Consolidated Statements of Operations for the years indicated:



	Years Ended December 31,
	2017					2016					2015
($ in thousands)
Tax at statutory rate	$	28,150		35	%	$	24,432		35	%	$	23,675	35	%
State taxes, net of federal benefit	3,548			4		2,010			3		2,717		4
Effect of U.S. tax reform (the Tax Act)	13,074			16		—			—		—		—
Effect of net income (loss) attributable to noncontrolling interests	(1,017		)	(1	)	(91		)	—		1,492		2
Change in valuation allowance	(2,613		)	(3	)	(5,125		)	(7	)	7,812		12
Other, net	(652		)	(1	)	(182		)	(1	)	1,276		2
Income tax expense (benefit)	$	40,490		50	%	$	21,044		30	%	$	36,972	55	%

The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of 50%, 30% and 55% for the years ended December 31, 2017, 2016 and 2015, respectively. The Company's tax position for the years ended December 31, 2017, 2016 and 2015 was impacted by changes in the valuation allowance related to the unrealized and realized gains and losses on the Company’s investments.

On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted which made significant changes to federal income tax law, including reducing the statutory corporate income tax rate to 21 percent from 35 percent. The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 118, which specifies, among other things, that reasonable estimates of the income tax effects of the Tax Act should be used, if determinable. The Company has accounted for the effects of the Tax Act using reasonable estimates based on currently available information and its interpretations thereof. This accounting may change due to, among other things, changes in interpretations the Company has made or the issuance of new tax or accounting guidance. In accordance with ASC 740, the effects of changes in tax rates and laws on deferred tax balances are recognized in the period in which the new legislation is enacted, this was the primary driver of the $13.1 million estimated income tax expense impact recognized in 2017 as a result of this legislation.

Deferred taxes resulted from temporary differences between the amounts reported in the consolidated financial statements and the tax basis of assets and liabilities. The tax effects of temporary differences are as follows:



	December 31,
	2017			2016
($ in thousands)
Deferred tax assets:
Intangible assets	$	10,706		$	19,348
Net operating losses	16,769			20,272
Compensation accruals	7,681			8,854
Capitalized transaction costs	5,849			10,022
Unrealized loss/(gain)	1,473			5,291
Capital losses	870			417
Other	1,675			977
Gross deferred tax assets	45,023			65,181
Valuation allowance	(3,088		)	(5,731		)
Gross deferred tax assets after valuation allowance	41,935			59,450
Deferred tax liabilities:
Intangible assets	(9,507		)	(11,915		)
Gross deferred tax liabilities	(9,507		)	(11,915		)
Deferred tax assets, net	$	32,428		$	47,535

At each reporting date, the Company evaluates the positive and negative evidence used to determine the likelihood of realization of its deferred tax assets. The Company maintained a valuation allowance in the amount of $3.1 million and $5.7 million at December 31, 2017 and 2016, respectively, relating to deferred tax assets on items of a capital nature as well as certain state deferred tax assets.

As of December 31, 2017, the Company had net operating loss carry-forwards for federal income tax purposes represented by a $8.5 million deferred tax asset. The related federal net operating loss carry-forwards are scheduled to begin to expire in the year 2031. As of December 31, 2017, the Company had state net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a $8.3 million deferred tax asset. The state net operating loss carry-forwards are scheduled to begin to expire in 2018.

Internal Revenue Code Section 382 limits tax deductions for net operating losses, capital losses and net unrealized built-in losses after there is a substantial change in ownership in a corporation’s stock involving a 50 percentage point increase in ownership by 5% or larger stockholders. During the year ended December 31, 2009, the Company incurred an ownership change as defined in Section 382. At December 31, 2017, the Company has pre-change losses represented by deferred tax assets totaling $12.6 million. The utilization of these assets is subject to an annual limitation of $1.1 million.

The Company has had no unrecognized tax benefits activity for the years ended December 31, 2017, 2016 and 2015. The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. The Company recorded no interest or penalties related to unrecognized tax benefits at December 31, 2017, 2016 and 2015.

The earliest federal tax year that remains open for examination is 2010 since net operating loss carry-forwards from 2010 could be denied when claimed in future years. The earliest open years in the Company’s major state tax jurisdictions are 2008 for Connecticut and 2013 for all of the Company's remaining state tax jurisdictions.