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Note 9 - Income Taxes | 3 Months Ended
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Mar. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For additional information on our income taxes, including our accounting policies and the TCJA, see Notes 1 and 10 of Notes to Consolidated Financial Statements in our 2017 Form 10-K. Because the TCJA was passed late in the fourth quarter of 2017 and ongoing guidance and accounting interpretation is expected throughout 2018, as of December 31, 2017, we made provisional estimates for the effects of the TCJA in accordance with SAB 118. These provisional estimates primarily related to NOLs, loss reserves, tax depreciation, share-based compensation and state taxes. We expect to complete our analysis of all deferred tax balances by December 2018. As of March 31, 2018, we have not recorded any measurement period adjustments in accordance with SAB 118 to change our provisional amounts that were recorded as of December 31, 2017. As of March 31, 2018, for federal income tax purposes and before any consideration of the impact of our potential IRS Settlement, we have generated certain tax attributes, including approximately $8.4 million of federal NOL carryforwards. We currently expect to utilize the majority of our federal NOL carryforwards during 2018, and the remainder before their expiration. Approximately $2.3 million of our federal NOL carryforwards were received as part of the acquisition of EnTitle Direct and, as such, their annual utilization amount is limited. However, we still expect to fully utilize these NOLs prior to their expiration in tax years 2027 through 2037. We also have research and development tax credit carryforwards of $6.8 million that, if not utilized, will expire during tax years 2031 through 2038. Additionally, we had approximately $57.1 million of AMT credit carryforwards, which are expected to be fully utilized or refunded in the near term. We are required to establish a valuation allowance against our deferred tax assets when it is more likely than not that all or some portion of our deferred tax assets will not be realized. At each balance sheet date, we assess our need for a valuation allowance and our assessment is based on all available evidence, both positive and negative. This requires management to exercise judgment and make assumptions regarding whether our deferred tax assets will be realized in future periods. In making this assessment as of March 31, 2018, we determined that certain of our subsidiaries within Radian may continue to generate taxable losses on a separate company basis in the near term and may not be able to fully utilize certain of their state and local NOLs on their state and local tax returns. As of March 31, 2018, our valuation allowance is $64.4 million, which relates primarily to these separate company NOLs and other state tax timing adjustments. We are contesting adjustments resulting from the examination by the IRS of our 2000 through 2007 consolidated federal income tax returns. The IRS opposes the recognition of certain tax losses and deductions that were generated through our investment in a portfolio of non-economic REMIC residual interests and has proposed denying the associated tax benefits of these items. We appealed these proposed adjustments to the Internal Revenue Service Office of Appeals and made “qualified deposits” with the U.S. Treasury of $85 million in June 2008 relating to the 2000 through 2004 tax years and $4 million in May 2010 relating to the 2005 through 2007 tax years, in order to avoid the accrual of incremental above-market-rate interest with respect to the proposed adjustments. We attempted to reach a compromised settlement with the Internal Revenue Service Office of Appeals, but in September 2014 we received Notices of Deficiency covering the 2000 through 2007 tax years that assert unpaid taxes and penalties of $157 million. The Deficiency Amount has not been reduced to reflect our NOL carryback ability. On December 3, 2014, we petitioned the U.S. Tax Court to litigate the Deficiency Amount. On September 1, 2015, we received a notice that the case had been scheduled for trial. However, the parties jointly filed, and the U.S. Tax Court approved, motions for continuance in this matter to postpone the trial date. Also, in February 2016, the U.S. Tax Court approved a joint motion to consolidate for trial, briefing and opinion our case with a similar case involving MGIC Investment Corporation. During 2016, we held several meetings with the IRS in an attempt to reach a settlement on the issues presented in our dispute. In October 2017, the parties informed the U.S. Tax Court that they believed they had reached agreement in principle on all issues in the dispute. In November 2017, as required by law, the agreement was reported to the JCT for review. In April 2018, we were notified that the JCT had no objection to the terms of the settlement agreement and that the IRS is working toward finalizing the settlement, which we now expect to occur within the next several months. While the expected impact of the final settlement will reduce our available holding company liquidity by approximately $35 million, during the second quarter of 2018 we expect to recognize a net positive impact to tax expense of approximately $30 million. This estimated benefit is primarily related to the lower than expected interest accrued on the tax deficiency and the impact of the remeasurement of our deferred taxes due to the enactment of the TCJA during the fourth quarter of 2017. This estimated benefit amount does not include any potential related benefit from the impact on our state or local uncertain tax positions. However, over the next twelve months, it is reasonably possible that we could record a material reduction to these liabilities for unrecognized tax benefits. We expect to complete the IRS settlement in the coming months. However, if the settlement is not completed, then the ongoing litigation could take several years to resolve and may result in substantial legal expenses. We can provide no assurance regarding the outcome of any such litigation or whether a settlement with the IRS will ultimately be reached. If we are unable to complete the settlement, or the ultimate resolution of this matter produces a result that differs materially from our current expectations, there could be a materially different impact than we currently expect on our effective tax rate, results of operations and cash flows.

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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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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