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11. INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | For the years ended December 31, 2016, 2015 and 2014, we recognized income tax expense comprised of the following (in thousands):
|  | 2016 |  |  | 2015 |  |  | 2014 |
Federal current tax |  | $ | 88 |  |  | $ | 237 |  |  | $ | – |
State current tax |  |  | 914 |  |  |  | 1,705 |  |  |  | 1,283 |
Other current tax |  |  | 28 |  |  |  | 28 |  |  |  | 29 |
Federal deferred tax |  |  | 2,539 |  |  |  | 3,625 |  |  |  | 869 |
State deferred tax |  |  | 863 |  |  |  | 412 |  |  |  | (214 | )
Income tax expense |  | $ | 4,432 |  |  | $ | 6,007 |  |  | $ | 1,967 |
A reconciliation of the statutory U.S. federal rate and effective rates is as follows:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Federal tax |  |  | 34.00% |  |  |  | 34.00% |  |  |  | 34.00% |
State franchise tax, net of federal benefit |  |  | 1.80% |  |  |  | 8.50% |  |  |  | -3.64% |
Other Non deductible expenses |  |  | -0.09% |  |  |  | -0.01% |  |  |  | 0.00% |
Meals and entertainment |  |  | 2.10% |  |  |  | 1.75% |  |  |  | 4.85% |
Noncontrolling Interest in Partnerships |  |  | -2.11% |  |  |  | -2.16% |  |  |  | -2.88% |
Equity compensation |  |  | -4.05% |  |  |  | -1.74% |  |  |  | -8.72% |
Changes in valuation allowance |  |  | 4.70% |  |  |  | -17.32% |  |  |  | 24.52% |
Return-to-provision |  |  | 0.22% |  |  |  | 3.29% |  |  |  | -9.57% |
Deferred true-ups and other |  |  | -25.25% |  |  |  | 13.41% |  |  |  | 16.34% |
Uncertain tax positions |  |  | 22.44% |  |  |  | 0.01% |  |  |  | -3.67% |
Expiring net operating losses |  |  | 1.88% |  |  |  | 1.28% |  |  |  | 2.62% |
Income tax expense |  |  | 35.64% |  |  |  | 41.01% |  |  |  | 53.85% |
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards. Our deferred tax assets and liabilities comprise the following (in thousands):
|  | At December 31, |
Deferred tax assets: |  | 2016 |  |  | 2015 |
Net operating losses |  | $ | 84,509 |  |  | $ | 78,912 |
Accrued expenses |  |  | 4,400 |  |  |  | 4,125 |
Straight-Line Rent Adjustment |  |  | 10,750 |  |  |  | 11,263 |
Unfavorable contract liability |  |  | 2,114 |  |  |  | 2,142 |
Equity compensation |  |  | 950 |  |  |  | 846 |
Allowance for doubtful accounts |  |  | 6,033 |  |  |  | 4,341 |
Other |  |  | 1,357 |  |  |  | 1,092 |
Valuation Allowance |  |  | (4,428 | ) |  |  | (3,841 | )
Total Deferred Tax Assets |  | $ | 105,685 |  |  | $ | 98,880 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property Plant & Equipment |  |  | (6,994 | ) |  |  | (8,582 | )
Goodwill |  |  | (23,350 | ) |  |  | (18,617 | )
Intangibles |  |  | (12,066 | ) |  |  | (12,088 | )
Non accrual experience method reserve |  |  | (8,483 | ) |  |  | (7,882 | )
Other |  |  | (4,436 | ) |  |  | (4,747 | )
Total Deferred Tax Liabilities |  | $ | (55,329 | ) |  | $ | (51,916 | )
Net Deferred Tax Asset |  | $ | 50,356 |  |  | $ | 46,964 |
As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $231.6 million, which expire at various intervals from the years 2017 to 2036. The Company also had state net operating loss carryforwards of approximately $ 160.5 million, which expire at various intervals from the years 2017 through 2036. As of December 31, 2016, $ 23.5 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. Future ownership changes as determined under Section 382 of the Internal Revenue Code could further limit the utilization of net operating loss carryforwards. We considered all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2016, we have determined that deferred tax assets of $105.7 million are more likely-than-not to be realized. We have also determined that deferred tax liabilities of $ 23.4 million are required related to book basis in goodwill that has an indefinite life. For the next five years, and thereafter, federal net operating loss carryforwards expire as follows (in thousands):
Year Ended |  | Total Net Operating Loss Carryforwards |  |  | Amount Subject to 382 limitation |
2017 |  |  | 1,501 |  |  |  | 1,501 |
2018 |  |  | 10,968 |  |  |  | – |
2019 |  |  | 7,178 |  |  |  | – |
2020 |  |  | – |  |  |  | – |
2021 |  |  | 24,257 |  |  |  | – |
Thereafter |  |  | 187,725 |  |  |  | 40,632 |
|  | $ | 231,629 |  |  | $ | 42,133 |
For the next five years, and thereafter, California net operating loss carryforwards expire as follows (in thousands):
Year Ended |  | Total Net Operating Loss Carryforwards |
2017 |  |  | 4,520 |
2018 |  |  | – |
2019 |  |  | – |
2020 |  |  | – |
2021 |  |  | – |
Thereafter |  |  | 17,773 |
|  | $ | 22,293 |
We file consolidated income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2012. We do not anticipate the results of any open examinations would result in a material change to its financial position. At December 31 2016, the Company has unrecognized tax benefits of $3.9 million of which $2.8 million will affect the effective tax rate if recognized. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended as follows (in thousands):
|  | December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Balance at beginning of year |  | $ | 94 |  |  | $ | 3,761 |  |  | $ | 3,970 |
Increases (Decreases) related to prior year tax positions |  |  | 3,861 |  |  |  | (3,667 | ) |  |  | (209 | )
Expiration of the statute of limitations for the assessment of taxes |  |  | (94 | ) |  |  | – |  |  |  | – |
Balance at end of year |  | $ | 3,861 |  |  | $ | 94 |  |  | $ | 3,761 |
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2016 the Company accrued an insignificant amount of interest expense. As of December 31, 2016, accrued interest and penalties were insignificant.

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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