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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Taxes |
Income Taxes | Note 6: Income Taxes The Tax Cuts and Jobs Act (“the Act”) effective January 1, 2018, included a reduction to the US federal tax rate from 35 percent to 21 percent, a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, adjustment of deferred tax assets and liabilities for the new corporate tax rate, and adjustments to deductible compensation of our executive officers. The Act also imposes a new tax on foreign earnings and profits in excess of a deemed return on tangible assets of foreign subsidiaries referred to as Global Low Taxed Intangible Income (“GILTI”), a new tax on certain payments between a U.S. corporation and its foreign subsidiaries referred to as Base Erosion and Anti-Abuse Minimum Tax (“BEAT”), and a tax deduction on certain qualifying income related to export sales of property or services referred to as Foreign Derived Intangible Income (“FDII”). The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017 and throughout 2018. In 2017, the Company recorded a discrete tax benefit of $19.3 million related to the enactment-date effects of the Act that included adjustments to the Company’s net deferred tax liabilities. In 2018, the Company adjusted the enactment-date provisional amounts by decreasing tax expense by an additional $5.1 million, recorded as a discrete tax benefit. These adjustments were recorded as components of income tax expense from continuing operations. As of December 31, 2018, the Company has completed its accounting for all of the enactment-date income tax effects of the Act. Discussion of specific provisions of the Act follows: One-time transition tax The one-time transition tax is based on the Company’s total post-1986 foreign earnings and profits (E&P), a tax that was previously deferred until repatriation of those earnings and profits. At December 31, 2017, the Company estimated the one-time transitional tax to be not material and no provision was included as a component of tax expense in 2017. Based on further analysis of the Act, and notices and regulations issued by the US Department of the Treasury and the Internal Revenue Service, the Company concluded that the tax impact of the Act from un-repatriated earnings and profits of our foreign subsidiaries was not material. Executive compensation arrangements As of December 31, 2017, we evaluated the deductibility of our executive compensation arrangements and the related impacts on both current and deferred taxes based on the guidance that was available at that time. At December 31, 2017, we recorded tax expense related to executive compensation of approximately $1.3 million. During 2018, with additional guidance from the US Department of Treasury and the Internal Revenue Service, we refined our calculations, and reduced our 2017 provisional expense by approximately $0.5 million. GILTI Our analysis at December 31, 2017, related to GILTI was incomplete, and therefore did not record a GILTI-related adjustment. Under FASB guidance, the Company elected to treat tax related to GILTI as a period expense rather than create a deferred tax for the temporary differences that are expected to reverse in future years. As of December 31, 2018, the impact of the Act on the Company related to Global Low Taxed Intangible Income was not material. BEAT The Company has analyzed the Act’s provisions related to Base Erosion and Profit Shifting, and has determined the impact to our financial statements to be not material. No provision was included as a component of tax expense in either 2017 or 2018. In summary, due to the complexity of the FDII, GILTI, and BEAT provisions of the Act, the Company is continuing to evaluate their impact in 2018. At this time, the Company has incorporated its best estimate for each of these provisions within the annual effective tax rate for 2018. The Company will continue to monitor developments as new information becomes available with respect to each of FDII, GILTI or BEAT and anticipates refining the calculations in connection with the filing of its 2018 US federal income tax return. The following table lists the components of the provision (benefit) for income taxes:
Years ended December 31, |  | 2018 |  |  | 2017 |  |  | 2016 |
(in thousands) |  |  |  |  |  |  |  |  |
Current provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 13,708 |  |  | $ | 95,995 |  |  | $ | (43,993 | )
State |  |  | 3,932 |  |  |  | 13,966 |  |  |  | (24,479 | )
Foreign |  |  | 6,843 |  |  |  | 2,953 |  |  |  | 4,567 |
Deferred provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 23,203 |  |  |  | (39,710 | ) |  |  | (31,505 | )
State |  |  | (1,808 | ) |  |  | (2,899 | ) |  |  | (2,704 | )
Total income tax provision (benefit) |  | $ | 45,878 |  |  | $ | 70,305 |  |  | $ | (98,114 | )
Reconciliation between the federal statutory rate and RPC’s effective tax rate is as follows:
Years ended December 31, |  | 2018 |  |  | 2017 |  |  | 2016 |
Federal statutory rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal benefit |  |  | 2.6 |  |  |  | 1.9 |  |  |  | 1.3 |
Tax credits |  |  | (0.1 | ) |  |  | (0.7 | ) |  |  | 0.1 |
Non-deductible expenses |  |  | 1.8 |  |  |  | 2.0 |  |  |  | (0.7 | )
Change in contingencies |  |  | — |  |  |  | — |  |  |  | 6.6 |
Adjustments related to the Act |  |  | (2.3 | ) |  |  | (8.3 | ) |  |  | — |
Adjustments related to vesting of restricted stock |  |  | (0.8 | ) |  |  | (1.2 | ) |  |  | — |
Other |  |  | (1.5 | ) |  |  | 1.5 |  |  |  | (1.3 | )
Effective tax rate |  |  | 20.7 | % |  |  | 30.2 | % |  |  | 41.0 | %
Significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31, |  | 2018 |  |  | 2017 |
(in thousands) |  |  |  |  |  |
Deferred tax assets: |  |  |  |  |  |  |  |
Self-insurance |  | $ | 5,055 |  |  | $ | 4,660 |
Pension |  |  | 7,261 |  |  |  | 8,730 |
State net operating loss carryforwards |  |  | 1,663 |  |  |  | 4,048 |
Bad debt |  |  | 1,291 |  |  |  | 1,149 |
Accrued payroll |  |  | 1,416 |  |  |  | 1,117 |
Stock-based compensation |  |  | 3,501 |  |  |  | 3,612 |
Foreign tax credits |  |  | — |  |  |  | 3,592 |
All others |  |  | 3,166 |  |  |  | 1,681 |
Valuation allowance |  |  | (445 | ) |  |  | (3,994 | )
Gross deferred tax assets |  |  | 22,908 |  |  |  | 24,595 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (71,647 | ) |  |  | (53,119 | )
Goodwill amortization |  |  | (6,587 | ) |  |  | (6,450 | )
Basis differences in consolidated limited liability company |  |  | (4,636 | ) |  |  | (4,102 | )
Basis differences in joint ventures |  |  | (408 | ) |  |  | (355 | )
All others |  |  | (5 | ) |  |  | (6 | )
Gross deferred tax liabilities |  |  | (83,283 | ) |  |  | (64,032 | )
Net deferred tax liabilities |  | $ | (60,375 | ) |  | $ | (39,437 | )
The Company's current intention is to permanently reinvest funds held in our foreign subsidiaries outside of the U.S., with the possible exception of repatriation of funds that have been previously subject to U.S. federal and state taxation or when it would be tax effective through the utilization of foreign tax credits, or would otherwise create no additional U.S. tax cost. As of December 31, 2018, the Company has net operating loss carryforwards related to state income taxes of $27.6 million (gross) that will expire between 2019 and 2035. As of December 31, 2018, the Company has a valuation allowance of $390 thousand, representing the tax-affected amount of loss carryforwards that the Company does not expect to utilize, against the corresponding deferred tax asset. Additionally, as of December 31, 2018, the Company has capital loss carryforwards of $56 thousand that are not expected to be utilized, and have a full valuation allowance against the corresponding deferred tax assets. Total net income tax payments (refunds) were $18.0 million in 2018, $98.0 million in 2017, and $(42.4) million in 2016. The Company and its subsidiaries are subject to U.S. federal and state income taxes in multiple jurisdictions. In many cases, our uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities. In general, the Company’s 2015 through 2018 tax years remain open to examination. Additional years may be open to the extent attributes are being carried forward to an open year. In March 2017, the Internal Revenue Service (IRS) initiated an examination of the Company’s Federal Income Tax Returns for the years 2013 through 2016. The IRS concluded it examinations, without adjustment, in the fourth quarter 2018. As of December 31, 2018 and 2017, our liability for unrecognized tax benefits related primarily to state income taxes did not change and remained at $2,215,000, and is recognized as a component of other long-term liabilities in the accompanying consolidated balance sheet. The liability, if recognized, would affect our effective rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | 2018 |  |  | 2017 |
Balance at January 1 |  | $ | 2,215,000 |  |  | $ | 2,215,000 |
Additions based on tax positions related to the current year |  |  | — |  |  |  | — |
Additions for tax positions of prior years |  |  | — |  |  |  | — |
Reductions for tax positions of prior years |  |  | — |  |  |  | — |
Balance at December 31 |  | $ | 2,215,000 |  |  | $ | 2,215,000 |
The Company’s policy is to record interest and penalties related to income tax matters as income tax expense. Accrued interest and penalties as of December 31, 2018 and 2017 were $263 thousand and $193 thousand, respectively. It is reasonably possible that the amount of the unrecognized tax benefits with respect to our unrecognized tax positions will increase or decrease in the next 12 months. These changes may result from, among other things, state tax settlements under voluntary disclosure agreements, or conclusions of ongoing examinations or reviews. However, quantification of an estimated range cannot be made at this time.

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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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