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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 8. Income Taxes The Tax Cuts and Jobs Act (“The Act”) was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. The Act also contained provisions that include the repeal of the domestic production activity deduction, established a new tax on Global Intangible Low-Taxed Income (“GILTI”), new base erosion and anti-abuse tax provisions (“BEAT”), a new deduction for Foreign-Derived Intangible Income (“FDII”), and increased limitations on the deductibility of certain executive compensation. Due to the complexities involved in accounting for the enactment of the Act, the SEC Staff Accounting Bulletin No. 118 (“SAB 118”) allowed the Company to record provisional amounts in earnings for the year ended December 31, 2017. Where reasonable estimates could be made, the provisional accounting was based on such estimates. In situations where no reasonable estimate could be made, the provisional accounting could be based on the tax law in effect before the Act. The Company was required to complete its tax accounting for the Act within a one-year period, when it has obtained, prepared, and analyzed the information to complete the accounting. Throughout 2018, we continued to refine our calculations and we finalized our accounting for the Act during the fourth quarter of 2018 when we filed our U.S. tax returns for the period ended December 31, 2017. The changes to the tax positions for temporary differences compared to the provisional amounts used at December 31, 2017 resulted in a $0.5 million adjustment of the income tax expense recorded as of December 31, 2018. Despite the completion of our accounting for the Act under SAB 118, many aspects of the law remain unclear and we expect ongoing guidance to be issued at both the federal and state levels. We will continue to monitor and assess the impact of any new developments. Deferred tax assets and liabilities: In 2017, we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. We recorded a provisional tax benefit related to the remeasurement of our deferred tax balance as of December 31, 2017 of $75.2 million. Transition tax: Under the Act, the Company was subject to a one-time transition tax on the untaxed foreign earnings of its foreign subsidiaries by deeming those earnings to be repatriated. Foreign earnings held in the form of cash and cash equivalents were taxed at a 15.5% rate and the remaining earnings were taxed at an 8.0% rate. In calculating the Transition Tax, we were required to calculate the cumulative earnings and profits of all non-U.S. subsidiaries back to 1987. We elected to pay the entire tax of thirty thousand dollars, in accordance with the Act, with our 2017 U.S. tax return. Global Intangible Low-Taxed Income (“GILTI”): We are required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred or (2) factoring such amounts into our measurement of deferred taxes. We made an accounting policy election to account for GILTI as a component of tax expense in the period in which we are subject and therefore will not provide any deferred tax impacts of GILTI in our consolidated financial statements. The Company does not expect GILTI to be material or to be subject to the tax. Base erosion and anti-abuse provisions (“BEAT”): The ACT introduced BEAT for companies that meet certain thresholds by effectively excluding deductions on certain payments to foreign related entities. The BEAT provisions eliminate the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. The Company does not expect to be subject to the tax. Foreign-derived intangible income (“FDII”): The ACT introduced FDII which, through deductions, effectively creates a preferential tax rate for income derived by domestic corporations from serving foreign markets. The FDII rules are complex and while we are still interpreting them, the Company does not expect a significant benefit from FDII. The following is a reconciliation of our effective tax rate to the federal statutory tax rate:
| Years Ended December 31, |  |
| 2018 |  |  | 2017 |  |  | 2016 |  |
U.S. federal statutory rate |  | 21.0 |  | % |  | 34.9 |  | % |  | 35.0 |  | %
Federal tax law changes |  | 0.5 |  |  |  | (112.2 | ) |  |  | - |  |
State taxes, net of federal benefit |  | 3.7 |  |  |  | 2.8 |  |  |  | 2.7 |  |
Federal and state incentives |  | (0.9 | ) |  |  | (7.0 | ) |  |  | (0.4 | ) |
State law changes |  | - |  |  |  | 2.0 |  |  |  | 0.4 |  |
Permanent differences |  | 0.6 |  |  |  | 0.2 |  |  |  | 1.0 |  |
Net effective rate |  | 24.9 |  | % |  | (79.3 | ) | % |  | 38.7 |  | %
The following is a summary of our provision for income taxes (in thousands):
| Years Ended December 31, |
| 2018 |  |  | 2017 |  |  | 2016 |
Current |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (13,750 | ) |  | $ | (10,426 | ) |  | $ | 21,527 |
State and local |  | 1,740 |  |  |  | 1,542 |  |  |  | 3,053 |
Foreign |  | (234 | ) |  |  | 59 |  |  |  | 108 |
|  | (12,244 | ) |  |  | (8,825 | ) |  |  | 24,688 |
Deferred |  |  |  |  |  |  |  |  |  |  |
Federal |  | 36,968 |  |  |  | (46,922 | ) |  |  | 10,867 |
State and local |  | 4,134 |  |  |  | 2,667 |  |  |  | 890 |
Foreign |  | 206 |  |  |  | (3 | ) |  |  | (64 | )
|  | 41,308 |  |  |  | (44,258 | ) |  |  | 11,693 |
Total provision | $ | 29,064 |  |  | $ | (53,083 | ) |  | $ | 36,381 |
The following is a summary of our deferred tax assets and liabilities (in thousands):
| December 31, |
| 2018 |  |  | 2017 |
Accrued compensation |  | 10,538 |  |  |  | 9,441 |
Other reserves |  | 8,568 |  |  |  | 6,736 |
Tax credit carryforwards |  | 5,062 |  |  |  | 3,411 |
Operating loss carryforwards |  | 6,914 |  |  |  | 1,388 |
Total gross deferred income taxes |  | 31,082 |  |  |  | 20,976 |
Valuation allowances |  | (3,128 | ) |  |  | (1,681 | )
Total deferred tax assets |  | 27,954 |  |  |  | 19,295 |
Prepaids |  | (5,409 | ) |  |  | (3,587 | )
Other receivables |  | (1,588 | ) |  |  | (2,462 | )
Property and equipment |  | (119,716 | ) |  |  | (79,224 | )
Goodwill |  | (55,118 | ) |  |  | (55,117 | )
Total deferred tax liabilities |  | (181,831 | ) |  |  | (140,390 | )
Total deferred taxes | $ | (153,877 | ) |  | $ | (121,095 | )
We are subject to income taxation in the U.S., numerous state jurisdictions, Mexico and Canada. Because income tax return formats vary among the states, we file both unitary and separate company state income tax returns. We do not permanently reinvest our foreign earnings, all amounts are accrued and accounted for, though not material. We acquired a federal net operating loss carryforward of $4.1 million through our acquisition of CaseStack. IRS loss limitation rules allowed us to utilize $0.1 million in 2018. The remaining net operating loss of $4.0 million has no expiration date. Our state tax net operating losses of $2.9 million includes $1.0 million from the acquisition of CaseStack. Those state net operating losses expire between December 31, 2019 and December 31, 2038. Management believes it is more likely than not that the loss carryforward deferred tax assets will be realized, except for forty-nine thousand dollars of state losses. A valuation allowance of forty-nine thousand dollars has been established. Our federal incentive tax credit carryforward of forty-five thousand dollars expires between December 31, 2025 and December 31, 2027. Our state incentive tax credit carryforwards of $5.0 million expire between December 31, 2019 and December 31, 2023. Management believes it is more likely than not that the incentive carryforward deferred tax assets will be realized, except for $3.1 million of state tax credits. A valuation allowance of $3.1 million has been established. As of December 31,2018 and December 31, 2017, the amount of unrecognized tax benefits was $3.9 million and $3.8 million, respectively. Of these amounts, our income tax provision would decrease $3.3 million and $2.8 million, respectively, if recognized. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| 2018 |  |  | 2017 |
Gross unrecognized tax benefits - beginning of the year | $ | 3,827 |  |  | $ | 1,832 |
Gross (decreases) increases related to prior year tax positions |  | (397 | ) |  |  | 1,830 |
Gross increases related to current year tax positions |  | 959 |  |  |  | 290 |
Lapse of applicable statute of limitations |  | (495 | ) |  |  | (125 | )
Gross unrecognized tax benefits - end of year | $ | 3,894 |  |  | $ | 3,827 |
We estimate it is reasonably possible that our reserve could either increase or decrease by up to $1.0 million during the next twelve months. We recognize interest expense and penalties related to income tax liabilities in our provision for income taxes. In our 2018 provision for income taxes, we recognized approximately $0.1 million dollars of interest income on tax refunds and approximately one thousand dollars of income tax penalty expense. In 2018, we were selected for examinations by Wisconsin for our 2014 through 2016 tax years, by Tennessee for our 2014 through 2016 tax years, and by Massachusetts for our 2016 and 2017 tax years. The Massachusetts and Wisconsin examinations are still ongoing. The Tennessee audit and audits by California for our 2012 and 2013 tax years and by Minnesota for our 2013 through 2015 tax years closed with no additional tax due.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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