INCOME TAXES:

The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2016, 2015 and 2014 (in thousands):



	2016			2015			2014
Provision for income taxes	$	122,128		$	57,694		$	97,432
Current provision for income taxes:
Federal	$	113,737		$	80,420		$	92,609
State	2,273			5,720			5,641
	116,010			86,140			98,250
Deferred provision (benefit) for income taxes:
Federal	8,555			(26,637		)	3,170
State	(2,437		)	(1,809		)	(3,988		)
	6,118			(28,446		)	(818		)
Provision for income taxes	$	122,128		$	57,694		$	97,432

The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision:



	2016		2015		2014
Federal statutory rate	35.0	%	35.0	%	35.0	%
Adjustments:
State income taxes, net of federal tax benefit (1)	0.2	%	0.6	%	(0.1	)%
Non-deductible items (2)	1.0	%	1.2	%	3.4	%
Domestic Production Activities Deduction	(3.4	)%	(3.9	)%	(3.2	)%
Effect of consolidated VIEs (3)	1.2	%	1.4	%	0.8	%
Changes in unrecognized tax benefits (4)	0.3	%	(1.9	)%	(3.4	)%
Basis in stock of subsidiaries (5)	—	%	(5.5	)%	—	%
Federal Research and Development Credit	(0.4	)%	(1.1	)%	—	%
Other	(0.6	)%	(0.6	)%	(1.0	)%
Effective income tax rate	33.3	%	25.2	%	31.5	%

_______________________________________________________


(1)	Included in state income taxes are deferred income tax effects related to certain acquisitions and/or intercompany mergers.

(2)

Included in 2014 is the current income taxes related to the taxable gain on sale of certain broadcast assets, which we acquired with the stock purchase of the Allbritton Companies in the same year. There was no book gain on this sale. Since a deferred tax liability was not established for the excess of book basis over tax basis of goodwill, a deferred tax benefit does not offset the current tax expense.


(3)	Certain of our consolidated VIEs incur expenses that are not attributable to non-controlling interests because we absorb certain related losses of the VIEs. These expenses are not tax-deductible by us, and since these VIEs are treated as pass-through entities for income tax purposes, deferred income tax benefits are not recognized.

(4)

During the year ended December 31, 2016, 2015, and 2014, we recorded a $1.0 million, $5.7 million, and $10.8 million benefit, respectively, related to the release of liabilities for unrecognized tax benefits as a result of expiration of the applicable statute of limitations and settlements with taxing authorities. See table below which summarizes the activity related to our accrued unrecognized tax benefits.


(5)	During the year ended December 31, 2015, we recorded a $12.6 million benefit related to the realization of a capital loss upon the sale of the stock of a subsidiary.

Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to deferred taxes. Total deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2015 were as follows (in thousands):



	2016			2015
Deferred Tax Assets:
Net operating and capital losses:
Federal	$	68,455		$	14,884
State	63,630			65,822
Goodwill and intangible assets	28,879			33,979
Other	44,873			37,812
	205,837			152,497
Valuation allowance for deferred tax assets	(51,846		)	(58,333		)
Total deferred tax assets	$	153,991		$	94,164
Deferred Tax Liabilities:
Goodwill and intangible assets	$	(650,139	)	$	(561,812	)
Property & equipment, net	(80,950		)	(76,106		)
Contingent interest obligations	(20,277		)	(30,575		)
Other	(11,942		)	(10,743		)
Total deferred tax liabilities	(763,308		)	(679,236		)
Net deferred tax liabilities	$	(609,317	)	$	(585,072	)

Our remaining federal and state capital and net operating losses will expire during various years from 2017 to 2036, and some of them are subject to annual limitations under the Internal Revenue Code Section 382 and similar state provisions. As discussed in Income taxes under Note 1. Nature of Operations and Summary of Significant Accounting Policies, we establish valuation allowances in accordance with the guidance related to accounting for income taxes. As of December 31, 2016, a valuation allowance has been provided for deferred tax assets related to a substantial portion of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies and projected future taxable income. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that they will be realized in the future. During the year ended December 31, 2016, we decreased our valuation allowance by $6.5 million to $51.8 million. The reduction in valuation allowance was primarily due to changes in estimates of apportionment and a tax rate reduction in certain states. During the year ended December 31, 2015, we decreased our valuation allowance by $0.6 million to $58.3 million. The reduction in valuation allowance was primarily due to changes in estimates of apportionment for certain states. During the year ended December 31, 2014, we increased our valuation allowance by $7.8 million to $58.9 million. The increase in valuation allowance was primarily due to intercompany mergers, effective December 31, 2014, which we expected to decrease the utilization of state NOL carryforwards.

As of December 31, 2016 and 2015, we had $4.7 million and $3.3 million of gross unrecognized tax benefits, respectively. Of this total, for the years ended December 31, 2016 and 2015, $3.9 and $2.6 million (net of federal effect on state tax issues) represent the amounts of unrecognized tax benefits that, if recognized, would favorably affect our effective tax rates.

The following table summarizes the activity related to our accrued unrecognized tax benefits (in thousands):



	2016			2015			2014
Balance at January 1,	$	3,257		$	7,138		$	16,883
Additions related to prior year tax positions	420			1,458			—
Additions related to current year tax positions	2,053			472			1,450
Reductions related to settlements with taxing authorities	—			(1,517		)	(2,910		)
Reductions related to expiration of the applicable statute of limitations	(991		)	(4,294		)	(8,285		)
Balance at December 31,	$	4,739		$	3,257		$	7,138

In addition, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized $0.2 million, $0.2 million, and $0.7 million of income tax expense for interest related to uncertain tax positions for the years ended December 31, 2016, 2015 and 2014, respectively.

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. All of our 2013 and subsequent federal and state tax returns remain subject to examination by various tax authorities. Some of our pre-2013 federal and state tax returns may also be subject to examination. We do not anticipate the resolution of these matters will result in a material change to our consolidated financial statements. In addition, we don’t believe that our liability for unrecognized tax benefits would be materially impacted, in the next twelve months, as a result of expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and the resolution of examination issues and settlements with federal and certain state tax authorities.