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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The United States and foreign components of income before income taxes and equity in earnings in affiliates are as follows:
|  | 2017 |  | 2016 |  | 2015
|  | (In thousands)
Income before income taxes and equity in earnings in affiliates |  |  |  |  |  |
United States |  | $ | 130,205 |  |  | $ | 139,937 |  |  | $ | 130,752 |
Foreign |  | 21,732 |  |  | 9,540 |  |  | 10,419 |
Income before income taxes and equity in earnings in affiliates |  | $ | 151,937 |  |  | $ | 149,477 |  |  | $ | 141,171 |
The provision for income taxes consists of the following components:
|  | 2017 |  | 2016 |  | 2015
|  | (In thousands)
Federal income taxes: |  |  |  |  |  |
Current |  | $ | 13,928 |  |  | $ | 5,801 |  |  | $ | 3,437 |
Deferred |  | (3,803 | ) |  | (3,541 | ) |  | (1,924 | )
|  | 10,125 |  |  | 2,260 |  |  | 1,513 |
State income taxes: |  |  |  |  |  |
Current |  | 3,337 |  |  | 2,764 |  |  | 683 |
Deferred |  | (2,269 | ) |  | (1,792 | ) |  | 684 |
|  | 1,068 |  |  | 972 |  |  | 1,367 |
Foreign income taxes: |  |  |  |  |  |
Current |  | (11,545 | ) |  | 5,302 |  |  | 5,643 |
Deferred |  | 18,310 |  |  | (630 | ) |  | (1,134 | )
|  | 6,765 |  |  | 4,672 |  |  | 4,509 |
Total U.S. and foreign provision for income taxes |  | $ | 17,958 |  |  | $ | 7,904 |  |  | $ | 7,389 |
T he U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. statutory corporate tax rate from 35% to 21%. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company has made reasonable estimates of the effects and recorded provisional amounts in its financial statements as of December 31, 2017. As the Company collects and prepares necessary data, and interprets the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, it may make adjustments to the provisional amounts. Those adjustments may materially impact the Company's provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed in 2018. Provisional amounts for the following income tax effects of the Tax Act have been recorded as of December 31, 2017 and are subject to change during 2018. One-time transition tax As a REIT, the Tax Act requires the Company to include into taxable income accumulated foreign subsidiary earnings not previously subject to U.S. income tax, subject to the REIT dividend paid deduction. Consequently, due to our status as a REIT, we will not be subject to tax on accumulated foreign subsidiary earnings. Deferred tax effects The Tax Act reduces the U.S. statutory tax rate from 35% to 21% for years after 2017. Accordingly, the Company has remeasured its deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. The Company recognized a deferred tax expense of $9.6 million to reflect the reduced U.S. tax rate. Although the tax rate reduction is known, the Company has not collected the necessary data to complete its analysis of the effect of the Tax Act on certain underlying deferred taxes such as the deductibility of accrued executive compensation and deferred taxes related to the CEC acquisition. As such, the amounts recorded as of December 31, 2017 are provisional. The net tax expense recognized in 2017 related to the Tax Act was $9.6 million. As the Company completes its analysis of the Tax Act and incorporates additional guidance that may be issued by the U.S. Treasury Department, the IRS or other standard-setting bodies, it may identify additional effects not reflected as of December 31, 2017. A reconciliation of the statutory U.S. federal tax rate of 35.00% and the effective income tax rate is as follows:
|  | 2017 |  | 2016 |  | 2015
|  | (In thousands)
Provisions using statutory federal income tax rate |  | $ | 53,175 |  |  | $ | 52,317 |  |  | $ | 49,410 |
State income taxes (benefit), net of federal tax benefit |  | (776 | ) |  | 1,161 |  |  | (322 | )
REIT Benefit |  | (43,554 | ) |  | (41,479 | ) |  | (42,536 | )
Change in contingent tax liabilities |  | (510 | ) |  | (403 | ) |  | (395 | )
Change in valuation allowance |  | 2,055 |  |  | 243 |  |  | 3,702 |
Tax Cut and Jobs Act Impact |  | 9,584 |  |  | — |  |  | — |
Other, net |  | (2,016 | ) |  | (3,935 | ) |  | (2,470 | )
Total provision for income taxes |  | $ | 17,958 |  |  | $ | 7,904 |  |  | $ | 7,389 |
The Company's effective tax rate differs from the U.S. statutory rate of 35.0% primarily due to a zero tax rate on earnings generated by the Company's REIT operations. State income taxes (benefit), net of federal tax benefits of $(0.8) million, $1.2 million and $(0.3) million for 2017, 2016 and 2015, respectively, is presented exclusive of the related change in valuation allowance of state income tax deferred items. Net of the related change in valuation allowances the state income taxes, net of federal tax benefits is $1.5 million, $1.2 million and $0.9 million for 2017, 2016 and 2015, respectively. The following table presents the breakdown between non-current net deferred tax assets as of December 31, 2017 and 2016:
|  | 2017 |  | 2016
|  | (In thousands)
Deferred tax assets - non current |  | 26,277 |  |  | 30,039 |
Deferred tax liabilities - non current |  | (8,757 | ) |  | — |
Total net deferred tax assets |  | $ | 17,520 |  |  | $ | 30,039 |
The significant components of the Company's deferred tax assets and liabilities consisted of the following as of December 31, 2017 and 2016:
|  | 2017 |  | 2016
Deferred tax assets: |  | (In thousands)
Net operating losses |  | $ | 45,041 |  |  | $ | 32,088 |
Accrued liabilities |  | 25,384 |  |  | 26,355 |
Deferred compensation |  | 11,675 |  |  | 14,273 |
Accrued compensation |  | 6,854 |  |  | 6,527 |
Deferred revenue |  | 2,780 |  |  | 4,564 |
Deferred rent |  | 506 |  |  | 2,469 |
Tax credits |  | 6,629 |  |  | 4,524 |
Equity awards |  | 4,076 |  |  | 4,296 |
Other, net |  | 453 |  |  | 1,260 |
Valuation allowance |  | (22,577 | ) |  | (17,312 | )
Total deferred tax assets |  | $ | 80,821 |  |  | $ | 79,044 |
Deferred tax liabilities: |  |  |  |
Intangible assets |  | $ | (30,084 | ) |  | $ | (40,935 | )
Capitalized transaction costs |  | (17,955 | ) |  | (5,945 | )
Depreciation |  | (15,262 | ) |  | (2,125 | )
Total deferred tax liabilities |  | $ | (63,301 | ) |  | $ | (49,005 | )
Total net deferred tax assets |  | $ | 17,520 |  |  | $ | 30,039 |
Deferred income taxes should be reduced by a valuation allowance if it is not more likely than not that some portion or all of the deferred tax assets will be realized. On a periodic basis, management evaluates and determines the amount of the valuation allowance required and adjusts such valuation allowance accordingly. At year end 2017 and 2016, the Company has a valuation allowance of $22.6 million and $17.3 million, respectively related to deferred tax assets for foreign net operating losses, state net operating losses and state tax credits. The valuation allowance increased by $5.3 million during the year ended December 31, 2017. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are permanently invested outside the United States. At December 31, 2017, $2.6 million of accumulated undistributed earnings of non-U.S. subsidiaries were permanently invested. At the existing U.S. federal income and applicable foreign withholding tax rates, additional taxes (net of foreign tax credits) of $0.1 million, consisting solely of withholding taxes, would have to be provided if such earnings were remitted currently. As of the year ended December 31, 2017, the Company had $42.7 million of Federal net operating loss carryforwards which begin to expire in 2032 and $189.7 million of combined net operating loss carryforwards in various states which begin to expire in 2018. The Federal net operating losses are at the Company's REIT which is not subject to tax. The Company has recorded a partial valuation allowance against the deferred tax assets related to the state operating losses. Also as of the year ended December 31, 2017, the Company had $104.6 million of foreign operating losses which carry forward indefinitely and $5.8 million of state tax credits which begin to expire in 2019. The Company has recorded a partial valuation allowance against the deferred tax assets related to the foreign operating losses and state tax credits. The Company recognizes the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards. The exercise of non-qualified stock options and vesting of restricted stock awards which have been granted under the Company’s equity award plans give rise to compensation income which is includable in the taxable income of the applicable employees and deducted by the Company for federal and state income tax purposes. In the case of non-qualified stock options, the compensation income results from increases in the fair market value of the Company's common stock subsequent to the date of grant. At year end 2017, the deferred tax asset net of a valuation allowance related to unexercised stock options and restricted stock grants for which the Company has recorded a book expense was $4.2 million. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | 2017 |  | 2016 |  | 2015
|  | (In thousands)
Balance at Beginning of Period |  | $ | 1,640 |  |  | $ | 1,571 |  |  | $ | 2,076 |
Additions based on tax positions related to the current year |  | — |  |  | 1,290 |  |  | — |
Additions for tax positions of prior years |  | — |  |  | 341 |  |  | — |
Additions from current year acquisitions |  | 4,121 |  |  | — |  |  | — |
Reductions for tax positions of prior years |  | (1,290 | ) |  | — |  |  | — |
Reductions as a result of a lapse of applicable statutes of limitations |  | (10 | ) |  | (1,562 | ) |  | (505 | )
Balance at End of Period |  | $ | 4,461 |  |  | $ | 1,640 |  |  | $ | 1,571 |
All amounts in the reconciliation are reported on a gross basis and do not reflect a federal tax benefit on state income taxes. The Company has accrued $4.3 million of accrued uncertain tax benefits as of December 31, 2017 which is inclusive of the federal tax benefit on state income taxes. The Company believes that it is reasonably possible that a decrease may be necessary in the unrecognized tax benefits within twelve months of the reporting date of approximately $0.2 million, related to state tax exposures, due to lapse of statute of limitation. The accrued uncertain tax balance at December 31, 2017 includes $4.3 million of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate. The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2014. The Company was under audit by the IRS for the 2013 tax year, its first REIT year. In the fourth quarter of 2017, the Company received a no change letter from the IRS for the 2013 tax year. The calculation of the Company’s provision (benefit) for income taxes requires the use of significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations. In determining the adequacy of the Company’s provision (benefit) for income taxes, potential settlement outcomes resulting from income tax examinations are regularly assessed. As such, the final outcome of tax examinations, including the total amount payable or the timing of any such payments upon resolution of these issues, cannot be estimated with certainty. During the year ended December 31, 2017, the Company did not recognize any interest and penalties. There was $0.1 million in interest and penalties recognized during the year ended December 31, 2016. The Company had accrued $0.1 million for the payment of interest and penalties at December 31, 2016. The Company classifies interest and penalties as interest expense and other expense, respectively. In 2016, the Company discovered certain immaterial errors in prior periods related to the calculation of deferred tax assets and liabilities. In accordance with ASC Topic 250-10-S99-2, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," the Company recorded an aggregate adjustment of approximately $2.7 million reducing the provision for income taxes in 2016. This adjustment to the Company's financial statements is immaterial both as it relates to 2016 as well as each of the prior periods affected. In evaluating materiality and determining the appropriateness of applying ASC Topic 250-10-S99-2 to these errors, the Company considered materiality both qualitatively and quantitatively as prescribed by ASC Topic 250-10-S99-1, "Assessing Materiality."

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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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