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Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2017
Income Taxes [Abstract] |
Income Tax Disclosure [Text Block] |
12. | Income Taxes
Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The current and deferred portions (in thousands) of federal, foreign and state income tax benefit or expense are as follows:
|  | For the Year Ended December 31,
|  | 2017 |  | 2016
Federal income tax benefit: |  |  |  |
Current tax (expense) benefit |  | $ | (113 | ) |  | $ | 59 |
Deferred tax benefit |  | 6,187 |  |  | 5,884 |
Total federal income tax benefit |  | $ | 6,074 |  |  | $ | 5,943 |
Foreign income tax expense: |  |  |  |
Current tax expense |  | $ | (94 | ) |  | $ | (41 | )
Deferred tax benefit |  | 8 |  |  | 3 |
Total foreign income tax expense |  | $ | (86 | ) |  | $ | (38 | )
State and other income tax benefit: |  |  |  |
Current tax benefit (expense) |  | $ | 16 |  |  | $ | (116 | )
Deferred tax benefit |  | 374 |  |  | 226 |
Total state and other income tax benefit |  | $ | 390 |  |  | $ | 110 |
Total income tax benefit |  | $ | 6,378 |  |  | $ | 6,015 |
We experienced effective income tax benefit rates of 13.5% and 48.7% for the years ended December 31, 2017, and 2016, respectively. Our effective income tax benefit rate for the year ended December 31, 2017 is below the statutory rate principally due to (1) interest and penalties that we accrued on unpaid federal tax liabilities and (2) our establishment of valuation allowances against our net federal deferred tax assets associated with our net loss incurred in this year. Our effective income tax benefit rate for the year ended December 31, 2016 is above the statutory rate principally due to income of our U.K. subsidiary (1) that is not subject to tax in the U.S., and (2) the U.K. tax on which was fully offset by a release of U.K. valuation allowances. We net against our income tax benefit line item on our consolidated statements of operations interest and penalties associated with our tax liabilities (including our accrued liabilities for uncertain tax positions and our unpaid tax liabilities). We likewise report the reversal of such interest and penalties within the income tax benefit line item to the extent that we resolve our liabilities for uncertain tax positions or unpaid tax liabilities in a manner favorable to our accruals therefor. During the years ended December 31, 2017 and 2016, $0.5 million and $0.4 million, respectively, of net income tax-related interest and penalties are netted against those years’ income tax benefit line items. In December 2014, we reached a settlement with the IRS concerning the tax treatment of net operating losses we incurred in 2007 and 2008 and carried back to obtain refunds of federal income taxes paid in earlier years dating back to 2003. Our net unpaid income tax assessment associated with that settlement was $7.4 million at December 31, 2017; this amount excludes unpaid interest and penalties on the tax assessment, the accruals for which aggregated $4.1 million at December 31, 2017. Prior to our filing amended return claims that would have eliminated the $7.4 million assessment (and corresponding interest and penalties) under a negotiated provision of the IRS settlement, the IRS filed a lien (as is customarily the case) associated with the assessment. Subsequently, an IRS examination team denied our amended return claims, and we filed a protest with IRS Appeals. During the fourth quarter of 2017, we attended an IRS Appeals conference related to the subject matter underlying our amended return claims and submitted supplemental information to address matters on which the IRS Appeals Officer needed additional support. The following table reconciles our effective income tax benefit rates for 2017 and 2016:
|  | For the Year Ended December 31,
|  | 2017 |  | 2016
Statutory benefit rate |  | 35.0 | % |  | 35.0 | %
Increase (decrease) in statutory tax benefit rate resulting from: |  |  |  |
Changes in valuation allowances |  | (12.7 | ) |  | 6.2 |
Interest and penalties related to uncertain tax positions |  | (0.9 | ) |  | (0.1 | )
Foreign income taxes |  | 0.6 |  |  | 7.5 |
Permanent and other prior year true ups |  | (0.4 | ) |  | (0.5 | )
Impact of change in federal tax rate |  | (8.7 | ) |  | — |
State and other income taxes, net |  | 0.6 |  |  | 0.6 |
Effective benefit rate |  | 13.5 | % |  | 48.7 | %
As of December 31, 2017 and December 31, 2016, the respective significant components (in thousands) of our deferred tax assets and liabilities were:
|  | As of December 31,
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |
Software development costs/fixed assets |  | $ | 83 |  |  | $ | — |
Goodwill and intangible assets |  | 1,801 |  |  | 3,798 |
Provision for loan loss |  | 16,320 |  |  | 18,353 |
Equity-based compensation |  | 604 |  |  | 670 |
Accrued expenses |  | 113 |  |  | 1,678 |
Accruals for state taxes and interest associated with unrecognized tax benefits |  | 78 |  |  | 286 |
Federal net operating loss carry-forward |  | 49,098 |  |  | 70,778 |
Alternative minimum tax credit carry-forward |  | 2,005 |  |  | 2,145 |
Foreign net operating loss carry-forward |  | 362 |  |  | 374 |
State tax benefits |  | 44,643 |  |  | 35,409 |
Deferred tax assets, gross |  | $ | 115,107 |  |  | $ | 133,491 |
Valuation allowances |  | (48,242 | ) |  | (33,924 | )
Deferred tax assets net of valuation allowance |  | $ | 66,865 |  |  | $ | 99,567 |
Deferred tax liabilities: |  |  |  |
Prepaid expenses and other |  | $ | (194 | ) |  | $ | (184 | )
Software development costs/fixed assets |  | — |  |  | (157 | )
Equity in income of equity-method investee |  | (1,054 | ) |  | (1,455 | )
Other |  | (511 | ) |  | (58 | )
Credit card fair value election differences |  | (32,464 | ) |  | (42,939 | )
Deferred costs |  | (466 | ) |  | (696 | )
Convertible senior notes |  | (20,098 | ) |  | (28,921 | )
Cancellation of indebtedness income |  | (9,841 | ) |  | (29,491 | )
Deferred tax liabilities, gross |  | $ | (64,628 | ) |  | $ | (103,901 | )
Deferred tax assets (liabilities), net |  | $ | 2,237 |  |  | $ | (4,334 | )
We undertook a detailed review of our deferred taxes and determined that a valuation allowance was required for certain deferred tax assets in the U.S. and various foreign jurisdictions (including U.S. territories). We reduce our deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. In making our valuation allowance determinations, we consider all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods, and the implementation of tax planning strategies. Because this evaluation requires consideration of future events, significant judgment is required in making the evaluation, and our conclusion could be materially different should certain of our expectations not be met. Our valuation allowance was $48.2 million and $33.9 million at December 31, 2017, and December 31, 2016, respectively. The significant components of the change in our valuation allowance include an $11.8 million increase due to losses incurred in our 2017 operations for which future benefits are not expected to be utilized, an $8.3 million increase against state tax deferred assets we believe will expire unused, offset by a $5.8 million decrease resulting from the corporate tax rate change enacted on December 22, 2017, in the Tax Cuts and Jobs Act of 2017. We note that we have not established a valuation allowance against approximately $2.0 million of federal minimum tax credits which are now fully refundable in the future without regard to our future results of operations. Certain of our deferred tax assets relate to federal, foreign and state net operating losses, capital losses, and credits as noted in the above table, and we have no other net operating losses, capital losses, or credit carry-forwards other than those noted herein. We have recorded a deferred tax asset of $49.1 million reflecting the tax benefit of federal net operating loss and capital loss carryforwards, which expire in varying amounts between 2029 and 2033. Beyond allowing for the refundability of federal minimum tax credits, the Tax Cuts and Jobs Act of 2017 made other significant changes to the Internal Revenue Code. Because of the significance of these changes, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Accordingly, we have recorded provisional amounts in our consolidated financial statements. Although we do not anticipate remeasurements of our recorded amounts, such remeasurements could occur given the passage of these significant tax law changes so late in the 2017 year, coupled with ongoing guidance and accounting interpretations that are expected over the next 12 months. We expect to complete our analysis within the measurement period in accordance with SAB 118. One significant provision within the new tax legislation is the decrease in the U.S. corporate income tax rate from 35% to 21%, which resulted in the re-measurement of our net deferred tax asset balance and related valuation allowance to reflect the future tax benefit at the newly enacted rate. Our net U.S. deferred tax asset was reduced by $4.3 million, as was our valuation allowance against this asset. Because of these offsetting remeasurements, the change in the U.S. corporate income tax rate had no effect on our 2017 effective tax rate. The Tax Cuts and Jobs Act of 2017 also requires the payment of a transition tax on the mandatory deemed repatriation of cumulative, unremitted foreign earnings. Based upon all available evidence and our analysis, we have no transition tax liability because we have a net earnings and profits deficit in our controlled foreign corporations; accordingly, this particular provision did not affect our 2017 effective tax rate. Although the Tax Cuts and Jobs Act of 2017 provides for a modified territorial tax system beginning in 2018, it includes two new U.S. tax base anti-erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions would require us to include foreign subsidiary earnings that exceed an allowable return on the foreign subsidiary’s tangible assets in our U.S. income tax return. We do not expect that the GILTI inclusions will result in any significant U.S. tax for us, and, if applicable, we intend to account for the GILTI tax in the period in which it is incurred. Therefore, we have not included any deferred tax impacts of GILTI in our 2017 consolidated financial statements. The BEAT provisions eliminate the deduction of certain base-eroding payments made to related foreign corporations and impose a minimum tax if it is greater than the regular tax. Based upon all available evidence and our analysis, we do not expect that the BEAT provisions will apply to us. We conduct business globally, and as a result, our subsidiaries file federal, state and/or foreign income tax returns. In the normal course of our business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the U.S., the U.K., and various U.S. states and territories. With a few exceptions of a non-material nature, and with the exception of our 2008 tax-settlement-related claims discussed previously, we are no longer subject to federal, state, local, or foreign income tax examinations for years prior to 2013. Reconciliations (in thousands) of our unrecognized tax benefits from the beginning to the end of 2017 and 2016, respectively, are as follows:
|  | 2017 |  | 2016
Balance at January 1, |  | $ | (818 | ) |  | $ | (1,798 | )
Reductions based on tax positions related to prior years |  | 583 |  |  | 1,167 |
Additions based on tax positions related to the current year |  | (87 | ) |  | (82 | )
Interest and penalties accrued |  | (51 | ) |  | (105 | )
Balance at December 31, |  | $ | (373 | ) |  | $ | (818 | )
Further, our unrecognized tax benefits that, if recognized, would affect the effective tax rate are not material at only $0.4 million and $0.8 million at December 31, 2017, and 2016, respectively.

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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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