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Income Taxes

Income tax expense (benefit) is as follows:


	Year ended December 31,
	2016		2017
Current:
Federal	$	789,150	$	(2,466,482	)
State		264,707		289,563

		1,053,857		(2,176,919	)
Deferred:
Federal		2,172,740		(47,531,436	)
State		5,071,205		1,480,065

		7,243,945		(46,051,371	)

	$	8,297,802	$	(48,228,290	)

Income tax expense (benefit) differs from the amounts that would result from applying the federal statutory rate of 35%, effective for most of the year ended December 31, 2017, to the Company’s income before taxes as follows:


	Year ended December 31,
	2016			2017
Expected tax expense	$	19,525,175		$	13,616,008
State income taxes, net of federal benefit		552,499			1,150,258
Gain on merger		(15,941,611	)		(3,518,814	)
Tax rate adjustments		2,915,844			(59,717,125	)
Change in valuation allowance		(65,900	)		52,833
Non-deductible items		1,147,565			(110,953	)
Other		164,230			299,503

	$	8,297,802		$	(48,228,290	)

Temporary differences that give rise to the components of deferred tax assets and liabilities are as follows:


	December 31,
	2016			2017
Deferred tax assets:
Allowance for doubtful accounts	$	625,317		$	427,484
Goodwill		8,782,364			—
Other assets		(42,787	)		(2,047,104	)
Accrued expenses		1,497,317			355,361
Other long-term liabilities		6,353,590			2,918,611
Stock-based compensation		248,046			107,715
Net operating losses		3,750,420			5,506,040

Subtotal		21,214,267			7,268,107
Valuation allowance		(528,179	)		(328,170	)

Total		20,686,088			6,939,937

Deferred tax liabilities:
Prepaid expenses		(874,495	)		(96,085	)
Property and equipment		(6,110,234	)		(2,743,550	)
Intangibles		(174,240,627	)		(119,383,233	)

Total		(181,225,356	)		(122,222,868	)

Net deferred tax liabilities	$	(160,539,268	)	$	(115,282,931	)

As of December 31, 2017, the Company has federal net operating losses of $5.5 million and state net operating losses of $74.3 million, which expire in various years through 2037. The valuation allowance relates to net operating losses and unrealized losses on investments which management has determined, more likely than not, that such losses will not be utilized.

As of December 31, 2016 and 2017, the Company does not have any material unrecognized tax benefits and accordingly has not recorded any interest or penalties related to unrecognized tax benefits. The Company and its subsidiaries file a consolidated federal income tax return and various state returns. These returns remain subject to examination by taxing authorities for all years after 2013.

New Tax Reform Legislation

In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act makes significant change in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The Tax Act reduced the U.S. corporate tax rate from the current rate of 35% to 21%. As a result of the Tax Act, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. This revaluation resulted in a benefit of $59.7 million to income tax expense and a corresponding reduction in the deferred tax liability.