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Income Taxes and Deferred Tax Asset/Liability | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes and Deferred Tax Asset/Liability |
12. | Income Taxes and Deferred Tax Asset/Liability
The Company and its subsidiaries file U.S. federal and various U.S. state income tax returns. Current income tax expense (or benefit) represents federal and state taxes based on tax paid or expected to be payable or receivable for the periods shown in the consolidated statements of operations. Current income tax expense represents federal and state income tax paid or expected to be payable for the years shown in the consolidated statements of operations. The income tax expense in the accompanying consolidated financial statements consists of the following (amounts in thousands):
| Years Ended December 31,
| 2018 |  | 2017 |  | 2016
Current tax expense | $ | 288 |  |  | $ | 118 |  |  | $ | 88 |
Deferred tax expense | 1,450 |  |  | — |  |  | — |
Total tax expense | $ | 1,738 |  |  | $ | 118 |  |  | $ | 88 |
The income tax provision differs from the amount using the statutory federal income tax rate of 21% for 2018 and 35% for the prior years for the following reasons (amounts in thousands):
| Years Ended December 31,
| 2018 |  | 2017 |  | 2016
| Amount |  | % |  | Amount |  | % |  | Amount |  | %
Tax expense (benefit) at the U.S. federal statutory rate | $ | 6,568 |  |  | 21.0 | % |  | $ | 5,577 |  |  | 35.0 | % |  | $ | (2,563 | ) |  | 35.0 | %
State tax based on income, net of refunds and federal benefits | 364 |  |  | 1.2 |  |  | (264 | ) |  | (1.7 | ) |  | (113 | ) |  | 1.5 |
Taxes on subsidiaries’ and joint ventures’ earnings allocated to noncontrolling interests owners | (4,097 | ) |  | (13.1 | ) |  | (5,504 | ) |  | (34.5 | ) |  | (3,786 | ) |  | 51.7 |
Valuation allowance | (1,013 | ) |  | (3.3 | ) |  | (18,006 | ) |  | (113.0 | ) |  | 6,919 |  |  | (94.5 | )
Tax credits | (286 | ) |  | (0.9 | ) |  | (349 | ) |  | (2.2 | ) |  | (1,258 | ) |  | 17.2 |
Tax rate change | (281 | ) |  | (0.9 | ) |  | 19,545 |  |  | 122.7 |  |  | — |  |  | — |
Return to provision | 21 |  |  | 0.1 |  |  | (62 | ) |  | (0.4 | ) |  | 400 |  |  | (5.5 | )
Earn-out liability | — |  |  | — |  |  | 460 |  |  | 2.9 |  |  | 433 |  |  | (5.9 | )
Equity compensation | 26 |  |  | 0.1 |  |  | (1,371 | ) |  | (8.6 | ) |  | — |  |  | — |
Other permanent differences | 436 |  |  | 1.4 |  |  | 92 |  |  | 0.6 |  |  | 56 |  |  | (0.8 | )
Income tax expense | $ | 1,738 |  |  | 5.6 | % |  | $ | 118 |  |  | 0.8 | % |  | $ | 88 |  |  | (1.3 | )%
The 2018 effective income rate varied from the statutory rate primarily as a result of a change in the valuation allowance on our net deferred tax assets exclusive of deferred tax liabilities on indefinite lived assets and net income attributable to noncontrolling interest owners, which is taxable to those owners rather than the Company. The 2017 effective income rate varied from the statutory rate primarily as a result of the change in federal tax rate under the new Tax Act offset by a change in the valuation allowance, net income attributable to noncontrolling interest owners, and equity compensation. The 2016 effective income rate varied from the statutory rate primarily as a result of a change in the valuation allowance offset by net income attributable to noncontrolling interest owners, and tax credits. Deferred tax assets and liabilities consist of the following (amounts in thousands):
| Long Term
| As of December 31,
| 2018 |  | 2017
Assets related to: |  |  |
Accrued compensation and other | $ | 3,707 |  |  | $ | 3,417 |
Goodwill | — |  |  | 1,133 |
Noncontrolling interests | 1,687 |  |  | 1,648 |
Deferred revenue | 232 |  |  | 312 |
Revaluation of put/call liabilities | 11,570 |  |  | 11,269 |
Net operating loss carryforwards | 22,818 |  |  | 26,015 |
Total deferred tax assets | 40,014 |  |  | 43,794 |
Valuation allowance for deferred tax assets | (31,718 | ) |  | (36,545 | )
Net deferred tax assets | $ | 8,296 |  |  | $ | 7,249 |
Liabilities related to: |  |  |
Depreciation of property and equipment | (7,709 | ) |  | (6,661 | )
Amortization of tax basis goodwill | (1,450 | ) |  | — |
Other | (587 | ) |  | (588 | )
Net deferred tax liabilities | $ | (9,746 | ) |  | $ | (7,249 | )
Net total deferred tax liabilities | $ | (1,450 | ) |  | $ | — |
We have federal and state net operating loss ("NOL") carryforwards of $94 million and $52 million, respectively, which will expire at various dates in the next 18 years for U.S. federal income tax and in the next 5 to 20 years for the various state jurisdictions where we operate. Such NOL carryforwards expire beginning in 2020 through 2038. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (3) creating a new limitation on deductible interest expense; and (4) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; (5) expanding the limitation for executive compensation deductions; and (6) implementing 100% immediate expensing of qualified property. As a result of the reduced federal corporate tax rate under the Tax Act, the Company has reduced the value of its net deferred tax assets $19.3 million to reflect the enacted rate. This reduction was entirely offset with a corresponding reduction of our valuation allowance which resulted in no charge to the tax provision for the year. The Tax Act also provides that existing AMT credit carryforwards are refundable beginning in 2018. The Company has approximately $210 thousand of AMT credit carryforwards that are expected to be fully refunded by 2022. Therefore, we have recorded a tax benefit and receivable for these credits in our December 31, 2017 financial statements. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. This assessment includes any impact from the newly enacted Tax Act. A significant piece of objective negative evidence evaluated was the recurring historical losses from 2013 to 2016 and the first quarter of 2017. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. On the basis of this evaluation, as of December 31, 2018, the Company continued to maintain a valuation allowance of $31.7 million on the net deferred tax assets including federal and state net operating losses as they are not likely to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if objective negative evidence or cumulative losses are no longer present and additional weight may be given to subjective evidence such as our projections for growth. Deferred tax liabilities are a consideration in the analysis of whether to apply a valuation allowance because taxable temporary differences may be used as a source of taxable income to support the realization of deferred tax assets. A deferred tax liability that relates to an asset with an indefinite life, such as goodwill, may not be considered a source of income and should not be netted against deferred tax assets for valuation allowance purposes. The Company has a deferred tax liability for the excess of book over tax basis difference in its goodwill. A $1.5 million deferred tax expense has been recorded to reflect this liability. If our assumptions change and we determine we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2018 will be accounted for as follows: approximately $25.6 million will be recognized as a reduction of income tax expense and $6.1 million will be recorded as an increase in equity. As a result of the Company’s analysis, management has determined that the Company does not have any material uncertain tax positions. The Company’s policy is to recognize interest related to any underpayment of taxes as interest expense and penalties as administrative expenses. No interest or penalties have been accrued at December 31, 2018, 2017 or 2016. The Company’s U.S. federal income tax returns for 2015 and later years are open and subject to examination by the I.R.S. In addition, the Company’s state income tax returns for 2014 and later years are open and subject to examination.

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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