Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.19.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 13. INCOME TAXES

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our consolidated financial statement carrying amount of assets and liabilities and their respective tax bases. We measure these deferred tax assets and liabilities using enacted tax rates expected to apply in the years in which these temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. We have calculated the impact of the Act in our year ending December 31, 2018 income tax provision in accordance with our understanding of the Act and guidance available as of the date of this filing.

For financial reporting purposes, we recorded a valuation allowance of $5.4 million as of December 31, 2018 to offset the deferred tax assets related to the state net operating loss carryforwards. For financial reporting purposes, we recorded a valuation allowance of $6.2 million as of December 31, 2017 to offset $6.0 million of the deferred tax assets related to the state net operating loss carryforwards and $0.2 million associated with asset impairments.

The consolidated provision for (benefit from) income taxes is as follows:

 

     Year Ended December 31,  
           2017                  2018        
     (Dollars in thousands)  

Current:

     

Federal

   $ —        $ —    

State

     63        282  
  

 

 

    

 

 

 
     63        282  

Deferred:

     

Federal

     (21,167      (658

State

     234        2,849  
  

 

 

    

 

 

 
     (20,933      2,191  
  

 

 

    

 

 

 

Provision for (benefit from) income taxes

   $ (20,870    $ 2,473  
  

 

 

    

 

 

 

 

Consolidated deferred tax assets and liabilities consist of the following:

 

     As of December 31,  
     2017      2018  
     (Dollars in thousands)  

Deferred tax assets:

     

Financial statement accruals not currently deductible

   $ 6,220      $ 6,822  

Net operating loss, AMT credit and other carryforwards

     55,720        50,067  

State taxes

     103        124  

Other

     2,191        3,969  
  

 

 

    

 

 

 

Total deferred tax assets

     64,234        60,982  

Valuation allowance for deferred tax assets

     (6,154      (5,371
  

 

 

    

 

 

 

Net deferred tax assets

   $ 58,080      $ 55,611  
  

 

 

    

 

 

 

Deferred tax liabilities:

     

Excess of net book value of property and equipment and software for financial reporting purposes over tax basis

   $ 1,218      $ 2,763  

Excess of net book value of intangible assets for financial reporting purposes over tax basis

     89,898        88,112  

Other

     45        8  
  

 

 

    

 

 

 

Total deferred tax liabilities

     91,161        90,883  
  

 

 

    

 

 

 

Net deferred tax liabilities

   $ (33,081    $ (35,272
  

 

 

    

 

 

 

The following table reconciles the above net deferred tax liabilities to the financial statements:

 

     As of December 31,  
     2017      2018  
     (Dollars in thousands)  

Deferred income tax asset per balance sheet

   $ 1,070      $ —    

Deferred income tax liability per balance sheet

     (34,151      (35,272
  

 

 

    

 

 

 
   $ (33,081    $ (35,272 ) 
  

 

 

    

 

 

 

A reconciliation of the statutory federal income tax rate to the provision for income tax is as follows:

 

     Year Ended December 31,  
           2017                  2018        
     (Dollars in thousands)  

Statutory federal income tax (statutory tax rate)

   $ 1,321      $ (151

Effect of state taxes, net of federal

     (1,207      2,284  

Permanent items

     458        318  

State rate change

     (179      248  

Valuation allowance

     1,667        (147

Tax Cuts and Jobs Act of 2017

     (23,000      —    

Other, net

     70        (79
  

 

 

    

 

 

 

Provision for income taxes

   $ (20,870    $ 2,473  
  

 

 

    

 

 

 

At December 31, 2018, we had net operating loss carryforwards for federal income tax purposes of approximately $148.1 million that expire in 2021 through 2038 and for state income tax purposes of approximately $783.8 million that expire in years 2019 through 2038. For financial reporting purposes at December 31, 2018, we had a valuation allowance of $5.4 million, net of federal benefit, to offset the deferred tax assets related to the state net operating loss carryforwards. Our evaluation was performed for tax years that remain subject to examination by major tax jurisdictions, which range from 2014 through 2017.

The amortization of our indefinite-lived intangible assets for tax purposes, but not for book purposes, creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (1) become impaired; or (2) are sold, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods exclusive of any impairment losses in future periods. These deferred tax liabilities and net operating loss carryforwards result in differences between our provision for income tax and cash paid for taxes.