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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Note 10 – Income Taxes Income tax provision (benefits) are summarized as follows:
| Year Ended December 31, |
(In thousands) | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (91 | ) |  | $ | — |  |  | $ | 247 |
State |  | (5 | ) |  |  | — |  |  |  | — |
Total current tax benefit (provision) |  | (96 | ) |  |  | — |  |  |  | 247 |
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (7,456 | ) |  | $ | (4,091 | ) |  | $ | (8,939 | )
State |  | (369 | ) |  |  | (234 | ) |  |  | (1,277 | )
Total deferred tax benefit |  | (7,825 | ) |  |  | (4,325 | ) |  |  | (10,216 | )
Income tax benefit | $ | (7,921 | ) |  | $ | (4,325 | ) |  | $ | (9,969 | )
Reconciliation of the statutory federal income tax rate to the Company’s actual rate based on income (loss) before income tax benefit is summarized as follows:
| Year Ended December 31, |
| 2017 |  |  | 2016 |  |  | 2015 |
Statutory federal tax rate |  | 35 | % |  |  | 35 | % |  |  | 35 | %
State income taxes, net of federal income taxes |  | 2.0 |  |  |  | 2.0 |  |  |  | 6.9 |
State tax credit |  | — |  |  |  | (45.9 | ) |  |  | — |
State rate adjustment |  | — |  |  |  | 2.1 |  |  |  | — |
Permanent tax differences – Merger expenses |  | — |  |  |  | — |  |  |  | 11.4 |
Permanent tax differences – investment in unconsolidated investee |  | — |  |  |  | — |  |  |  | 9.8 |
Permanent tax differences – executive compensation |  | (12.5 | ) |  |  | — |  |  |  | — |
Permanent tax differences – other |  | (17.0 | ) |  |  | 2.4 |  |  |  | 1.4 |
Purchase price allocation adjustment – Merger |  | — |  |  |  | 3.7 |  |  |  | — |
Change in valuation allowance |  | 193.5 |  |  |  | (34.8 | ) |  |  | (131.1 | )
FICA credit generated |  | 11.8 |  |  |  | (4.7 | ) |  |  | — |
Impact of Tax Cuts and Jobs Act |  | (74.6 | ) |  |  | — |  |  |  | — |
Other, net |  | (0.4 | ) |  |  | 4.1 |  |  |  | (1.8 | )
Effective tax rate |  | 137.8 | % |  |  | -36.1 | % |  |  | -68.4 | %
The Company’s current and non-current deferred tax assets (liabilities) are comprised of the following:
| December 31, |
(In thousands) | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |
Accruals and reserves | $ | 4,348 |  |  | $ | 1,144 |
Share-based compensation expense |  | 2,532 |  |  |  | 2,366 |
Development costs |  | — |  |  |  | 5 |
Alternative minimum tax credit carryforward |  | 1,483 |  |  |  | 1,468 |
General business credit carryforward |  | 1,126 |  |  |  | 481 |
State tax credits |  | 5,500 |  |  |  | 5,500 |
Net operating loss carryforwards |  | 17,350 |  |  |  | 28,025 |
Other |  | 701 |  |  |  | 1,065 |
|  | 33,040 |  |  |  | 40,054 |
Valuation allowances |  | (6,983 | ) |  |  | (18,109 | )
| $ | 26,057 |  |  | $ | 21,945 |
Deferred tax liabilities: |  |  |  |  |  |  |
Prepaid services |  | (884 | ) |  |  | (1,034 | )
Amortization of intangible assets |  | (14,304 | ) |  |  | (20,024 | )
Depreciation of fixed assets |  | (3,082 | ) |  |  | (925 | )
|  | (18,270 | ) |  |  | (21,983 | )
Net deferred tax assets (liabilities) | $ | 7,787 |  |  | $ | (38 | )
Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income and the impact of tax planning strategies. The Company's financial results for the year ended December 31, 2017, include the release of a portion of the valuation allowance recorded against the deferred tax assets of the Company. This release resulted in the recognition of a $7.9 million income tax benefit. The Company has performed a continuing evaluation of its deferred tax asset valuation allowance on a quarterly basis. The Company concluded that, as of December 31, 2017, it is more likely than not that the Company will generate sufficient taxable income within the applicable net operating loss carry-forward periods to realize a portion of its deferred tax assets. This conclusion, and the resulting partial release of the deferred tax asset valuation allowance, was based upon consideration of several factors, including the Company's completion of eight consecutive quarters of profitability, its demonstrated ability to meet or exceed budgets, and its forecast of future profitability. Although the Company’s operations in the fourth quarter of 2017 reported a book loss, this loss was primarily attributable to costs associated with the American Acquisition and accordingly is not expected to be recurring. As of December 31, 2017, the Company had approximately $77.1 million of federal net operating loss carryforwards, which will begin to expire in 2032. These net operating losses have the potential to be used to offset future ordinary taxable income and reduce future cash tax liabilities. However, in connection with the American Acquisition, the Company issued 4,046,494 shares of its common stock to ACEP Holdings, which resulted in an “ownership change” under Section 382 that will generally limit the amount of net operating losses the Company can utilize annually. Following an “ownership change” under Section 382, the amount of net operating losses the Company can utilize in a given year is limited to an amount equal to the aggregate fair market value of the Company’s common stock immediately prior to the ownership change, multiplied by the long-term exempt interest rate in effect for the month of the ownership change. The Company estimates that the amount of net operating losses that it will be able to utilize following the closing of the American Acquisition is limited to approximately $10.8 million annually. Additionally, the Company had deferred tax assets of approximately $1.5 million related to Alternative Minimum Tax credits and approximately $1.1 million related to general business credits. The general business credit carryforward expires in 2037. With the enactment of The Tax Cuts and Jobs Act of 2017, Alternative Minimum Tax credits can no longer be carried forward indefinitely. Due to the Section 382 limitations and projected taxable income estimates, it has been determined that the Company will not be able to utilize any of its Alternative Minimum Tax credits. A valuation allowance against the Alternative Minimum Tax credits has been created accordingly. During the second quarter of 2015, the Company was notified by the state of California that its audit of the Company for the 2010 tax year had been completed and resulted in no adjustments. During the fourth quarter of 2016, the Company completed an IRS audit for the 2009 through 2013 tax years. The impact of the audit was not material and has been reflected in the financial statements. The 2014 and 2015 tax years are still subject to examination. The Tax Cuts and Jobs Act of 2017 reduced the corporate federal income tax rate to 21%, effective January 1, 2018. The Company has completed its accounting for the Tax Cuts and Jobs Act. Consequently, the Company has recorded a decrease related to the net deferred tax assets of $4.3 million, with a corresponding net adjustment to deferred income tax expense for the year ended December 31, 2017.

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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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