Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pretax book income or loss. The tax effects of discrete items, including but not limited to, excess tax benefits associated with stock-based compensation, changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. The effective tax rate (income taxes as a percentage of income before income taxes) including discrete items was 31.0% and 28.0% for the three and nine months ended September 30, 2019, respectively, as compared to 20.1% and 22.8% for the three and nine months ended September 30, 2018, respectively. The Company’s effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings, changes to our state valuation allowance and the level of our tax credits. Certain of these and other factors, including our history and projections of pretax earnings, are considered in assessing our ability to realize our net deferred tax assets.

As discussed in Note 5, “Acquisitions,” the Company finalized its allocation of the purchase price pertaining to the Pinnacle Acquisition during the third quarter of 2019. During the nine months ended September 30, 2019, the effect of measurement period adjustments were an increase of $0.8 million to deferred tax liabilities.

The adoption of ASC 842, which is described fully in Note 3, “New Accounting Pronouncements,” required us to adjust the deferred income taxes associated with our Master Leases through retained earnings as of January 1, 2019. Upon adoption, the Company recorded a reduction to our net deferred tax asset of $80.6 million, an increase to our net deferred tax liability of $223.2 million, and a decrease to retained earnings of $303.8 million.