XML 46 R27.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Reconciliations of the statutory U.S. federal income tax rates to our effective tax rate for continuing operations follow:
|  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Statutory rate |  | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Tax reform |  | (0.3 | ) |  | 3.1 |  |  | — |
State tax, net of federal benefit |  | 3.8 |  |  | 2.6 |  |  | 3.1 |
Reverse federal impact of indemnification adjustments |  | 3.5 |  |  | 2.5 |  |  | (0.7 | )
Unrecognized tax benefits, U.S. federal and state, net of federal benefit |  | (15.9 | ) |  | (2.0 | ) |  | 1.6 |
Excess tax benefits/deficiencies for employee stock-based compensation, federal and state, net of federal benefit |  | (0.6 | ) |  | (1.7 | ) |  | — |
Impact of state rate change on net deferred tax liabilities, net of federal benefit |  | (0.4 | ) |  | 0.6 |  |  | (0.5 | )
State, valuation allowance adjustments on net operating losses |  | 0.4 |  |  | 0.2 |  |  | 1.0 |
Other, net |  | 1.4 |  |  | 0.9 |  |  | 0.1 |
Effective tax rate |  | 12.9 | % |  | 41.2 | % |  | 39.6 | %
The effective tax rate varies from the statutory U.S. federal rate of 21 percent primarily due to the reduction in uncertain tax positions related to statutes of limitations expirations and the impact of state taxes, net of federal benefit, for the year ended December 31, 2018; the impact of tax reform and state taxes, net of federal benefit, for the year ended December 31, 2017; and the impact of state taxes, net of federal benefit, for the year ended December 31, 2016. Income tax expense consists of:
|  | December 31,
|  | 2018 |  | 2017 |  | 2016
Current provision: |  |  |  |  |  |
Federal |  | $ | 102,516 |  |  | $ | 248,191 |  |  | $ | 228,505 |
State |  | 32,638 |  |  | 13,092 |  |  | 24,336 |
Total current provision |  | 135,154 |  |  | 261,283 |  |  | 252,841 |
Deferred (benefit)/provision: |  |  |  |  |  |
Federal |  | (57,076 | ) |  | (58,124 | ) |  | (89,518 | )
State |  | (6,225 | ) |  | (628 | ) |  | 786 |
Total deferred benefit |  | (63,301 | ) |  | (58,752 | ) |  | (88,732 | )
Provision for income tax expense |  | $ | 71,853 |  |  | $ | 202,531 |  |  | $ | 164,109 |
The tax effect of temporary differences that give rise to deferred tax assets and liabilities is summarized below.
|  | December 31,
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |
Loan reserves |  | $ | 85,100 |  |  | $ | 62,603 |
Stock-based compensation plans |  | 9,312 |  |  | 10,216 |
Deferred revenue |  | 1,081 |  |  | 782 |
Operating loss carryovers |  | — |  |  | 4,186 |
Accrued expenses not currently deductible |  | 12,896 |  |  | 5,356 |
Unrecorded tax benefits |  | 5,106 |  |  | 3,781 |
Market value adjustments on student loans, investments and derivatives |  | 1,460 |  |  | 1,974 |
Other |  | 953 |  |  | 436 |
Total deferred tax assets |  | 115,908 |  |  | 89,334 |
Deferred tax liabilities: |  |  |  |
Gains on repurchased debt |  | — |  |  | 40,175 |
Fixed assets |  | 7,150 |  |  | 5,303 |
Acquired intangible assets |  | 5,179 |  |  | 4,595 |
Unrealized gains |  | 3,436 |  |  | 1,104 |
Federal deferred for state receivable |  | 2,083 |  |  | 3,584 |
Student loan premiums and discounts, net |  | 1,971 |  |  | 1,051 |
Other |  | 285 |  |  | 298 |
Total deferred tax liabilities |  | 20,104 |  |  | 56,110 |
Net deferred tax assets |  | $ | 95,804 |  |  | $ | 33,224 |
Included in operating loss carryovers is a valuation allowance of $19.1 million and $68.6 million as of December 31, 2018 and 2017, respectively, against our state net operating loss carryovers that management believes is more likely than not to expire prior to being realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible. Management considers, among other things, the scheduled reversals of deferred tax liabilities and the history of positive taxable income in evaluating the realizability of the deferred tax assets. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize our deferred tax assets (other than state net operating loss carryovers as outlined above). As of December 31, 2018, the state net operating loss carryforwards will begin to expire in 2029. Accounting for Uncertainty in Income Taxes The following table summarizes changes in unrecognized tax benefits:
|  | December 31,
|  | 2018 |  | 2017 |  | 2016
Unrecognized tax benefits at beginning of year |  | $ | 131,608 |  |  | $ | 152,581 |  |  | $ | 47,109 |
Increases resulting from tax positions taken during a prior period |  | 4,121 |  |  | 7,482 |  |  | 110,894 |
Decreases resulting from tax positions taken during a prior period |  | — |  |  | (7,025 | ) |  | (3,285 | )
Increases resulting from tax positions taken during the current period |  | 3,169 |  |  | 1,656 |  |  | 817 |
Decreases related to settlements with taxing authorities |  | (601 | ) |  | (3,594 | ) |  | (123 | )
Reductions related to the lapse of statute of limitations |  | (86,138 | ) |  | (19,492 | ) |  | (2,831 | )
Unrecognized tax benefits at end of year |  | $ | 52,159 |  |  | $ | 131,608 |  |  | $ | 152,581 |
As of December 31, 2018, the gross unrecognized tax benefits are $52.2 million. Included in the $52.2 million are $47.2 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate. As a part of the Spin-Off, the Company recorded a liability related to uncertain tax positions for which it is indemnified by Navient. See Note 2, “Significant Accounting Policies — Income Taxes,” for additional details. Tax related interest and penalty expense is reported as a component of income tax expense. As of December 31, 2018, 2017 and 2016, the total amount of income tax-related accrued interest and penalties, net of related benefit, recognized in the consolidated balance sheets was $13.6 million, $21.2 million and $20.2 million, respectively. For the years ended December 31, 2018, 2017 and 2016, the total amount of income tax-related accrued interest, net of related tax benefit, recognized in the consolidated statements of income was $(7.3) million, $2.7 million and $5.1 million, respectively. The Company or one of its subsidiaries files income tax returns at the U.S. federal level and in most U.S. states. U.S. federal income tax returns filed for years 2014 and prior are no longer subject to examination. Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years). We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits. It is reasonably possible that the uncertain tax position reserve may decrease by as much as $6.2 million during the next 12 months due to the expiration of statutes of limitations primarily related to indemnified tax liabilities. The reduction in the uncertain tax position reserve would be reflected as a tax benefit. We recorded a tax indemnification receivable from Navient for the indemnified tax liabilities which are included in the uncertain tax position reserve. A portion of the tax benefit will be offset by an expense related to the write-down of the indemnification receivable.

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://fasb.org/us-gaap/role/ref/legacyRef -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