INCOME TAXES

Income taxes attributable to continuing operations consist of the following (amounts in millions):



	For the Years Ended December 31,
	2017			2016			2015
Current income tax expense/(benefit):
Federal	$	(2.0	)	$	(0.5	)	$	2.2
State and local	(0.1		)	(0.1		)	0.5
	(2.1		)	(0.6		)	2.7
Deferred income tax expense/(benefit):
Federal	51.2			22.1			(0.5		)
State and local	1.0			2.4			(0.1		)
Foreign	—			—			(0.1		)
	52.2			24.5			(0.7		)
Income tax expense	$	50.1		$	23.9		$	2.0

Total income tax expense for the years ended December 31, 2017, 2016 and 2015 was allocated as follows (amounts in millions):



	For the Years Ended December 31,
	2017			2016			2015
Income from continuing operations	$	50.1		$	23.9		$	2.0
Interest expense	—			(0.1		)	0.2
Goodwill	—			—			(0.1		)
Stockholders’ equity	(0.3		)	(7.2		)	(2.1		)
	$	49.8		$	16.6		$	—

A reconciliation of significant differences between the reported amount of income tax expense and the expected amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of 35 percent to income before taxes is as follows:



	For the Years Ended December 31,
	2017		2016		2015 (1)
Income tax expense at U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	3.8		4.8		(7.1	)
Excess tax benefits from share-based compensation (2)	(3.5	)	—		—
Valuation allowance	0.2		0.1		79.1
Tax credits	(0.8	)	(0.6	)	136.0
Tax rate change (3)	26.5		—		—
Uncertain tax positions	(0.3	)	(1.0	)	(230.3	)
Other items, net (4)	1.1		0.6		(663.3	)
Income tax expense/(benefit)	62.0	%	38.9	%	(650.6	)%

(1)

The information provided for the year ended December 31, 2015 does not provide a meaningful reconciliation of the effective tax rate or comparable to other periods. The effective tax rate for the year is influenced by the relationship of the amount of “effective tax rate drivers” (i.e. non-deductible expenses, non-taxable income, tax credits, valuation allowance, uncertain tax positions, etc.) to income or loss before taxes. A significant asset impairment was recorded in the first quarter of 2015, resulting in a scenario where the company’s loss before tax for the year was near zero. Consequently, for 2015, the relationship between the “effective tax rate drivers” and loss before taxes is distorted.

(2)

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplified the accounting for share-based payment award transactions, including income tax consequences. The new guidelines required excess tax benefits and tax deficiencies to be recorded in the income statement when stock awards vest or are settled. As a result, the Company recognized a $2.9 million federal income tax benefit in the consolidated statement of operations (rather than additional paid-in capital) for the year ended December 31, 2017 from share-based compensation excess tax benefits.

(3)

On December 22, 2017, H.R. 1 (Tax Cuts and Jobs Act), which reduces the U.S. federal corporate tax rate to 21% from 35%, effective January 1, 2018 was enacted. According to ASC 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate resulted in a $21.4 million deferred income tax expense during the three-month period ended December 31, 2017.


(4)	Includes various items such as, non-deductible expenses, non-taxable income and return-to-accrual adjustments.

As of December 31, 2017 and 2016, the Company had income taxes receivable of $3.4 million and $1.3 million, respectively, included in other current assets. The income tax receivable at December 31, 2017 includes a $2.3 million Alternative Minimum Tax (AMT) Credit carryforward. The Tax Cuts and Jobs Act repeals the AMT for corporations and makes it refundable in years 2018 through 2020. Since the AMT credit carryforward is refundable from 2018 through 2020 and the company plans to utilize its AMT credit carryforward to reduce taxable income in 2018, the AMT credit carryforward was reclassified from deferred tax assets to other current assets as of December 31, 2017.

Deferred tax assets (liabilities) consist of the following components (amounts in millions):



	As of December 31,
	2017 (1)			2016
Deferred tax assets:
Allowance for doubtful accounts	$	5.3		$	6.9
Accrued payroll & employee benefits	9.0			11.4
Workers’ compensation	7.9			10.9
Amortization of intangible assets	26.0			56.3
Share-based compensation	6.1			7.8
Net operating loss carryforwards (2)	20.1			44.2
Tax credit carryforwards (3)	4.6			4.8
Other	2.4			1.1
Gross deferred tax assets	81.4			143.4
Less: valuation allowance	(0.7		)	(0.4		)
Net deferred tax assets	80.7			143.0
Deferred tax (liabilities):
Property and equipment	(4.0		)	(7.8		)
Deferred revenue	(18.0		)	(23.2		)
Investment in partnerships	(2.1		)	(3.2		)
Other liabilities	(0.5		)	(0.9		)
Gross deferred tax liabilities	(24.6		)	(35.1		)
Net deferred tax assets (liabilities)	$	56.1		$	107.9

(1)

On December 22, 2017, H.R. 1 (Tax Cuts and Jobs Act), which reduces the U.S. federal corporate tax rate to 21% from 35%, effective January 1, 2018, was enacted. According to ASC 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate resulted in a $21.4 million deferred income tax expense during the three-month period ended December 31, 2017.


(2)	The net operating loss (“NOL”) carry forwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the NOL carry forwards, as of December 31, 2017 and 2016, are presented net of unrecognized tax benefits of $2.1 million and $3.1 million, respectively.


(3)	The tax credit carry forwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the tax credit carry forwards are presented net of unrecognized tax benefits of $0.7 million for each of the years ended December 31, 2017 and 2016.

As of December 31, 2017, we have U.S. net operating loss (“NOL”) carry forwards of $52.6 million that are available to reduce future taxable income and begin to expire in 2034. In addition, we have research and development tax credits and employment tax credits of $1.9 million and $0.4 million, respectively, available to reduce future U.S. federal income taxes which begin to expire in 2032.

As of December 31, 2017, we have state NOL carry forwards of $223.0 million that are available to reduce future taxable income. In addition, we have $3.8 million of various state tax credits available to reduce future taxable income. The state NOL and tax credit carry forwards begin to expire at various times.

The valuation allowance for deferred tax assets as of December 31, 2017 and 2016 was $0.7 million and $0.4 million, respectively. The net change in the total valuation allowance for the year ended December 31, 2017 and December 31, 2016 was an increase of $0.3 million and $0.1 million, respectively. The valuation allowance is primarily related to certain state NOL and state tax credit carry forwards.

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 tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those jurisdictions during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income before the expiration of the carry forwards governed by the tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of future taxable income needed to support the realization of the deferred tax assets. As a result, as of December 31, 2017, management believes that it is more likely than not that we will realize the benefits of these deferred tax assets, net of the existing valuation allowances. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

Uncertain Tax Positions

We account for uncertain tax positions in accordance with the authoritative guidance for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in millions):



	For the Years Ended December 31,
	2017			2016
Balance at beginning of period	$	4.1		$	4.7
Additions for tax positions related to current year	—			—
Additions for tax positions related to prior year	—			—
Reductions for tax positions related to prior years	—			—
Lapse of statute of limitations	(0.3		)	(0.6		)
Change in statutory tax rate	(1.1		)	—
Settlements	—			—
Balance at end of period	$	2.7		$	4.1

The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate as a result of the recent tax reform resulted in a $1.1 million reduction in its uncertain tax positions recorded in net deferred tax assets at December 31, 2017. As of December 31, 2017, there is $2.7 million of unrecognized tax benefits recorded in deferred income taxes within the consolidated balance sheet that, if recognized in future periods, would impact our effective tax rate.

During the years ended December 31, 2017 and 2016, we recognized less than $(0.1) million and $(0.1) million of interest and penalties, respectively, as components of penalties or interest expense in connection with our reserve for uncertain tax positions. Interest and penalties, related to uncertain tax positions, included in the consolidated balance sheet at December 31, 2017 and 2016 were less than $0.1 million.

We are subject to income taxes in the U.S. and in many of the 50 individual states, with significant operations in Louisiana, Alabama, Georgia, Massachusetts and Tennessee. We are open to examination in the U.S. and in various individual states for tax years ended December 31, 2014 through December 31, 2017. We are also open to examination in various states for the years ended 2001 – 2017 resulting from net operating losses generated and available for carry forward from those years.