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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Tax Disclosure | INCOME TAXES The provision (benefit) for income taxes for the years ended December 31, 2017, 2018 and 2019 consisted of the following (in thousands):
| Years Ended December 31,
| 2017 |  | 2018 |  | 2019
Current: |  |  |  |  |
U. S. federal provision (benefit) | $ | 6,425 |  |  | $ | 1,489 |  |  | $ | (2,039 | )
State provision (benefit) | 815 |  |  | 1,309 |  |  | (195 | )
Total current provision (benefit) | $ | 7,240 |  |  | $ | 2,798 |  |  | $ | (2,234 | )
Deferred: |  |  |  |  |
U. S. federal provision (benefit) | $ | (12,881 | ) |  | $ | 2,831 |  |  | $ | 8,056 |
State provision | 1,230 |  |  | 992 |  |  | 2,061 |
Total deferred provision (benefit) | $ | (11,651 | ) |  | $ | 3,823 |  |  | $ | 10,117 |
Total income tax provision (benefit) | $ | (4,411 | ) |  | $ | 6,621 |  |  | $ | 7,883 |
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, 2017, 2018 and 2019 is as follows (dollars in thousands):
| Years Ended December 31, |
| 2017 |  | 2018 |  | 2019 |
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent |
Federal statutory rate | $ | 11,474 |  |  | 35.0 |  | % | $ | 3,834 |  |  | 21.0 |  | % | $ | 4,707 |  |  | 21.0 |  | %
Effect of state income taxes, net of federal benefit | 1,304 |  |  | 4.0 |  |  | 1,776 |  |  | 9.7 |  |  | 1,352 |  |  | 6.0 |  |
Effect of non-deductible expenses and other, net | (36 | ) |  | (0.1 | ) |  | 1,451 |  |  | 7.9 |  |  | 947 |  |  | 4.2 |  |
Effect of divestiture and impairment of business | — |  |  | — |  |  | — |  |  | — |  |  | 911 |  |  | 4.1 |  |
Change in valuation allowance | 23 |  |  | 0.1 |  |  | 26 |  |  | 0.1 |  |  | (34 | ) |  | (0.2 | ) |
Re-measurement of deferred taxes due to tax reform | (17,176 | ) |  | (52.4 | ) |  | (466 | ) |  | (2.5 | ) |  | — |  |  | — |  |
Total | $ | (4,411 | ) |  | (13.5 | ) | % | $ | 6,621 |  |  | 36.2 |  | % | $ | 7,883 |  |  | 35.1 |  | %
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 examination was still ongoing as of December 31, 2019. The federal statute of limitations remains open for our tax years from 2015 through 2018. The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities at December 31, 2018 and 2019 are as follows (in thousands):
| Years Ended December 31,
| 2018 |  | 2019
Deferred income tax assets: |  |  |
Net operating loss carryforwards | $ | 1,569 |  |  | $ | 3,602 |
Interest expense limitation | 996 |  |  | 4,190 |
Tax credit carryforwards | 133 |  |  | 100 |
State bonus depreciation | 970 |  |  | 1,124 |
Accrued liabilities and other | 5,493 |  |  | 5,124 |
Amortization of non-compete agreements | 1,135 |  |  | 1,104 |
Preneed liabilities | 4,242 |  |  | — |
Total deferred income tax assets | 14,538 |  |  | 15,244 |
Less valuation allowance | (276 | ) |  | (234 | )
Total deferred income tax assets | $ | 14,262 |  |  | $ | 15,010 |
Deferred income tax liabilities: |  |  |
Depreciation and amortization | $ | (45,150 | ) |  | $ | (49,568 | )
Preneed liabilities | — |  |  | (6,446 | )
Convertible subordinated notes due 2021 | (131 | ) |  | (75 | )
Prepaids and other | (244 | ) |  | (289 | )
Total deferred income tax liabilities | (45,525 | ) |  | (56,378 | )
Total net deferred tax liabilities | $ | (31,263 | ) |  | $ | (41,368 | )
Our deferred tax assets and liabilities, along with related valuation allowances are classified as non-current on our Consolidated Balance Sheet at December 31, 2018 and 2019. 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 decrease in our valuation allowance during 2019. For federal income tax reporting purposes, we have net operating loss carryforwards of $7.2 million with an indefinite life that will not expire. For state reporting purposes, we have $45.8 million of net operating loss carryforwards that will expire between 2020 and 2038, 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, 2019 was attributable to the deferred tax asset related to a portion of the state operating losses. The federal and state net operating loss (NOL) carryforwards in the income tax returns filed included unrecognized tax benefits. 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. The deferred tax assets recognized for those NOLs are presented net of these unrecognized tax benefits. At December 31, 2019, the Company’s unrecognized tax benefits reserve for uncertain tax positions primarily relates to pending accounting method changes filed for the tax year ending December 31, 2018. In 2018, we filed two Form 3115s, Application for Change in Accounting Method, and associated statements to request consent to change the method of accounting for deferred revenue for our cemetery property and cemetery merchandise and service operations for the tax year beginning January 1, 2018. These method changes are still under review. The amount of the reserve recorded as of December 31, 2019 was $0.7 million. No reserve was recorded at December 31, 2018. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| Years Ended December 31,
| 2017 |  | 2018 |  | 2019
Unrecognized tax benefit at beginning of year | $ | — |  |  | $ | — |  |  | $ | — |
Gross increases - tax positions in prior period | — |  |  | — |  |  | 691 |
Gross decreases - tax positions in prior period | — |  |  | — |  |  | — |
Gross increases - tax positions in current period | — |  |  | — |  |  | — |
Settlement | — |  |  | — |  |  | — |
Unrecognized tax benefit at end of year | $ | — |  |  | $ | — |  |  | $ | 691 |
There are no balances included in unrecognized tax benefits that, if recognized, would affect the effective tax rate. We believe that it is reasonably possible that a decrease of the entire unrecognized tax benefit may be recognized within the next 12 months. On December 31, 2019, pursuant to the Transactions Agreement dated November 25, 2019 with Calvary Memorial Park, Inc. and Fairfax Memorial Funeral Home, LLC (“the Agreement“), all of the outstanding equity interests of the Fairfax, Virginia funeral and cemetery combination businesses were acquired for $102.0 million in cash. The funeral home business was operated by a limited liability company that was treated as a partnership for federal tax purposes prior to the acquisition date, and therefore, the acquisition of all of the outstanding membership units of the partnership were treated as an asset acquisition. The cemetery business was operated by an S corporation prior to the acquisition date, and therefore, consent was obtained from the selling S corporation shareholders to make a 338(h)(10) election under the Internal Revenue Code, which allowed us to treat the acquisition of the stock of the cemetery business as an asset acquisition and allowed us to record the assets and liabilities at fair value. Therefore, no deferred taxes have been recorded. See Note 3 to the Consolidated Financial Statements included herein, for a additional information regarding the Fairfax, Virginia acquisition.

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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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