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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Taxes |
Income Taxes | Note 19—Income Taxes Income before provision for income taxes consists of the following (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  | 2017 |  | 2016 |
United States |  | $ | 111,002 |  | $ | 105,555 |  | $ | 48,097 |
Foreign |  |  | 2,356 |  |  | (272) |  |  | 774 |
Total |  |  | 113,358 |  |  | 105,283 |  |  | 48,871 |
The components of the provision for income taxes are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  | 2017 |  | 2016 |
Current provision (benefit) |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 3,405 |  | $ | 21,509 |  | $ | 4,726 |
State |  |  | 4,536 |  |  | 3,371 |  |  | 5,423 |
Foreign |  |  | 674 |  |  | (188) |  |  | 92 |
|  |  | 8,615 |  |  | 24,692 |  |  | 10,241 |
Deferred provision (benefit) |  |  |  |  |  |  |  |  |  |
Federal |  |  | 14,535 |  |  | 1,958 |  |  | 11,560 |
State |  |  | 2,120 |  |  | 1,219 |  |  | (727) |
Foreign |  |  | (139) |  |  | (36) |  |  | 72 |
|  |  | 16,516 |  |  | 3,141 |  |  | 10,905 |
Change in valuation allowance |  |  | 634 |  |  | 600 |  |  | — |
Total |  | $ | 25,765 |  | $ | 28,433 |  | $ | 21,146 |
A reconciliation of income tax expense compared to the amount of income tax expense that would result by applying the U.S. federal statutory income tax rate to pre-tax income is as follows:
|  | Year Ended December 31, |  |
|  | 2018 |  |  | 2017 |  |  | 2016 |  |
U.S. federal statutory income tax rate |  | 21.0 | % |  | 35.0 | % |  | 35.0 | % |
Impact of U.S tax reform |  | 1.1 |  |  | (9.3) |  |  | — |  |
State taxes, net of federal income tax impact |  | 5.1 |  |  | 2.9 |  |  | 6.4 |  |
Tax credits |  | (5.3) |  |  | — |  |  | (0.4) |  |
Income taxed at rates greater than U.S. |  | 0.4 |  |  | (0.2) |  |  | 0.4 |  |
Domestic production activities deduction |  | — |  |  | (2.3) |  |  | (1.1) |  |
Nondeductible meals & entertainment |  | 2.9 |  |  | 2.8 |  |  | 5.4 |  |
Other items |  | (0.2) |  |  | (0.7) |  |  | (1.5) |  |
Effective tax rate excluding income attributable to noncontrolling interests |  | 25.0 |  |  | 28.2 |  |  | 44.2 |  |
Impact of income from noncontrolling interests on effective tax rate |  | (2.3) |  |  | (1.2) |  |  | (0.9) |  |
Effective tax rate |  | 22.7 | % |  | 27.0 | % |  | 43.3 | % |
The provision for income taxes has been determined based upon the tax laws and rates in the countries in which we operate. The Company and its subsidiaries operating in the United States are subject to federal income tax rates of 21.0% and varying state income tax rates. Our principal international operations are in Canada. Our subsidiaries in Canada are subject to a corporate income tax rate of 27.0%. We did not have any non-taxable foreign earnings from tax holidays for taxable years 2016 through 2018. Deferred taxes are recognized for temporary differences between the financial reporting bases and tax bases of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based upon consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income, the length of the tax asset carryforward periods, and tax planning strategies. SAB 118 provides guidance on accounting for uncertainties of the effects of the Tax Act. Specifically, SAB 118 allowed companies to record provisional estimates of the impact of the Tax Act during a one year “measurement period” from the December 22, 2017 enactment date, similar to that used when accounting for business combinations. As a result of the Tax Act, we remeasured deferred tax assets and liabilities using the newly enacted tax rates and recorded a one-time net tax benefit of $9.4 million in the year ended December 31, 2017. As of December 31, 2018, our accounting for the Tax Act is complete. The provision for income taxes for the year ended December 31, 2018 includes a $1.1 million increase from the completion of our provisional accounting for the effects of the Tax Act under SAB 118. The increase is due to $0.6 million of additional expense associated with foreign tax credits, net of associated valuation allowances, and $0.5 million of additional expense related to the corporate tax rate change impact on return-to-provision adjustments, primarily for depreciation. The tax effect of temporary differences that give rise to deferred income taxes are as follows (in thousands):
|  | December 31, |
|  | 2018 |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |
Accrued compensation |  | $ | 4,999 |  | $ | 4,280 |
Accrued workers compensation |  |  | 10,309 |  |  | 7,980 |
Net operating losses |  |  | 34,615 |  |  | 982 |
Disallowed interest |  |  | 1,908 |  |  | — |
Capital loss carryforward |  |  | 10,796 |  |  | — |
Deferred rent |  |  | 1,552 |  |  | 57 |
Insurance reserves |  |  | 3,737 |  |  | 3,276 |
Loss reserves |  |  | 2,064 |  |  | 2,852 |
Tax credit |  |  | 1,505 |  |  | 2,364 |
State income taxes |  |  | 1,045 |  |  | 463 |
Other |  |  | 1,600 |  |  | 182 |
Total deferred tax assets |  |  | 74,130 |  |  | 22,436 |
Deferred tax liabilities |  |  |  |  |  |  |
Depreciation and amortization |  |  | (56,670) |  |  | (34,652) |
Prepaid expenses and other |  |  | (231) |  |  | (755) |
Total deferred tax liabilities |  |  | (56,901) |  |  | (35,407) |
Valuation allowance |  |  | (23,938) |  |  | (600) |
Net deferred tax liabilities |  | $ | (6,709) |  | $ | (13,571) |
As of December 31, 2018, we have remaining U.S. federal and state net operating loss carryforwards of $20.1 million and $10.5 million, respectively. In addition, we have net operating loss carryforwards for Australia and Canada of $2.6 million and $1.4 million, respectively. Our U.S. federal net operating losses expire beginning in 2031, and our state net operating losses generally expire 20 years after the period in which the net operating loss was incurred. As of December 31, 2018, our U.S. capital loss and tax credit carryforwards totaled $10.8 million and $1.5 million, respectively. The U.S. capital losses expire in 2023. The unused tax credits are primarily comprised of $1.2 million of foreign tax credits. The foreign tax credit carryforwards begin expiring in 2019. We claimed $6.1 million of solar investment tax credits (“ITC”) in 2018. We made an accounting policy election to use the flow through income statement method under which we recognized the benefit of the ITC and the related detriment of tax basis reductions in 2018. Valuation allowances on U.S. capital losses, on U.S. state net operating losses, and on Australian net operating losses acquired from Willbros were $22.7 million as of December 31, 2018. The $0.6 million valuation allowance related to foreign tax credits as of December 31, 2017, was increased to $1.2 million in 2018 in connection with completion of the accounting for the Tax Act. A reconciliation of the beginning and ending and aggregate changes in the gross balances of unrecognized tax benefits is as follows (in thousands):
|  | December 31, |
|  | 2018 |  | 2017 |  | 2016 |
Beginning balance |  | $ | 592 |  | $ | — |  | $ | — |
Increases in balances for tax positions taken during the current year |  |  | 146 |  |  | 592 |  |  | — |
Increases in balances for tax positions taken during prior years |  |  | 2,666 |  |  | — |  |  | — |
Settlements and effective settlements with tax authorities |  |  | (1,979) |  |  | — |  |  | — |
Lapse of statute of limitations |  |  | (95) |  |  | — |  |  | — |
Total |  | $ | 1,330 |  | $ | 592 |  | $ | — |
We recognize accrued interest and penalties related to uncertain tax positions in income tax expense, which were not material for the three years presented. The $2.7 million increase in balances for tax positions taken during prior years and the $2.0 million settlements and effective settlements with tax authorities are related to our acquisition of Willbros and did not impact net income for the year ended December 31, 2018. We believe it is reasonably possible that decreases up to $0.1 million of unrecognized tax benefits could occur in the next twelve months due to the expiration of statutes of limitation. Our federal income tax returns are generally no longer subject to examination for tax years before 2015. The statutes of limitation of state and foreign jurisdictions generally vary between 3 to 5 years. Accordingly, our state and foreign income tax returns are generally no longer subject to examination for tax years before 2013.

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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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