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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure | INCOME TAXES The provision (benefit) for income taxes for the years ended December 31, 2016, 2017 and 2018 consisted of the following (in thousands):
| Year Ended December 31,
| 2016 |  | 2017 |  | 2018
Current: |  |  |  |  |
U. S. federal provision | $ | 6,609 |  |  | $ | 6,425 |  |  | $ | 1,489 |
State provision | 1,195 |  |  | 815 |  |  | 1,309 |
Total current provision | $ | 7,804 |  |  | $ | 7,240 |  |  | $ | 2,798 |
Deferred: |  |  |  |  |
U. S. federal provision (benefit) | $ | 3,475 |  |  | $ | (12,881 | ) |  | $ | 2,831 |
State provision | 1,381 |  |  | 1,230 |  |  | 992 |
Total deferred provision (benefit) | $ | 4,856 |  |  | $ | (11,651 | ) |  | $ | 3,823 |
Total income tax provision (benefit) | $ | 12,660 |  |  | $ | (4,411 | ) |  | $ | 6,621 |
A reconciliation of taxes calculated at the U.S. federal statutory rate to those reflected in the Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018 is as follows (dollars in thousands):
| Year Ended December 31, |
| 2016 |  | 2017 |  | 2018 |
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent |
Federal statutory rate | $ | 11,300 |  |  | 35.0 |  | % | $ | 11,474 |  |  | 35.0 |  | % | $ | 3,834 |  |  | 21.0 |  | %
Effect of state income taxes, net of federal benefit | 1,127 |  |  | 3.5 |  |  | 1,304 |  |  | 4.0 |  |  | 1,776 |  |  | 9.7 |  |
Effect of non-deductible expenses and other, net | 213 |  |  | 0.7 |  |  | (36 | ) |  | (0.1 | ) |  | 1,451 |  |  | 7.9 |  |
Change in valuation allowance | 20 |  |  | 0.1 |  |  | 23 |  |  | 0.1 |  |  | 26 |  |  | 0.1 |  |
Re-measurement of deferred taxes due to tax reform | — |  |  | — |  |  | (17,176 | ) |  | (52.4 | ) |  | (466 | ) |  | (2.5 | ) |
Total | $ | 12,660 |  |  | 39.3 |  | % | $ | (4,411 | ) |  | (13.5 | ) | % | $ | 6,621 |  |  | 36.2 |  | %
On May 10, 2017, we filed amended federal returns for the tax years ending December 31, 2013, 2014 and 2015, which generated significant refunds. As a result, on July 18, 2017, we received notification that the IRS selected our tax years ended December 31, 2013, 2014 and 2015 for a limited scope examination to verify the refunds due. The examinations are in process, however, the timing of the conclusion of the audit is uncertain. The federal statute is still open for our 2016 tax year. On December 21, 2018, we filed 3 Form 3115s, Application for Change in Accounting Method, and associated statements with the requesting consent to change the method of accounting for deferred revenue for our cemetery property and cemetery merchandise and service operations for the taxable year beginning January 1, 2018 and ending December 31, 2018. The application requesting a change in the method of accounting for recognizing advance payments received under preneed contracts for cemetery services and merchandise is to comply with Internal Revenue Code (I.R.C.) Sections 61, 451, and 471. The change in method of accounting for constructed and unconstructed cemetery property is to comply with I.R.C Sections 61, 451, 1001, 1012 and 460. The method changes filed are non-automatic and require IRS approval. The impact of the change in the method of accounting for deferred revenue will be recorded in the interim period in which the method changes are approved. The method changes are expected to be approved but the timing of the approval is uncertain. Additionally, once approved the method changes will result in significant favorable deductions and will have a favorable impact on cash taxes paid during 2019. We do not have any unrecognized tax benefits recorded as of December 31, 2018 and we do not anticipate a material change in our unrecognized tax benefits during the next twelve months. The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities at December 31, 2017 and 2018 were as follows (in thousands):
| Year Ended December 31,
| 2017 |  | 2018
Deferred income tax assets: |  |  |
Net operating loss carryforwards | $ | 1,978 |  |  | $ | 1,569 |
Tax credit carryforwards | 133 |  |  | 133 |
State bonus depreciation | 494 |  |  | 970 |
Accrued liabilities and other | 6,136 |  |  | 7,544 |
Amortization of non-compete agreements | 873 |  |  | 1,135 |
Preneed liabilities, net | 5,239 |  |  | 4,242 |
Total deferred income tax assets | 14,853 |  |  | 15,593 |
Less valuation allowance | (244 | ) |  | (276 | )
Total deferred income tax assets | $ | 14,609 |  |  | $ | 15,317 |
Deferred income tax liabilities: |  |  |
Depreciation and amortization | $ | (41,447 | ) |  | $ | (46,205 | )
Convertible subordinated notes due 2021 | (4,096 | ) |  | (131 | )
Prepaids and other | (225 | ) |  | (244 | )
Total deferred income tax liabilities | (45,768 | ) |  | (46,580 | )
Total net deferred tax liabilities | $ | (31,159 | ) |  | $ | (31,263 | )
Current deferred tax asset | $ | — |  |  | $ | — |
Non-current deferred tax liabilities | (31,159 | ) |  | (31,263 | )
Total net deferred tax liabilities | $ | (31,159 | ) |  | $ | (31,263 | )
Our deferred tax assets and liabilities, along with related valuation allowances are classified as non-current on our Consolidated Balance Sheet at December 31, 2017 and 2018. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. Effective as of January 1, 2018, the Tax Act established new tax laws, including but not limited to (1) a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%; (2) a limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses); (3) a limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks; (4) limitations of certain executive compensation deductions; and (5) limitations or repeals of many business deductions and credits. The analysis required by SAB 118 to determine the impact of the Tax Act was complete as of December 31, 2017. Return to provision adjustments recorded in the fourth quarter of 2018 resulted in additional favorable impact from the rate reduction as there were changes to the deferred balances recorded. We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain. Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more likely than not that the tax benefits will be realized. We recognized an immaterial net increase in our valuation allowance during 2018 and 2017. For federal income tax reporting purposes, we have no net operating loss carryforwards. For state reporting purposes, we have $31.2 million of net operating loss carryforwards that will expire between 2019 and 2037, if not utilized. Based on management’s assessment of the various state net operating losses, it was determined that it is more likely than not that we will be able to realize tax benefits on some portion of the amount of the state losses. The valuation allowance at December 31, 2018 was attributable to the deferred tax asset related to a portion of the state operating losses. We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheet. At December 31, 2018, no uncertain tax positions were identified and we do not anticipate a material change to our unrecognized tax benefits during the next twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31,
| 2016 |  | 2017 |  | 2018
Unrecognized tax benefit at beginning of year | $ | 814 |  |  | $ | — |  |  | $ | — |
Reductions based on tax positions related to the prior year | (17 | ) |  | — |  |  | — |
Reductions for tax year 2011 federal audit | (568 | ) |  | — |  |  | — |
Reductions based on tax positions related to the current year | (229 | ) |  | — |  |  | — |
Reductions as a result of a lapse of the applicable statute of limitations | — |  |  | — |  |  | — |
Unrecognized tax benefit at end of year | $ | — |  |  | $ | — |  |  | $ | — |

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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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