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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
INCOME TAXES |
INCOME TAXES | 10.INCOME TAXES Income Taxes: On December 22, 2017, the Tax Act was signed into law and included numerous changes in existing tax law, including a reduction in the federal corporate income tax rate from 35 percent to 21 percent. The rate reduction and other changes took effect on January 1, 2018. Other changes such as remeasurement of deferred tax assets and liabilities were effective as of the fourth quarter of 2017. Also, on December 22, 2017, the Securities Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. As of December 31, 2018, the Company has completed its assessment of the impact of the Tax Act. In connection with the Company’s analysis of the impact of the Tax Act, the Company recorded a net tax benefit of $154.0 million related to the remeasurement and other discrete adjustments to the Company’s deferred tax assets and liabilities during the year ended December 31, 2017. In addition, the Company recorded a non-cash tax adjustment of $2.9 million that increased current income taxes during the year ended December 31, 2018. This adjustment related to the application of an estimated 6.2 percent sequestration on alternative minimum tax (AMT) refunds for the years 2018 to 2021. On January 19, 2019, the Internal Revenue Service issued new guidance indicating that sequestration would not apply to refundable AMT credits. In accordance with this new guidance, the Company will record a non-cash adjustment of $2.9 million that will reduce current income taxes during the three months ending March 31, 2019. Income taxes for the years ended December 31, 2018, 2017 and 2016 consisted of the following:
|  | Years Ended December 31, |
(In millions) |  | 2018 |  | 2017 |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 2.4 |  | $ | 21.6 |  | $ | 10.5 |
State |  |  | 2.1 |  |  | 2.2 |  |  | (1.3) |
Discrete adjustments related to the Tax Act (1) |  |  | 2.9 |  |  | — |  |  | — |
Total |  |  | 7.4 |  |  | 23.8 |  |  | 9.2 |
Deferred: |  |  |  |  |  |  |  |  |  |
Deferred tax expense |  |  | 31.3 |  |  | 24.4 |  |  | 39.9 |
Remeasurement and discrete adjustments related to the Tax Act (2) |  |  | — |  |  | (154.0) |  |  | — |
Total |  |  | 31.3 |  |  | (129.6) |  |  | 39.9 |
Total income taxes |  | $ | 38.7 |  | $ | (105.8) |  | $ | 49.1 |
| (1) |  | Current income taxes for the year ended December 31, 2018 includes a non-cash income tax expense of $2.9 million, which relates to discrete adjustments as a result of applying the provisions of the Tax Act.
| (2) |  | Deferred income taxes for the year ended December 31, 2017 includes a non-cash income tax benefit of $154.0 million, which relates to the remeasurement of the Company’s deferred tax assets and liabilities and other discrete adjustments as a result of applying the provisions of the Tax Act.
Income taxes for the years ended December 31, 2018, 2017, and 2016, differs from amounts computed by applying the statutory federal rate to income before income taxes for the following reasons:
|  | Years Ended December 31, |
|  | 2018 |  | 2017 |  | 2016 |
Computed federal income tax expense |  | 21.0 | % | 35.0 | % | 35.0 | %
State income tax |  | 3.4 | % | 2.6 | % | 1.8 | %
Valuation allowance |  | (0.7) | % | 1.4 | % | 0.3 | %
Foreign taxes |  | 0.6 | % | 0.1 | % | 0.4 | %
Remeasurement and discrete adjustments related to the Tax Act (1) |  | 2.0 | % | (123.0) | % | — | %
Share-based payments |  | 0.1 | % | (1.4) | % | — | %
Other — net |  | (0.2) | % | 0.8 | % | 0.1 | %
Effective income tax rate |  | 26.2 | % | (84.5) | % | 37.6 | %
| (1) |  | Effective income tax rate for the year ended December 31, 2018 and 2017 includes the impact of a non-cash income tax expense of $2.9 million, or 2.0 percent, and a non-cash income tax benefit of $154.0 million, or (123.0 percent), respectively, related to the remeasurement of the Company’s deferred assets and liabilities and other discrete adjustments as a result of applying the provisions of the Tax Act.
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2018 and 2017, were as follows:
|  | As of December 31, |
(In millions) |  | 2018 |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |
Benefit plans |  | $ | 45.6 |  | $ | 44.2 |
Federal net operating losses |  |  | 15.2 |  |  | 21.6 |
Insurance reserves |  |  | 5.6 |  |  | 6.8 |
State net operating losses |  |  | 7.4 |  |  | 7.4 |
Foreign losses |  |  | 5.1 |  |  | 6.6 |
U.S. State alternative minimum tax credits |  |  | 5.9 |  |  | 4.2 |
Allowance for doubtful accounts |  |  | 1.1 |  |  | 0.9 |
Other |  |  | 1.8 |  |  | 1.9 |
Total deferred tax assets |  |  | 87.7 |  |  | 93.6 |
Valuation allowance |  |  | (11.5) |  |  | (13.0) |
Total deferred tax assets, net of valuation allowance |  |  | 76.2 |  |  | 80.6 |
Deferred tax liabilities: |  |  |  |  |  |  |
Basis differences for property and equipment |  |  | 302.1 |  |  | 254.4 |
Lease financing |  |  | 26.0 |  |  | — |
Capital Construction Fund |  |  | 7.0 |  |  | 54.2 |
Intangibles |  |  | 38.4 |  |  | 36.4 |
Deferred revenue |  |  | 3.0 |  |  | 6.9 |
Terminal Joint Venture investment |  |  | 11.4 |  |  | 9.6 |
Reserves |  |  | 1.0 |  |  | 2.7 |
Total deferred tax liabilities |  |  | 388.9 |  |  | 364.2 |
Deferred tax liability, net |  | $ | 312.7 |  | $ | 283.6 |
The Company’s income taxes payable has been reduced by the tax benefits from share-based compensation. The Company receives an income tax benefit for exercised stock options calculated as the difference between the fair market value of the stock issued at the time of exercise and the option exercise price, tax-effected. The Company also receives an income tax benefit for non-vested stock when it vests, measured at the fair market value of the stock at the time of vesting, tax-effected. The net tax benefits from share-based transactions were $2.2 million for 2016, and the portion of the tax benefit related to the excess of the amount reported as the tax deduction over expense was reflected as an increase to additional paid-in-capital in the 2016 Consolidated Statements of Shareholders’ Equity. Valuation Allowance: Valuation allowances recorded against the Company’s foreign income tax net operating losses (“NOLs”) and a portion of the state income tax NOLs were $11.5 million and $13.0 million as of December 31, 2018 and 2017, respectively. The Company believes that it is more likely than not that the benefit from these amounts will not be realized. The Company recorded adjustments to its valuation allowance of ($1.1) million, $1.7 million and $0.4 million during the years ended December 31, 2018, 2017 and 2016, respectively. Net Operating Losses and Tax Credit Carryforwards: The Company’s NOLs and tax credit carryforwards at December 31, 2018 and 2017, were as follows:
(In millions) |  | Expiration Date |  | 2018 |  | 2017
U.S. Federal income tax NOLs |  | Various dates beginning in 2027 |  | $ | 74.5 |  | $ | 183.8
U.S. State income tax NOLs |  | Various dates beginning in 2032 |  | $ | 189.2 |  | $ | 192.3
Foreign income tax NOLs |  | No expiration date |  | $ | 18.4 |  | $ | 23.7
U.S. State alternative minimum tax credit |  | No expiration date |  | $ | 5.9 |  | $ | 4.2
The U.S. federal and state income tax NOLs in the Company’s filed income tax returns include unrecognized tax benefits. The deferred tax assets recognized for those NOLs are presented net of these unrecognized tax benefits. As a result of changes in tax legislation, the use of a portion of the Company’s domestic NOL and tax credit carryforwards may be limited in future periods. Further, a portion of the federal and state income tax NOLs and tax credit carryforwards may expire before being applied to reduce future income tax liabilities. Unrecognized Tax Benefits: Total unrecognized benefits represent the amount that, if recognized, would favorably affect the Company’s incomes taxes and effective tax rate in future periods. The Company does not expect a material change in gross unrecognized benefits in the next twelve months. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
Unrecognized Tax Benefits (in millions) |  | Amount |
Balance at December 31, 2015 |  | $ | 22.1 |
Changes in tax positions of prior years, net |  |  | (1.1) |
Reductions for lapse of statute of limitations |  |  | (0.6) |
Balance at December 31, 2016 |  |  | 20.4 |
Changes in tax positions of prior years, net |  |  | 1.1 |
Reductions for lapse of statute of limitations |  |  | (0.1) |
Revaluation of unrecognized tax benefits due to the Tax Act (1) |  |  | (5.5) |
Balance at December 31, 2017 |  |  | 15.9 |
Changes in tax positions of prior years, net |  |  | (0.3) |
Reductions for lapse of statute of limitations |  |  | (0.5) |
Balance at December 31, 2018 |  | $ | 15.1 |
| (1) |  | Amount relates to the impact of applying the Tax Act during the year ended December 31, 2017.
Included in the balance of unrecognized tax benefits at December 31, 2018 are potential benefits of $13.7 million that, if recognized, would affect the Company’s income taxes and effective tax rate. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income taxes. To the extent interest and penalties are not ultimately assessed with respect to the settlement of uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the Company’s income taxes. Interest accrued related to the balance of unrecognized tax benefits totaled $0.4 million and $0.5 million as of December 31, 2018 and 2017, respectively. The Company is no longer subject to U.S. federal income tax audits for years before 2014. The Company is routinely involved in state, local income and excise tax audits, and foreign tax audits.

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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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