Income Taxes

U.S. and foreign components of income before provision for income taxes is as follows (in thousands):



	Year Ended July 31,
	2017		2016		2015
U.S.	$	251,478	$	231,756	$	142,190
Foreign	96,971		10,863		7,138
Income before income taxes	$	348,449	$	242,619	$	149,328

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows (in thousands):



	July 31,
	2017			2016
Deferred income tax liabilities:
Fixed assets	$	180,480		$	180,267
Intangible assets	65,614			59,009
Other	31,191			7,933
Total	277,285			247,209
Deferred income tax assets:
Canyons obligation	19,276			18,984
Stock-based compensation	17,862			17,287
Investment in Partnerships	17,511			8,108
Deferred compensation and other accrued benefits	15,215			17,426
Contingent Consideration	10,472			4,244
Unfavorable lease obligation, net	9,542			10,904
Net operating loss carryforwards and other tax credits	12,783			8,268
Other, net	19,468			35,635
Total	122,129			120,856
Valuation allowance for deferred income taxes	(6,955		)	(3,641		)
Deferred income tax assets, net of valuation allowance	115,174			117,215
Net deferred income tax liability	$	162,111		$	129,994

The components of deferred income taxes recognized in the Consolidated Balance Sheets are as follows (in thousands):



	July 31,
	2017		2016
Non-current deferred income tax asset	$	9,331	$	—
Net non-current deferred income tax liability	171,442		129,994
Net deferred income tax liability	$	162,111	$	129,994

Significant components of the provision for income taxes are as follows (in thousands):



	Year Ended July 31,
	2017		2016			2015
Current:
Federal	$	55,887	$	70,553		$	12,668
State	8,096		10,555			5,501
Foreign	16,311		4,431			3,581
Total current	80,294		85,539			21,750
Deferred:
Federal	29,065		7,603			11,534
State	3,601		1,051			1,623
Foreign	3,771		(1,028		)	(189		)
Total deferred	36,437		7,626			12,968
Provision for income taxes	$	116,731	$	93,165		$	34,718

A reconciliation of the income tax provision from continuing operations and the amount computed by applying the United States federal statutory income tax rate to income before income taxes is as follows:



	Year Ended July 31,
	2017		2016		2015
At U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal benefit	2.2	%	3.1	%	3.2	%
IRS settlement on NOL utilization	—	%	—	%	(16.0	)%
Change in valuation allowance	0.9	%	0.1	%	0.5	%
Noncontrolling interests	(2.1	)%	—	%	—	%
Foreign rate differential	(1.8	)%	(0.2	)%	—	%
Other	(0.7	)%	0.4	%	0.5	%
Effective tax rate	33.5	%	38.4	%	23.2	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest and penalties, if applicable, is as follows (in thousands):



	Year Ended July 31,
	2017		2016		2015
Balance, beginning of year	$	57,032	$	38,572	$	46,973
Additions based on tax positions related to the current year	—		—		—
Additions for tax positions of prior years	19,079		18,460		17,443
Reductions for tax positions of prior years	—		—		(21,574		)
Lapse of statute of limitations	—		—		—
Settlements	—		—		(4,270		)
Balance, end of year	$	76,111	$	57,032	$	38,572

As of July 31, 2017, the Company’s unrecognized tax benefits associated with uncertain tax positions relate to the treatment of the Talisker lease payments as payments of debt obligations and that the tax basis in Canyons goodwill is deductible, and are included within “other long-term liabilities” in the accompanying Consolidated Balance Sheets.

The Company does not anticipate a significant change to its unrecognized tax benefits recorded as of July 31, 2017 during the year ending July 31, 2018. As of July 31, 2017 and 2016, accrued interest and penalties, net of tax, was $3.6 million and $1.6 million, respectively. For the years ended July 31, 2017, 2016 and 2015, the Company recognized as income tax expense (benefit) $2.0 million, $1.1 million and $(1.4 million) of interest expense (income) and penalties, net of tax, respectively.

The Company had federal NOL carryforwards that expired in the year ended July 31, 2008 and were limited in deductibility each year under Section 382 of the Internal Revenue Code. The Company had only been able to use these NOL carryforwards to the extent of approximately $8.0 million per year through December 31, 2007. However, during the year ended July 31, 2005, the Company amended previously filed tax returns (for tax years 1997-2002) in an effort to remove the restrictions under Section 382 of the Internal Revenue Code on approximately $73.8 million of NOL carryforwards to reduce future taxable income. As a result, the Company requested a refund related to the amended returns in the amount of $6.2 million and reduced its federal tax liability in the amount of $19.6 million in subsequent returns. These NOL carryforwards relate to fresh start accounting from the Company’s reorganization in 1992. During the year ended July 31, 2006, the Internal Revenue Service (“IRS”) completed its examination of the Company’s filing position in these amended returns and disallowed the Company’s request for refund and its position to remove the restrictions under Section 382 of the Internal Revenue Code. The Company appealed the examiner’s disallowance of these NOL carryforwards to the Office of Appeals. In December 2008, the Office of Appeals denied the Company’s appeal, as well as a request for mediation. The Company disagreed with the IRS interpretation disallowing the utilization of the NOL’s and in August 2009, the Company filed a complaint in the United States District Court for the District of Colorado against the United States of America seeking a refund of approximately $6.2 million in federal income taxes paid, plus interest. On July 1, 2011, the District Court granted the Company summary judgment, concluding that the IRS’s decision disallowing the utilization of the NOLs was inappropriate. The computations themselves, however, remained in dispute, and the District Court’s ruling was subject to appeal by the IRS. Subsequently, the District Court proceedings were continued pending settlement discussions between the parties.

The Company also filed two related tax proceedings in the United States Tax Court regarding calculation of NOL carryover deductions for tax years 2006, 2007 and 2008. The two proceedings involved substantially the same issues as the litigation in the District Court for tax years 2000 and 2001 in which the Company disagreed with the IRS as to the utilization of NOLs. Like the District Court proceedings, the Tax Court proceedings were continued pending settlement discussions between the parties.

On January 29, 2015, the parties completed the execution of a comprehensive settlement agreement resolving all issues and computations in the above mentioned pending proceedings, which allowed the Company to utilize a significant portion of the NOLs. As a result, the Company reversed $27.7 million of other long-term liabilities related to uncertain tax benefits, and recorded income tax benefits of $23.8 million for the utilization of the NOLs, including the reversal of accrued interest and penalties, within its Consolidated Statements of Operations for the year ended July 31, 2015.

The Company’s major tax jurisdictions in which it files income tax returns is the U.S. federal jurisdiction, various state jurisdictions, Australia, and Canada. As discussed above, on January 29, 2015, all issues and computations were resolved upon the completion of a comprehensive settlement agreement with the IRS in regards to the federal NOL carryforward dispute. The Company is no longer subject to U.S. federal examinations for tax years prior to 2014. With few exceptions, the Company is no longer subject to examination by various state jurisdictions for tax years prior to 2012.

The Company has NOL carryforwards totaling $34.5 million which are primarily comprised of state net operating loss (“NOL”) carryforwards that expire by the year ending July 31, 2031. As of July 31, 2017, the Company recorded a valuation allowance on $29.5 million of these NOL carryforwards as the Company has determined that it is more likely than not that these NOL carryforwards will not be realized. Additionally, the Company has foreign tax credit carryforwards of $9.9 million which expire by the year ending July 31, 2027. As of July 31, 2017, the Company has recorded a valuation allowance of $4.2 million on foreign tax credit carryforwards as the Company has determined that it is more likely than not that these foreign tax credit carryforwards will not be realized.

The Company intends to indefinitely reinvest undistributed earnings, if any, in its Canadian foreign subsidiary. As of July 31, 2017, there are no unremitted earnings in our Canadian foreign subsidiary, and therefore no additional tax due to the extent of eventual remittance.