Income Taxes

12 Months Ended

Dec. 31, 2018

(14)	Income Taxes

Income tax expense (benefit) is as follows:

	Year ended December 31,
	2017			2018
Current:
Federal	$	(2,466,482	)	$	3,043,583
State		289,563			902,863
		(2,176,919	)		3,946,446
Deferred:
Federal		(47,531,436	)		2,741,821
State		1,480,065			5,007,279
		(46,051,371	)		7,749,100
	$	(48,228,290	)	$	11,695,546

Income tax expense (benefit) differs from the amounts that would result from applying the federal statutory rate of 35% in 2017 and 21% in 2018 to the Company’s income before taxes as follows:

	Year ended December 31,
	2017			2018
Expected tax expense	$	13,616,008		$	3,817,085
State income taxes, net of federal benefit		1,150,258			1,957,508
Gain on merger		(3,518,814	)		927,344
Tax rate adjustments		(59,717,125	)		294,924
Change in valuation allowance		52,833			3,432,284
Non-deductible items		(110,953	)		1,140,948
Other		299,503			125,453
	$	(48,228,290	)	$	11,695,546

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

	December 31,
	2017			2018
Deferred tax assets:
Allowance for doubtful accounts	$	427,484		$	530,744
Other assets		(2,047,104	)		(1,647,113	)
Accrued expenses		355,361			412,165
Other long-term liabilities		2,918,611			2,729,442
Stock-based compensation		107,715			141,960
Net operating losses		5,506,040			3,726,364
Subtotal		7,268,107			5,893,562
Valuation allowance		(328,170	)		(3,760,454	)
Total		6,939,937			2,133,108
Deferred tax liabilities:
Prepaid expenses		(96,085	)		(99,187	)
Property and equipment		(2,743,550	)		(2,858,163	)
Intangibles		(119,383,233	)		(122,088,303	)
Total		(122,222,868	)		(125,045,653	)
Net deferred tax liabilities	$	(115,282,931	)	$	(122,912,545	)

As of December 31, 2018, the Company has state net operating losses of $65.3 million, which expire in various years through 2038. 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, 2017 and 2018, 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 2014.

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.