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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES For the years ended December 31, 2019, 2018 and 2017, we recognized income tax expense comprised of the following (in thousands):
| December 31,
| 2019 |  | 2018 |  | 2017
Federal current tax | $ | (161 | ) |  | $ | (765 | ) |  | $ | 871 |
State current tax | 7,715 |  |  | 7,263 |  |  | 4,906 |
Other current tax | 22 |  |  | 20 |  |  | 23 |
Federal deferred tax | 3,396 |  |  | (2,020 | ) |  | 21,389 |
State deferred tax | (4,743 | ) |  | (4,104 | ) |  | (2,879 | )
Income tax expense | $ | 6,229 |  |  | $ | 394 |  |  | $ | 24,310 |
A reconciliation of the statutory U.S. federal rate and effective rates is as follows:
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Federal tax | $ | 6,231 |  |  | 21.00 | % |  | $ | 8,256 |  |  | 21.00 | % |  | $ | 8,971 |  |  | 34.00 | %
State franchise tax, net of federal benefit | 3,891 |  |  | 13.12 | % |  | 1,332 |  |  | 3.39 | % |  | 1,799 |  |  | 6.82 | %
Other Non deductible expenses | 674 |  |  | 2.27 | % |  | 471 |  |  | 1.20 | % |  | 91 |  |  | 0.35 | %
Noncontrolling interests in partnerships | (1,824 | ) |  | (6.15 | )% |  | (1,237 | ) |  | (3.15 | )% |  | (687 | ) |  | (2.61 | )%
Changes in valuation allowance | (462 | ) |  | (1.56 | )% |  | 1,760 |  |  | 4.48 | % |  | (1,045 | ) |  | (3.96 | )%
Tax Cuts and Jobs Act | — |  |  | — | % |  | — |  |  | — | % |  | 13,527 |  |  | 51.27 | %
Gain on change in control | — |  |  | — | % |  | (8,303 | ) |  | (21.12 | )% |  | — |  |  | — | %
Deferred true-ups and other | (761 | ) |  | (2.56 | )% |  | (4,254 | ) |  | (10.82 | )% |  | (194 | ) |  | (0.74 | )%
Other reconciling items | (1,520 | ) |  | (5.12 | )% |  | 2,369 |  |  | 6.02 | % |  | 1,848 |  |  | 7.00 | %
Income tax expense | $ | 6,229 |  |  | 21.00 | % |  | $ | 394 |  |  | 1.00 | % |  | $ | 24,310 |  |  | 92.13 | %
Pursuant to the federal tax legislation that was enacted on December 22, 2017 ("Tax Act"), the Company re-measured its existing deferred tax assets and liabilities based on 21%, the current rate at which they are expected to reverse in the future. In 2017, the Company recorded provisional amounts for certain enactment-date efforts of the Act by applying the guidance in SAB 118 because it had not yet completed our enactment-date effects of the Act. The Company has completed analysis of Tax Act's income tax effects. In total, the Company recorded a non-cash charge of 13.6 million, which is included as a component of income tax expense from continuing operations in 2017. Upon further analysis of certain aspects of the Tax Act and refinement of the calculations during the 12 months ended December 31, 2018, the Company found an immaterial adjustment was necessary. 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):
| December 31,
Deferred tax assets: | 2019 |  | 2018
Net operating losses | $ | 34,490 |  |  | $ | 46,875 |
Accrued expenses | 4,280 |  |  | 3,421 |
Operating lease liability | 126,546 |  |  | — |
Straight-Line rent adjustment | — |  |  | 9,811 |
Unfavorable contract liability | — |  |  | 1,354 |
Equity compensation | 1,374 |  |  | 1,065 |
Allowance for doubtful accounts | 27,220 |  |  | 14,850 |
Other | 4,616 |  |  | 2,815 |
Valuation allowance | (5,348 | ) |  | (5,810 | )
Total Deferred Tax Assets | $ | 193,178 |  |  | $ | 74,381 |
Deferred tax liabilities: |  |  |
Property and equipment | (6,450 | ) |  | (6,194 | )
Goodwill | (24,637 | ) |  | (19,780 | )
Intangibles | (6,669 | ) |  | (8,110 | )
Operating lease right-of-use asset | (115,364 | ) |  | — |
Non accrual experience method reserve | — |  |  | (1,446 | )
Other | (5,510 | ) |  | (7,345 | )
Total Deferred Tax Liabilities | $ | (158,630 | ) |  | $ | (42,875 | )
Net Deferred Tax Asset | $ | 34,548 |  |  | $ | 31,506 |
As of December 31, 2019, the Company had federal net operating loss carryforwards of approximately $136.2 million, which comprise of definite and indefinite net operating losses. We had federal net operating loss carryforwards of approximately $124.7 million, which expire at various intervals from the years 2023 to 2037, and had carryforwards of $11.5 million of net operating losses generated in 2018, which do not expire. Federal net operating losses generated following December 31, 2017 carryover indefinitely and may generally be used to offset up to 80% of future taxable net income. The Company also had state net operating loss carryforwards of approximately $98.6 million, which expire at various intervals from the years 2020 through 2039. As of December 31, 2019, $24.6 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. and the 2019 acquisition of Nulogix Health, 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, 2019, we have determined that deferred tax assets of $193.2 million are more likely-than-not to be realized. We have also taken into consideration deferred tax liabilities of $24.6 million are related to book basis in goodwill that has an indefinite life. 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 2015. We do not anticipate the results of any open examinations would result in a material change to its financial position. At December 31, 2019, the Company has unrecognized tax benefits of $4.3 million of which $3.5 million will affect the effective tax rate if recognized. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended are as follows (in thousands):
| December 31,
| 2019 |  | 2018 |  | 2017
Balance at beginning of year | $ | 4,629 |  |  | $ | 3,615 |  |  | $ | 3,861 |
Increases related to prior year tax positions | (34 | ) |  | 896 |  |  | 1 |
Increases related to current year tax positions | 119 |  |  | 111 |  |  | — |
Expiration of the statute of limitations for the assessment of taxes | (393 | ) |  | — |  |  | — |
Increase (decrease) related to change in rate | (1 | ) |  | 7 |  |  | (247 | )
Balance at end of year | $ | 4,320 |  |  | $ | 4,629 |  |  | $ | 3,615 |
We believe it is reasonably possible it will not materially reduce its unrecognized tax benefits within the next twelve months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2019 the Company accrued approximately $30,000 of interest and penalties. As of December 31, 2019, accrued interest and penalties amounted to approximately $300,000.

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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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