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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
INCOME TAXES |
12. | INCOME TAXES
As discussed in Note 1, the Company began operating in compliance with REIT requirements for federal income tax purposes effective January 1, 2013. As a REIT, the Company must distribute at least 90 percent of its taxable income (including dividends paid to it by its TRSs) and will not pay federal income taxes on the amount distributed to its stockholders. In addition, the Company must meet a number of other organizational and operational requirements. It is management's intention to adhere to these requirements and maintain the Company's REIT status. Most states where CoreCivic holds investments in real estate conform to the federal rules recognizing REITs. Certain subsidiaries have made an election with the Company to be treated as TRSs in conjunction with the Company's REIT election; the TRS elections permit CoreCivic to engage in certain business activities in which the REIT may not engage directly. A TRS is subject to federal and state income taxes on the income from these activities and therefore, CoreCivic includes a provision for taxes in its consolidated financial statements. The TCJA was enacted on December 22, 2017. The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign-sourced earnings. However, the TCJA does not change the dividends paid deduction applicable to REITs and, therefore, CoreCivic generally will not be subject to federal income taxes on the Company's REIT taxable income and gains that it distributes to its stockholders. At December 31, 2017, the Company has recorded, in accordance with ASC 740, the tax effects of enactment of the TCJA on existing deferred tax balances and the Company estimates there is no one-time transition tax on foreign earnings. The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The Company recognized a charge of $4.5 million, which is included as a component of income tax expense, for the revaluation of deferred tax assets and liabilities and other taxes associated with the TCJA. However, the Company is still analyzing certain aspects of the TCJA, including research on historical earnings of certain foreign subsidiaries among others, and refining its calculations which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. Income tax expense is comprised of the following components (in thousands):
|  | For the Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current income tax expense |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,202 |  |  | $ | 10,181 |  |  | $ | 2,519 |
State |  |  | 2,788 |  |  |  | 1,983 |  |  |  | 136 |
|  |  | 12,990 |  |  |  | 12,164 |  |  |  | 2,655 |
Deferred income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 1,088 |  |  |  | (3,400 | ) |  |  | 5,589 |
State |  |  | (167 | ) |  |  | (511 | ) |  |  | 117 |
|  |  | 921 |  |  |  | (3,911 | ) |  |  | 5,706 |
Income tax expense |  | $ | 13,911 |  |  | $ | 8,253 |  |  | $ | 8,361 |
Significant components of CoreCivic's deferred tax assets and liabilities as of December 31, 2017 and 2016, are as follows (in thousands):
|  | December 31, |
|  | 2017 |  |  | 2016 |
Noncurrent deferred tax assets: |  |  |  |  |  |  |  |
Asset reserves and liabilities not yet deductible for tax |  | $ | 19,045 |  |  | $ | 29,198 |
Tax over book basis of certain assets |  |  | 40 |  |  |  | 866 |
Net operating loss and tax credit carryforwards |  |  | 5,040 |  |  |  | 5,487 |
Intangible contract value |  |  | — |  |  |  | 2,570 |
Other |  |  | 172 |  |  |  | 346 |
Total noncurrent deferred tax assets |  |  | 24,297 |  |  |  | 38,467 |
Less valuation allowance |  |  | (3,308 | ) |  |  | (3,436 | )
Total noncurrent deferred tax assets |  |  | 20,989 |  |  |  | 35,031 |
Noncurrent deferred tax liabilities: |  |  |  |  |  |  |  |
Book over tax basis of certain assets |  |  | (5,959 | ) |  |  | (9,386 | )
Intangible lease value |  |  | — |  |  |  | (8,368 | )
Other |  |  | (2,216 | ) |  |  | (3,542 | )
Total noncurrent deferred tax liabilities |  |  | (8,175 | ) |  |  | (21,296 | )
Net total noncurrent deferred tax assets |  | $ | 12,814 |  |  | $ | 13,735 |
The tax benefits associated with equity-based compensation reduced income taxes payable by $1.0 million with a corresponding income tax benefit recognized in the accompanying statement of operations for the year ended December 31, 2017, consistent with the newly-adopted ASU 2016-09. The tax benefits associated with equity-based compensation reduced income taxes payable by $1.5 million and $0.5 million during 2016 and 2015, respectively, with benefits recorded as increases to stockholders' equity. A reconciliation of the income tax provision at the statutory income tax rate and the effective tax rate as a percentage of income from continuing operations before income taxes for the years ended December 31, 2017, 2016, and 2015 is as follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Statutory federal rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Dividends paid deduction |  |  | (31.3 | ) |  |  | (32.5 | ) |  |  | (31.9 | )
State taxes, net of federal tax benefit |  |  | 1.2 |  |  |  | 1.1 |  |  |  | 0.9 |
Permanent differences |  |  | 0.6 |  |  |  | 0.3 |  |  |  | 0.4 |
Charges associated with adoption of tax reform |  |  | 2.4 |  |  |  | — |  |  |  | — |
Tax benefit of equity-based compensation |  |  | (0.5 | ) |  |  | — |  |  |  | — |
Other items, net |  |  | (0.2 | ) |  |  | (0.3 | ) |  |  | (0.8 | )
|  |  | 7.2 | % |  |  | 3.6 | % |  |  | 3.6 | %
CoreCivic's effective tax rate was 7.2%, 3.6%, and 3.6% during 2017, 2016, and 2015, respectively. As a REIT, CoreCivic is entitled to a deduction for dividends paid, resulting in a substantial reduction in the amount of federal income tax expense it recognizes. Substantially all of CoreCivic's income tax expense is incurred based on the earnings generated by its TRSs. CoreCivic's overall effective tax rate is estimated based on its current projection of taxable income primarily generated by its TRSs. The Company's consolidated effective tax rate could fluctuate in the future based on changes in estimates of taxable income, the relative amounts of taxable income generated by the TRSs and the REIT, the implementation of additional tax planning strategies, changes in federal or state tax rates or laws affecting tax credits available to the Company, changes in other tax laws, changes in estimates related to uncertain tax positions, or changes in state apportionment factors, as well as changes in the valuation allowance applied to the Company's deferred tax assets that are based primarily on the amount of state net operating losses and tax credits that could expire unused. CoreCivic had no liabilities for uncertain tax positions as of December 31, 2017 and 2016. CoreCivic recognizes interest and penalties related to unrecognized tax positions in income tax expense. CoreCivic does not currently anticipate that the total amount of unrecognized tax positions will significantly change in the next twelve months. CoreCivic's U.S. federal income tax returns for tax years 2014 through 2016 remain subject to examination by the IRS. All states in which CoreCivic files income tax returns follow the same statute of limitations as federal, with the exception of the following states whose open tax years include 2013 through 2016: Arizona, California, Colorado, Kentucky, Minnesota, New Jersey, Texas, and Wisconsin.

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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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