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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Components of the provision for income taxes are as follows:
| Years Ended December 31,
(in thousands) | 2015 |  | 2014 |  | 2013
Current provision: |  |  |  |  |
Federal | $ | 46,138 |  |  | $ | 13,236 |  |  | $ | 22,727 |
State and local | 3,822 |  |  | 2,008 |  |  | 2,462 |
Foreign | 376 |  |  | 78 |  |  | — |
| 50,336 |  |  | 15,322 |  |  | 25,189 |
Deferred: |  |  |  |  |
Federal | (1,797 | ) |  | 19,672 |  |  | 5,788 |
State and local | 9 |  |  | 81 |  |  | (504 | )
Foreign | (1,656 | ) |  | (4,914 | ) |  | — |
| (3,444 | ) |  | 14,839 |  |  | 5,284 |
| $ | 46,892 |  |  | $ | 30,161 |  |  | $ | 30,473 |
Income from continuing operations before provision for income taxes were as follows:
| Years Ended December 31,
(in thousands) | 2015 |  | 2014 |  | 2013
Domestic | $ | 114,380 |  |  | $ | 76,023 |  |  | $ | 84,742 |
Foreign | (2,291 | ) |  | 495 |  |  | 764 |
| $ | 112,089 |  |  | $ | 76,518 |  |  | $ | 85,506 |
Our income tax expense is different from the amount computed by applying the federal statutory income tax rate to income before taxes as follows:
| Years Ended December 31,
(in thousands) | 2015 |  | 2014 |  | 2013
Federal statutory tax on earnings before income taxes | $ | 39,231 |  |  | $ | 26,782 |  |  | $ | 29,928 |
State income taxes, net of federal income tax benefit | 1,772 |  |  | 1,388 |  |  | 1,514 |
Non-deductible expense | 2,629 |  |  | 999 |  |  | 723 |
Non-deductible acquisition-related charges | 6,567 |  |  | 1,339 |  |  | — |
Accruals and settlements related to tax audits | 181 |  |  | 529 |  |  | (395 | )
Change in effective state tax rates | 93 |  |  | (401 | ) |  | (383 | )
Manufacturing deduction | (1,960 | ) |  | — |  |  | — |
Tax credits and incentives | (999 | ) |  | (1,209 | ) |  | (663 | )
Other | (622 | ) |  | 734 |  |  | (251 | )
| $ | 46,892 |  |  | $ | 30,161 |  |  | $ | 30,473 |
During 2003, we entered into a Tax Increment Financing ("TIF") Agreement with the Commonwealth of Kentucky. Pursuant to this agreement, we are entitled to receive reimbursement for 80% of the increase in Kentucky income and sales tax resulting from our 2005 renovation of the Churchill Downs facility. We recognized reductions in operating expense of $0.6 million in 2015, $0.6 million in 2014 and $0.8 million in 2013. We recognized reductions to our income tax expense, net of federal taxes, of $0.6 million in 2015, less than $0.1 million in 2014 and $0.3 million in 2013. As of December 31, 2015, we have received $6.4 million of combined benefits and established a sales tax receivable of $1.2 million and an income tax receivable of $0.7 million related to the reimbursement. Components of our deferred tax assets and liabilities are as follows:
(in thousands) | 2015 |  | 2014
Deferred tax assets: |  |  |
Deferred compensation plans | $ | 34,080 |  |  | $ | 31,520 |
Deferred income | 14,336 |  |  | 752 |
Allowance for uncollectible receivables | 1,251 |  |  | 1,323 |
Deferred liabilities | 1,869 |  |  | 4,625 |
Net operating losses and credit carryforward | 11,680 |  |  | 32,573 |
Deferred tax assets | 63,216 |  |  | 70,793 |
Valuation allowance | (1,052 | ) |  | (1,274 | )
Net deferred tax asset | 62,164 |  |  | 69,519 |
Deferred tax liabilities: |  |  |
Intangible assets in excess of tax basis | 142,970 |  |  | 151,210 |
Property and equipment in excess of tax basis | 31,216 |  |  | 37,827 |
Other | 15,861 |  |  | 11,485 |
Deferred tax liabilities | 190,047 |  |  | 200,522 |
Net deferred tax liability | $ | (127,883 | ) |  | $ | (131,003 | )
Income taxes are classified in the balance sheet as follows: |  |  |
Net current deferred tax asset | $ | — |  |  | $ | 18,519 |
Net non-current deferred tax liability | (127,883 | ) |  | (149,522 | )
| $ | (127,883 | ) |  | $ | (131,003 | )
On December 31, 2015, we adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes and all deferred taxes were prospectively recorded as non-current liabilities. As of December 31, 2015, we have federal net operating losses of $7.0 million which were acquired in conjunction with the acquisitions of Youbet.com. The utilization of these losses, which expire between 2019 and 2030, is limited on an annual basis pursuant to IRC § 382. We believe that we will be able to fully utilize all of these losses. In addition, we have $2.4 million of state net operating losses, $1.3 million of which was acquired in conjunction with the acquisitions of Youbet.com and Big Fish Games. These losses, which expire between 2016 and 2034, may be subject to annual limitations similar to IRC § 382. We have recorded a valuation allowance of $0.6 million against the state net operating losses due to the fact that it is unlikely that we will generate income in certain states which is necessary to utilize the assets. The changes in the valuation allowance for deferred tax assets are as follows:
(in thousands) | 2015 |  | 2014
Balance at beginning of the year | $ | 1,274 |  |  | $ | 1,213 |
Charged to costs and expense | (313 | ) |  | 158 |
Charged to other accounts | 91 |  |  | (83 | )
Deductions | — |  |  | (14 | )
Balance at end of the year | $ | 1,052 |  |  | $ | 1,274 |
The IRS has audited us through 2012. Subsequent years are open to examination. Big Fish Games was recently notified of an IRS audit for the tax year ended December 16, 2014 which is the last tax year prior to our acquisition of Big Fish Games. As a result of the indemnity provided by the acquisition agreement, any cash liability arising from this audit will be the liability of the prior shareholders of Big Fish Games at the time of the acquisition. However, any audit adjustment impacting post-acquisition tax attributes, such as net operating losses or credits would be our liability. We do not expect this issue to have a material adverse impact on our business. State and local tax years open for examination vary by jurisdiction. As of December 31, 2015, we have approximately $2.5 million of total gross unrecognized tax benefits, excluding interest of less than $0.1 million. Of this amount, $0.9 million was related to tax positions acquired in the Big Fish Games acquisition. If the total gross unrecognized tax benefits were recognized, there would be a $1.9 million effect to the annual effective tax rate and an additional $0.2 million would be reimbursed by the pre-acquisition shareholders of Big Fish Games, in conjunction with a tax indemnity agreement. We anticipate a decrease in our unrecognized tax positions of approximately $0.2 million during the next twelve months primarily due to the expiration of statutes of limitation. During October 2012, we funded a $2.9 million income tax payment to the State of Illinois related to a dispute over state income tax apportionment methodology which was recorded in other assets as a receivable at December 31, 2014. We filed our state income tax returns related to the years 2002 through 2005 following the methodology prescribed by Illinois statute; however the State of Illinois has taken a contrary tax position. We filed a formal protest with the State of Illinois during the fourth quarter of 2012. We won our protest and the state has elected not to appeal the court decision. We received the $2.9 million refund during the third quarter of 2015. The refund did not have an impact on our tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands) | 2015 |  | 2014 |  | 2013
Balance as of January 1 | $ | 2,926 |  |  | $ | 582 |  |  | $ | 8,565 |
Additions for tax positions related to the current year | 310 |  |  | 573 |  |  | 190 |
Additions for tax positions of prior years | 302 |  |  | 2,097 |  |  | 207 |
Reductions for tax positions of prior years | (1,018 | ) |  | (326 | ) |  | (8,380 | )
Balance as of December 31 | $ | 2,520 |  |  | $ | 2,926 |  |  | $ | 582 |
The decrease in the uncertain tax position during 2015 resulted from the expiration of the statute of limitations on a position that was taken by Big Fish Games prior to our acquisition. The increase in the uncertain tax position during 2014 was primarily related to the acquisition of Big Fish Games. We recognize interest accrued related to unrecognized tax benefits in income tax expense and penalties in selling, general and administrative expense in the Consolidated Statements of Comprehensive Income.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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