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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company is subject to U.S. federal income taxes and income taxes in numerous U.S. states. In addition, the Company is subject to income tax in the U.K. and Brazil relative to its foreign subsidiaries. Income (loss) before income taxes by geographic area was as follows (in thousands):
|  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Domestic |  | $ | 192,105 |  |  | $ | 206,579 |  |  | $ | 222,178 |
Foreign |  | 13,298 |  |  | 12,424 |  |  | 5,193 |
Total income before income taxes |  | $ | 205,403 |  |  | $ | 219,003 |  |  | $ | 227,371 |
In accordance with SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Job Act (“SAB 118”), the Company made a reasonable estimate of the Tax Act’s impact and provisionally recorded this estimate in its results for the period ended December 31, 2017. As of December 31, 2018, the Company has completed its accounting for all aspects of the Tax Act and recorded a $0.6 million adjustment as a reduction of income tax expense from continuing operations. The Company also determined that it does not have a transition tax liability for previously untaxed accumulated and current earnings and profits of foreign subsidiaries. The Company completed the evaluation of the impact of the Tax Act based on available guidance issued by the U.S. Treasury Department, the IRS, state tax authorities and other standard-setting bodies. In February 2018, the FASB issued ASU 2018-02, requiring reporting entities to select an accounting policy regarding the classification of all stranded tax effects in Other Comprehensive Income (“OCI”) caused by the change in the federal corporate tax rate contained in the Tax Act. This standard takes effect for all entities in fiscal years beginning after December 15, 2018, with early adoption permitted. As of December 31, 2018, the Company elected to reclassify the income tax effects resulting from the Tax Act from OCI to Retained Earnings, recording a $0.2 million increase in OCI and a corresponding reduction in Retained Earnings. Federal, state and foreign income tax provisions (benefits) were as follows (in thousands):
|  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Federal: |  |  |  |  |  |
Current |  | $ | 35,923 |  |  | $ | 44,921 |  |  | $ | 57,321 |
Deferred |  | 2,600 |  |  | (46,938 | ) |  | 18,704 |
State: |  |  |  |  |  |
Current |  | 4,327 |  |  | 3,774 |  |  | 4,636 |
Deferred |  | 884 |  |  | 3,921 |  |  | 1,878 |
Foreign: |  |  |  |  |  |
Current |  | 3,907 |  |  | 2,929 |  |  | 4,187 |
Deferred |  | (10 | ) |  | (3,046 | ) |  | (6,420 | )
Provision for income taxes |  | $ | 47,631 |  |  | $ | 5,561 |  |  | $ | 80,306 |
Actual income tax expense differed from income tax expense computed by applying the applicable U.S. federal statutory corporate tax rate of 21.0% in 2018 and of 35.0% in 2017 and 2016 to income before income taxes, as follows (in thousands):
|  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Provision at the U.S. federal statutory rate |  | $ | 43,135 |  |  | $ | 76,651 |  |  | $ | 79,580 |
Increase (decrease) resulting from: |  |  |  |  |  |
State income tax, net of benefit for federal deduction |  | 3,639 |  |  | 4,472 |  |  | 4,230 |
Foreign income tax rate differential |  | (259 | ) |  | (2,443 | ) |  | (2,799 | )
Employment credits |  | (1,327 | ) |  | (862 | ) |  | (821 | )
Changes in valuation allowances |  | 3,442 |  |  | 629 |  |  | 749 |
Non-deductible goodwill |  | — |  |  | — |  |  | 34 |
Tax Cuts and Jobs Act - Enactment date effect |  | (575 | ) |  | (73,028 | ) |  | — |
Stock-based compensation |  | (74 | ) |  | (136 | ) |  | 368 |
Other |  | (350 | ) |  | 278 |  |  | (1,035 | )
Provision for income taxes |  | $ | 47,631 |  |  | $ | 5,561 |  |  | $ | 80,306 |
For the year ended December 31, 2018, the Company recorded a tax provision of $47.6 million. This included the impact of the Tax Act that made broad and complex changes to the Code. Those changes include, but are not limited to, reducing the U.S. federal corporate tax rate from 35.0% to 21.0%, creating a territorial tax system that generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, requiring companies to pay a one-time transition tax on unrepatriated earnings of their foreign subsidiaries, creating a “minimum tax” on certain foreign earnings (i.e. global intangible low-taxed income, or “GILTI”), limiting the deduction for net interest expense incurred by U.S. corporations, and eliminating certain deductions, including deductions for certain compensation arrangements and certain other business expenses. The Company recognizes the tax on GILTI as a period expense in the period the tax is incurred. Under this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period. For the year ended December 31, 2018, the Company estimated it has no GILTI tax liability. The Company's effective income tax rate was more than the U.S. federal statutory rate of 21.0%, due primarily to: (1) the taxes provided for in U.S. state jurisdictions; and (2) valuation allowances provided for net operating losses and other deferred tax assets in certain U.S. states and in Brazil, partially offset by: (1) income generated in the U.K., which is taxed at a 19.0% statutory rate; (2) employment tax credits; and (3) the enactment date adjustments from the Tax Act. As a result of these items recorded in 2018 compared to the 2017 items discussed below, the effective tax rate for the year ended December 31, 2018 increased to 23.2%, as compared to 2.5% for the year ended December 31, 2017. During 2017, the Company recorded a tax provision of $5.6 million. This included the tax benefit for the deferred tax impact of the Tax Act noted above, as well as excess tax deductions for restricted stock resulting from the adoption of ASU 2016-09, which were partially offset by certain expenses for stock-based compensation recorded in 2017 that were non-deductible for income tax purposes. For the year ended December 31, 2017, the Company also provided valuation allowances with respect to deferred tax assets primarily relating to goodwill and net operating losses of certain Brazil subsidiaries, as well as state net operating losses in the U.S., based on expectations concerning their realizability. As a result of these items recorded in 2017 compared to the 2016 items discussed below, the effective tax rate for the year ended December 31, 2017 decreased to 2.5%, as compared to 35.5% for the year ended December 31, 2016. During 2016, the Company recorded a tax provision of $80.3 million. Certain expenses for stock-based compensation recorded in 2015 were non-deductible for income tax purposes. The Company provided valuation allowances with respect to goodwill and net operating losses of certain Brazil subsidiaries, as well as state net operating losses in the U.S., based on expectations concerning their realizability. Deferred income tax provisions resulted from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effects of these temporary differences representing deferred tax assets/liabilities resulted principally from the following (in thousands):
|  | December 31,
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |
Loss reserves and accruals |  | $ | 41,779 |  |  | $ | 44,004 |
Interest rate swaps |  | — |  |  | 259 |
Goodwill and intangible franchise rights |  | 44 |  |  | 2,770 |
U.S. state net operating loss (“NOL”) carryforwards |  | 17,894 |  |  | 17,430 |
Depreciation expense |  | 433 |  |  | — |
Foreign NOL carryforwards |  | 37,587 |  |  | 40,582 |
Other |  | 84 |  |  | 379 |
Deferred tax assets |  | 97,821 |  |  | 105,424 |
Valuation allowance on deferred tax assets |  | (52,257 | ) |  | (54,415 | )
Net deferred tax assets |  | $ | 45,564 |  |  | $ | 51,009 |
Deferred tax liabilities: |  |  |  |
Goodwill and intangible franchise rights |  | $ | (123,659 | ) |  | $ | (118,447 | )
Depreciation expense |  | (50,172 | ) |  | (50,166 | )
Deferred gain on bond redemption |  | — |  |  | (327 | )
Interest rate swaps |  | (2,788 | ) |  | — |
Other |  | (72 | ) |  | (1,820 | )
Deferred tax liabilities |  | (176,691 | ) |  | (170,760 | )
Net deferred tax liability |  | $ | (131,127 | ) |  | $ | (119,751 | )
As of December 31, 2018, the Company had state NOL carryforwards in the U.S. of $271.8 million that will expire between 2019 and 2038, and foreign NOL carryforwards of $113.2 million that may be carried forward indefinitely. To the extent that the Company expects that net income will not be sufficient to realize these NOLs in certain jurisdictions, a valuation allowance has been established. The Company believes it is more likely than not that its deferred tax assets, net of valuation allowances provided, will be realized, based primarily on our expectation of future taxable income, considering future reversals of existing taxable temporary differences. As of December 31, 2018, the Company had two controlled foreign corporations that own its foreign operations (the “Foreign Subsidiaries”). The Company has not provided for U.S. deferred taxes on the outside basis differences of its Foreign Subsidiaries, as the Company has taken the position that its investment in the Foreign Subsidiaries will be permanently reinvested outside the U.S. The book basis for one of the Company’s Foreign Subsidiaries that consists of the Company’s U.K. operations exceeded the tax basis by approximately $25.7 million, as of December 31, 2017. If a taxable event resulting in the recognition of these outside basis differences occurred, the resulting tax would not be material. Based on the statutes of limitations in the applicable jurisdiction in which the Company operates, the Company is generally no longer subject to examinations by U.S. tax authorities in years prior to 2014, by U.K. tax authorities in years prior to 2014 and by Brazil tax authorities in years prior to 2013. A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):
| 2018
BALANCE at January 1 | $ | 1,151 |
Additions for current tax | 562 |
Additions based on tax positions in prior years | — |
Reductions for tax positions | — |
Settlements with tax authorities | — |
Reductions due to lapse of statutes of limitations | (115 | )
BALANCE, December 31 | $ | 1,598 |
The Company had no unrecognized tax benefits as of December 31, 2016 with respect to uncertain tax positions and did not incur any interest and penalties for the year then ended. Included in the balance of unrecognized tax benefits as of December 31, 2018 and 2017, are $1.4 million and $1.0 million, respectively, of tax benefits that would affect the effective tax rate if recognized. For both years ended December 31, 2018, and 2017 the Company recorded approximately $0.2 million of interest and penalty related to its uncertain tax positions. Consistent with prior practice, the Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the accompanying Consolidated Statements of Operations.

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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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