XML 37 R22.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes: On December 22, 2017, the US enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act, which is commonly referred to as “US tax reform,” significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate from 35% to 21% starting in 2018. As a result, we recorded a net charge of $1.2 million during the fourth quarter of 2017. This amount, which is included in Provision for income tax expense in the consolidated statement of operations, consists of three components: (i) a $10.1 million charge resulting from the remeasurement of our net federal deferred tax assets based on the new lower corporate income tax rate, (ii) a $14.7 million credit resulting from the remeasurement of our net state deferred tax assets as a result of the decreased federal benefit implicit in the new lower corporate income tax rate, and (iii) a $5.8 million charge resulting from the remeasurement of our net valuation allowances for state NOLs as a result of the decreased federal benefit implicit in the new lower corporate income tax rate. The net charge of $1.2 million did not have a material impact on our effective tax rate. In addition, we adopted the Tax Act’s provisions allowing for 100% bonus depreciation on qualifying assets placed in service after September 27, 2017, which resulted in additional bonus depreciation deductions of $8.8 million in the fourth quarter of 2017. The significant components of the Provision for income tax expense related to continuing operations are as follows (in millions):
| For the Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
Federal | $ | 72.2 |  |  | $ | 16.1 |  |  | $ | 2.6 |
State and other | 12.8 |  |  | 14.9 |  |  | 12.2 |
Total current expense | 85.0 |  |  | 31.0 |  |  | 14.8 |
Deferred: |  |  |  |  |  |  |  |
Federal | 74.2 |  |  | 130.5 |  |  | 113.9 |
State and other | 1.4 |  |  | 2.4 |  |  | 13.2 |
Total deferred expense | 75.6 |  |  | 132.9 |  |  | 127.1 |
Total income tax expense related to continuing operations | $ | 160.6 |  |  | $ | 163.9 |  |  | $ | 141.9 |
A reconciliation of differences between the federal income tax at statutory rates and our actual income tax expense on our income from continuing operations, which include federal, state, and other income taxes, is presented below:
| For the Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Tax expense at statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Increase (decrease) in tax rate resulting from: |  |  |  |  |  |  |  |
State and other income taxes, net of federal tax benefit | 3.5 | % |  | 3.8 | % |  | 3.6 | %
Increase in valuation allowance | 0.4 | % |  | 0.1 | % |  | 1.2 | %
Noncontrolling interests | (4.6 | )% |  | (4.4 | )% |  | (5.3 | )%
Share-based windfall tax benefits | (1.8 | )% |  | — | % |  | — | %
Other, net | (0.1 | )% |  | (0.5 | )% |  | 1.4 | %
Income tax expense | 32.4 | % |  | 34.0 | % |  | 35.9 | %
The Provision for income tax expense in 2017 was less than the federal statutory rate primarily due to: (1) the impact of noncontrolling interests and (2) share-based windfall tax benefits offset by (3) state and other income tax expense. See Note 1, Summary of Significant Accounting Policies, “Income Taxes,” for a discussion of the allocation of income or loss related to pass-through entities, which is referred to as the impact of noncontrolling interests in this discussion. The Provision for income tax expense in 2016 was less than the federal statutory rate primarily due to: (1) the impact of noncontrolling interests offset by (2) state and other income tax expense. The Provision for income tax expense in 2015 was greater than the federal statutory rate primarily due to: (1) state and other income tax expense and (2) an increase in our valuation allowance offset by (3) the impact of noncontrolling interests. The increase in our valuation allowance in 2015 related primarily to changes to our state apportionment percentages resulting from the acquisitions of EHHI, Reliant, and CareSouth and changes to our current forecast of earnings in each jurisdiction. Deferred income taxes recognize the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes and the impact of available NOLs. The significant components of our deferred tax assets and liabilities are presented in the following table (in millions):
| As of December 31,
| 2017 |  | 2016
Deferred income tax assets: |  |  |
Net operating loss | $ | 77.3 |  |  | $ | 64.8 |
Property, net | 36.3 |  |  | 52.1 |
Insurance reserve | 19.9 |  |  | 32.0 |
Stock-based compensation | 19.5 |  |  | 23.7 |
Allowance for doubtful accounts | 14.0 |  |  | 19.3 |
Alternative minimum tax | — |  |  | 7.5 |
Carrying value of partnerships | — |  |  | 12.9 |
Other accruals | 20.4 |  |  | 26.1 |
Tax credits | 2.8 |  |  | 2.6 |
Noncontrolling interest | 26.3 |  |  | 14.8 |
Other | 0.5 |  |  | 0.8 |
Total deferred income tax assets | 217.0 |  |  | 256.6 |
Less: Valuation allowance | (35.8 | ) |  | (27.9 | )
Net deferred income tax assets | 181.2 |  |  | 228.7 |
Deferred income tax liabilities: |  |  |  |  |
Deferred revenue | (28.9 | ) |  | — |
Intangibles | (80.0 | ) |  | (113.2 | )
Convertible debt interest | — |  |  | (38.1 | )
Carrying value of partnerships | (6.2 | ) |  | — |
Other | (2.5 | ) |  | (1.6 | )
Total deferred income tax liabilities | (117.6 | ) |  | (152.9 | )
Net deferred income tax assets | $ | 63.6 |  |  | $ | 75.8 |
In the consolidated statements of shareholders’ equity, the fair value adjustments to redeemable noncontrolling interests have been reported net of tax for each period presented. The amount of tax benefit allocated to Capital in excess of par value was ($25.1) million, ($4.2) million, and $(11.7) million for the years ended December 31, 2017, 2016, and 2015, respectively. We have state NOLs of $77.3 million that expire in various amounts at varying times through 2031. For the years ended December 31, 2017, 2016, and 2015, the net changes in our valuation allowance were $7.9 million, $0.3 million, and $4.6 million, respectively. The increase in our valuation allowance in 2017 related primarily to the impact of remeasuring our state NOL deferred tax assets and their corresponding valuation allowances pursuant to the Tax Act. The increase in our valuation allowance in 2016 related primarily to the valuation of our tax credits. The increase in our valuation allowance in 2015 related primarily to changes to our state apportionment percentages resulting from the acquisitions of EHHI, Reliant, and CareSouth and changes to our current forecast of earnings in each jurisdiction. As of December 31, 2017, we have a remaining valuation allowance of $35.8 million. This valuation allowance remains recorded due to uncertainties regarding our ability to utilize a portion of our state NOLs and other credits before they expire. The amount of the valuation allowance has been determined for each tax jurisdiction based on the weight of all available evidence including management’s estimates of taxable income for each jurisdiction in which we operate over the periods in which the related deferred tax assets will be recoverable. It is possible we may be required to increase or decrease our valuation allowance at some future time if our forecast of future earnings varies from actual results on a consolidated basis or in the applicable state tax jurisdictions, or if the timing of future tax deductions or credit utilizations differs from our expectations. During the third quarter of 2016, we filed a non-automatic tax accounting method change related to billings denied under pre-payment claims reviews conducted by certain of our Medicare Administrative Contractors. In March 2017, the IRS approved our request resulting in additional cash tax benefits of approximately $51.3 million through December 31, 2017. Approximately $39 million of this amount represents pre-payment claims denials received in years prior to and including the year ended December 31, 2015. These benefits are expected to reverse as pre-payment claims denials are settled and collected. This change did not have a material impact on our effective tax rate. The Tax Act included revisions to Internal Revenue Code §451 that may eliminate this deferral of revenue for tax purposes and require us to pay tax on such denied claims. We are currently evaluating this provision of the Tax Act and its future impact on the method change we received in March 2017. As of January 1, 2015, total remaining gross unrecognized tax benefits were $0.9 million, all of which would have affected our effective tax rate if recognized. The amount of unrecognized tax benefits did not change significantly during 2015. Total remaining gross unrecognized tax benefits were $2.9 million as of December 31, 2015, all of which would have affected our effective tax rate if recognized. The amount of unrecognized tax benefits did not change significantly during 2016. Total remaining gross unrecognized tax benefits were $2.8 million as of December 31, 2016, all of which would have affected our effective tax rate if recognized. The amount of unrecognized tax benefits decreased $2.5 million during 2017, primarily related to the favorable settlement of a federal interest claim. Total remaining gross unrecognized tax benefits were $0.3 million as of December 31, 2017, all of which would affect our effective tax rate if recognized. A reconciliation of the beginning and ending liability for unrecognized tax benefits is as follows (in millions):
| Gross Unrecognized Income Tax Benefits |  | Accrued Interest and Penalties
January 1, 2015 | $ | 0.9 |  |  | $ | — |
Gross amount of increases in unrecognized tax benefits related to prior periods | 1.7 |  |  | — |
Gross amount of increases in unrecognized tax benefits related to current period | 0.3 |  |  | — |
December 31, 2015 | 2.9 |  |  | — |
Gross amount of increases in unrecognized tax benefits related to prior periods | 0.3 |  |  | — |
Gross amount of decreases in unrecognized tax benefits related to prior periods | (0.4 | ) |  | — |
Gross amount of increases in unrecognized tax benefits related to current period | 0.1 |  |  | — |
Gross amount of decreases in unrecognized tax benefits related to current period | (0.1 | ) |  | — |
December 31, 2016 | 2.8 |  |  | — |
Gross amount of decreases in unrecognized tax benefits related to prior periods | (0.4 | ) |  | — |
Decreases in unrecognized tax benefits relating to settlements with taxing authorities | (2.1 | ) |  | — |
December 31, 2017 | $ | 0.3 |  |  | $ | — |
Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. Interest recorded as part of our income tax provision during 2017, 2016, and 2015 was not material. Accrued interest income related to income taxes as of December 31, 2017 and 2016 was not material. In December 2014, we signed an agreement with the IRS to begin participating in their Compliance Assurance Process, a program in which we and the IRS endeavor to agree on the treatment of significant tax positions prior to the filing of our federal income tax return. We renewed this agreement in December 2015 for the 2016 tax year, in December 2016 for the 2017 tax year, and in January 2018 for the 2018 tax year. As a result of these agreements, the IRS surveyed our 2013, 2012, and 2011 federal income tax returns and is currently examinin g 2016, 2017, and 2018 tax years. Our 2014 federal income tax return has been filed, and the IRS has not indicated its intent to examine or survey this return. In February 2017, the IRS issued a no-change Revenue Agent’s Report effectively closing our 2015 tax audit. We have settled federal income tax examinations with the IRS for all tax years throu gh 2013 as well as 2015. Our state income tax returns are also periodically examined by various regulatory taxing authorities. We are currently under audit by two states for tax years ranging from 2012 through 2015. For the tax years that remain open under the applicable statutes of limitations, amounts related to unrecognized tax benefits have been considered by management in its estimate of our potential net recovery of prior years’ income taxes. Based on discussions with taxing authorities, we anticipate none of our unrecognized tax benefits will be released within the next 12 months. See also Note 1, Summary of Significant Accounting Policies, “Recent Accounting Pronouncements.”

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration