Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2018 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes
The Company’s interim income tax provision or benefit consists of U.S. federal and state income taxes based on the estimated annual effective rate that the Company expects for the full year together with the tax effect of discrete items. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. As of March 31, 2018, the estimated annual effective tax rate for 2018 (exclusive of discrete items) is approximately 30.4% of projected pre-tax income. Our estimated annual tax expense consists of a provision for federal and state and local income taxes.
For the three months ended March 31, 2018, the Company recorded an income tax expense of $2,172 on pre-tax income of $7,636. The estimated annual effective tax rate is higher than the statutory rate of 21% related primarily to state and local taxes and certain non-deductible expenses.
For the three months ended March 31, 2017, the Company recorded an income tax benefit of $839 on a pre-tax loss of $4,518.
In assessing the realizability of deferred tax assets, we evaluate whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. We assess all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. As of March 31, 2018, the Company concluded that its deferred tax assets were realizable on a more-likely-than-not basis with the exception of certain separate company state net operating losses.
On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606)”. Upon adoption, the Company recorded a net deferred tax liability of $3,600 with an offset to retained earnings. The valuation allowance release as a result of ASC 606 was $3,592. This resulted in a remaining valuation allowance of $1,929, offsetting certain separate state net operating losses.
On December 22, 2017 the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance on accounting for the tax effects of the Tax Cuts and Job Act ("TCJA"). The purpose of SAB No. 118 was to address any uncertainty or diversity of view in applying GAAP in the reporting period in which the TCJA was enacted. SAB No. 118 addresses situations where the accounting is incomplete for certain income tax effects of the TJCA upon issuance of a company’s financial statements for the reporting period that includes the enactment date. SAB No. 118 allows for a provisional amount to be recorded if it is a reasonable estimate of the impact of the TCJA. Additionally, SAB No. 118 allows for a measurement period to finalize the impacts of the TCJA, not to extend beyond one year from the date of enactment.
The Company’s accounting for the certain elements of the TCJA was incomplete as of the period ended December 31, 2017, and remains incomplete as of March 31, 2018. However, the Company was able to make reasonable estimates of the effects and, therefore, recorded provisional estimates for these items at December 31, 2017. To date, no revisions have had to be made to these estimates.
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