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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Note 9. Income Taxes Tax Cuts and Jobs Act (the “Tax Act”). On December 22, 2017, the U.S. government enacted comprehensive tax legislation, which made broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact the Company: (1) reducing the U.S. federal corporate income tax rate from 35% to 21%; (2) enhancing and extending the option to claim accelerated depreciation deductions by allowing full expensing of qualified property through 2022; (3) limiting the deductibility of certain executive compensation; and (4) limiting certain other deductions. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides for a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting relating to the Tax Act under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As the result of the Company’s initial analysis of the impact of the Tax Act, the Company recorded a provisional net tax expense of $80.3 million in 2017 related to the revaluation of its net deferred tax liabilities, in accordance with ASC 740. The Company completed its accounting for the income tax effects of the Tax Act in the fourth quarter of 2018, and no material adjustments were required to the provisional amounts initially recorded. Tax Matters Agreement with TEGNA. On February 3, 2017, the Company entered into a Tax Matters Agreement with TEGNA, which governs the tax relationship between the Company and TEGNA for the tax periods through the May 31, 2017 Separation of the Company from TEGNA. Under this agreement, TEGNA is responsible for all payments of federal and state income tax due with respect to pre-closing tax liabilities. Accordingly, TEGNA prepared all federal, state and local income tax returns for the pre-closing period. Pursuant to the Tax Matters Agreement, TEGNA agreed to indemnify the Company for: (1) all pre-closing taxes, including any pre-closing taxes resulting from any audit, amendment, other change or adjustment, (2) any taxes resulting from a breach by TEGNA of any covenant in the Tax Matters Agreement and (3) any stamp, sales and use, gross receipts, value-added or other transfer taxes imposed on TEGNA on the Separation of the Company from TEGNA, any refund of pre-closing taxes, or other taxes for which TEGNA is responsible are for the benefit of, and will be paid to, TEGNA. The Company agreed to indemnify TEGNA for: (1) all post-closing taxes, (2) any taxes resulting from a breach by the Company of any covenant in the Tax Matters Agreement, (3) any tax arising from the failure or breach of any representation or covenant made by the Company which failure or breach results in the intended tax consequences of the Separation transaction not being achieved and (4) any stamp, sales and use, gross receipts, value-added or other transfer tax imposed on the Company on the Separation of the Company from TEGNA. Selected Information Related to Income Taxes. Significant components of Income before income taxes are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
U.S. |  | $ | 56,114 |  |  | $ | 122,162 |  |  | $ | 176,958 |
Non-U.S. |  |  | 815 |  |  |  | — |  |  |  | — |
Income before income taxes |  | $ | 56,929 |  |  | $ | 122,162 |  |  | $ | 176,958 |
Significant components of the Income tax expense (benefit) are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 254 |  |  | $ | 5,966 |  |  | $ | 1,001 |
U.S. state and local |  |  | 953 |  |  |  | 598 |  |  |  | — |
Non-U.S. |  |  | 220 |  |  |  | — |  |  |  | — |
Total current income tax expense |  |  | 1,427 |  |  |  | 6,564 |  |  |  | 1,001 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 11,133 |  |  |  | (110,361 | ) |  |  | (538 | )
U.S. state and local |  |  | 5,560 |  |  |  | 1,516 |  |  |  | 125 |
Non-U.S. |  |  | — |  |  |  | — |  |  |  | — |
Total deferred income tax expense |  | $ | 16,693 |  |  | $ | (108,845 | ) |  | $ | (413 | )
Income tax expense (benefit) |  | $ | 18,120 |  |  | $ | (102,281 | ) |  | $ | 588 |
The income tax provision differed from amounts computed at the statutory federal income tax rate, as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  |  | 2017 (1) |  |  |  | 2016 (2) |
|  | $ |  |  | % |  |  |  | $ |  |  | % |  |  |  | $ |
Income tax provision at statutory rate |  | $ | 11,955 |  |  |  | 21.0 |  | % |  | $ | 42,757 |  |  |  | 35.0 |  | % |  | $ | 521 |
Tax effect of pre-Separation earnings |  |  | — |  |  |  | — |  |  |  |  | (16,210 | ) |  |  | (13.3 | ) |  |  |  | — |
State income taxes, net of federal income tax benefit |  |  | 2,668 |  |  |  | 4.7 |  |  |  |  | 2,294 |  |  |  | 1.9 |  |  |  |  | 67 |
Effect of change in apportionment factors (3) |  |  | 3,467 |  |  |  | 6.1 |  |  |  |  | — |  |  |  | — |  |  |  |  | — |
Write-off of permanent outside basis difference |  |  | — |  |  |  | — |  |  |  |  | (50,687 | ) |  |  | (41.5 | ) |  |  |  | — |
Effect of U.S. federal tax rate change |  |  | — |  |  |  | — |  |  |  |  | (80,298 | ) |  |  | (65.7 | ) |  |  |  | — |
Other, net |  |  | 30 |  |  |  | — |  |  |  |  | (137 | ) |  |  | (0.1 | ) |  |  |  | — |
Income tax expense (benefit) |  | $ | 18,120 |  |  |  | 31.8 |  | % |  | $ | (102,281 | ) |  |  | (83.7 | ) | % |  | $ | 588 |
(1) | The income tax benefit for the year ended December 31, 2017 is based upon seven months of Cars.com, LLC activity and twelve months of DealerRater activity.
(2) | As a partnership, Cars.com, LLC generally was not subject to federal and state income tax. Therefore, the income tax benefit is based upon five months of DealerRater post-acquisition activity.
(3) | This item relates to changes in apportionment factors upon the finalization of the post-Spin 2017 state tax returns in the fourth quarter of 2018.
The Company’s effective tax rate for the year ended December 31, 2018 differed from the federal statutory rate of 21%, primarily due to unfavorable changes in the apportionment factors upon the finalization of the post-Spin 2017 state tax returns in the fourth quarter of 2018 and state income tax expenses. The Company’s effective tax rate for the year ended December 31, 2017 differed from the federal statutory rate of 35%, primarily due to the non-cash income tax benefits of $16 million, $51 million and $80 million related to pre-Separation earnings, of which the payments were the responsibility of TEGNA, the write-off of the permanent outside basis difference resulting from the change in the tax status of the Cars.com, LLC flow-through entity and the reduction in the corporate federal income tax rate, respectively. Deferred Tax Assets and Liabilities. With the implementation of the post-Separation legal entity structure, the Company was required to record deferred tax assets and liabilities for temporary differences between financial accounting and tax reporting. Accordingly, in 2017, the Company recorded $246 million of net deferred tax liabilities associated with the outside basis difference in the Cars.com, LLC flow-through entity, with the offset recorded in TEGNA’s investment net. In October 2017, Cars.com, LLC prospectively changed its corporate structure to convert from being taxed as a partnership to being taxed as a C corporation. As a result of the change in corporate structure, Cars.com, LLC was also required to change its reporting of deferred tax assets and liabilities. During the period, the Company recorded a $51 million non-cash write-off of the permanent outside basis difference resulting from this reporting change. Significant components of the deferred tax assets and liabilities are as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Deferred income tax asset (liability): |  |  |  |  |  |  |  |
Accrued compensation |  | $ | 4,098 |  |  | $ | 2,374 |
Unfavorable contracts liability |  |  | 4,739 |  |  |  | 10,794 |
Other |  |  | 2,725 |  |  |  | 3,758 |
Less: Valuation allowance |  |  | — |  |  |  | — |
Total deferred tax assets |  | $ | 11,562 |  |  | $ | 16,926 |
Depreciation |  | $ | (4,629 | ) |  | $ | (4,667 | )
Intangibles |  |  | (183,632 | ) |  |  | (156,968 | )
Other |  |  | (1,217 | ) |  |  | (1,773 | )
Total deferred tax liabilities |  |  | (189,478 | ) |  |  | (163,408 | )
Net deferred tax liability |  | $ | (177,916 | ) |  | $ | (146,482 | )
Uncertain Tax Positions. Significant judgment is required in evaluating tax positions and determining the provision for income taxes, and the Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when the Company believes that certain positions might be challenged despite the Company’s belief that the tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. Unrecognized tax benefits were immaterial as of December 31, 2018. No unrecognized tax benefits were recorded as of December 31, 2017 and 2016. Cars.com files a consolidated U.S. federal income tax return as well as income tax returns in various state and local jurisdictions. The Company's tax returns are routinely audited by federal and state tax authorities and these tax audits are at various stages of completion at any given time. Generally, the Company’s tax returns open to examination by a federal or state taxing authority are for years beginning on or after December 31, 2014.

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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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