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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Significant Components of (Loss) Income Before Income Taxes

Significant components of (Loss) Income before income taxes are as follows (in thousands):

	Year Ended December 31,
	2019			2018		2017
U.S.	$	(476,925	)	$	56,114	$	122,162
Non-U.S.		1,646			815		—
(Loss) income before income taxes	$	(475,279	)	$	56,929	$	122,162

Schedule of Significant Components of the Income Tax Expense (Benefit)

	Year Ended December 31,
	2019			2018		2017
Current:
U.S. federal	$	1,501		$	254	$	5,966
U.S. state and local		427			953		598
Non-U.S.		448			220		—
Total current income tax expense		2,376			1,427		6,564
Deferred:
U.S. federal		(27,692	)		11,133		(110,361	)
U.S. state and local		(4,636	)		5,560		1,516
Non-U.S.		(3	)		—		—
Total deferred income tax (benefit) expense		(32,331	)		16,693		(108,845	)
Income tax (benefit) expense	$	(29,955	)	$	18,120	$	(102,281	)

Schedule of Income Tax Provision Differed from Amounts Computed at the Statutory Federal Income Tax Rate

The income tax provision differed from amounts computed at the statutory federal income tax rate, as follows (in thousands, except percentage):

	Year Ended December 31,
	2019							2018					2017 ^{(1) (2)}
	$			%				$		%			$			%
Income tax provision at statutory rate	$	(99,808	)		21.0		%	$	11,955		21.0	%	$	42,757			35.0		%
Tax effect of pre-Separation earnings		—			—				—		—			(16,210	)		(13.3	)
State income taxes, net of federal income tax benefit		(5,374	)		1.1				2,668		4.7			2,294			1.9
Book impairment and other permanent differences		71,650			(15.1	)			—		—			—			—
Effect of change in apportionment factors ⁽³⁾		928			(0.2	)			3,467		6.1			—			—
Write-off of permanent outside basis difference		—			—				—		—			(50,687	)		(41.5	)
Effect of U.S. federal tax rate change ⁽⁴⁾		—			—				—		—			(80,298	)		(65.7	)
Other, net		2,649			(0.5	)			30		—			(137	)		(0.1	)
Income tax (benefit) expense	$	(29,955	)		6.3		%	$	18,120		31.8	%	$	(102,281	)		(83.7	)	%

(1)

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.

(2)

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.

(3)

This reflects changes in apportionment factors upon the finalization of the post-Spin 2017 state tax returns in the fourth quarter of 2018.

(4)

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 Company recorded net tax expense of $80.3 million in 2017 related to the revaluation of its net deferred tax liabilities, in accordance with ASC 740.

Significant Components of Deferred Tax Assets and Liabilities

Significant components of the deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2019			2018
Deferred income tax liabilities:
Depreciation	$	(4,459	)	$	(4,629	)
Intangibles		(150,090	)		(183,632	)
Lease obligations		(3,893	)		—
Other		(1,420	)		(1,217	)
Total deferred tax liabilities	$	(159,862	)	$	(189,478	)
Deferred income tax assets:
Accrued compensation	$	5,742		$	4,098
Right of use assets		3,793			—
Unfavorable contracts liability		—			4,739
NOL and tax credit carryforwards		11,152			—
Other		6,179			2,725
Total deferred tax assets	$	26,866		$	11,562
Less: Valuation allowance		—			—
Net deferred tax liability	$	(132,996	)	$	(177,916	)

Summary of Uncertain Tax Positions

A summary of the Company’s uncertain tax positions is as follows (in thousands):

	Year Ended December 31,
	2019		2018
Balance as of January 1	$	595	$	—
Additions for tax positions of prior years		906		595
Income before income taxes	$	1,501	$	595