Annual report pursuant to Section 13 and 15(d)

Income Taxes (Notes)

v3.6.0.2
Income Taxes (Notes)
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

The provision for income taxes consists of the following:

 
2016

2015

2014
Current:
 

 

 
Federal
$
24,139


$
8,319


$
33,631

State
3,052


1,242


4,306

 
27,191


9,561


37,937

Deferred:
 


 


 

Federal
3,256


12,477


(2,102
)
State
269


2,054


(919
)
 
3,525


14,531


(3,021
)
 
$
30,716


$
24,092


$
34,916



The tax benefit associated with the exercise of stock options and the vesting of non-vested shares recorded to additional paid in capital during the years ended December 31, 2016, 2015 and 2014 were $1,732, $5,413 and $2,109, respectively, and are reflected as an increase in additional paid-in capital in the accompanying consolidated statements of shareholders’ equity.
 
The historical income tax expense differs from the amounts computed by applying the federal statutory rate of 35.0% to income before income taxes as follows:
 
2016
 
2015
 
2014
Tax expense at the statutory rate
$
20,435

 
$
27,883

 
$
33,630

State income taxes, net of federal benefit
2,229

 
2,178

 
1,879

Non-deductible transaction costs


394



Incentive stock options
(88
)
 
(120
)
 
(96
)
Other permanent differences
474

 
216

 
186

TQI goodwill impairment
8,990

 

 

Deferred tax asset valuation allowance
(2
)
 
(11
)
 
39

Federal qualified property deductions
(1,311
)

(6,066
)


Federal income tax credits

 
(732
)
 
(533
)
Other
(11
)
 
350

 
(189
)
 
$
30,716

 
$
24,092

 
$
34,916



Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows:

December 31,
2016

December 31,
2015
Deferred tax assets:
 

 
Accrued expenses
$
9,647


$
11,952

Allowance for doubtful accounts
662


936

Share-based compensation
5,005


5,242

Accruals for income tax contingencies
252


268

Net operating loss carryforwards
10,231


13,620

Total deferred tax assets
25,797


32,018

Valuation allowance
(282
)

(284
)
Total deferred tax assets, net of valuation allowance
25,515


31,734

Deferred tax liabilities:
 

 
Tax over book depreciation
29,416


28,027

Intangible assets
17,588


25,399

Prepaid expenses deductible when paid
4,862


5,018

Goodwill
15,520


13,166

Total deferred tax liabilities
67,386


71,610

Net deferred tax liabilities
$
(41,871
)

$
(39,876
)

Total income tax payments, net of refunds, during fiscal years 2016, 2015 and 2014 were $10,628, $25,264 and $30,087, respectively.

As a result of the Towne acquisition the Company has approximately $27,050 and $36,034 of federal net operating losses as of December 31, 2016 and 2015 respectively, that will expire between 2020 and 2030. The Company expects to be able to fully utilize these federal net operating losses before they expire.

At December 31, 2016 and 2015, the Company had state net operating loss carryforwards of $18,155 and $23,595, respectively, that will expire between 2016 and 2030. Also, the use of these state net operating losses is limited to the future taxable income of separate legal entities. Based on expectations of future taxable income, management believes that it is more likely than not that the results of operations for certain separate legal entities will not generate sufficient taxable income to realize portions of these net operating loss benefits for state loss carryforwards.  As a result, a valuation allowance has been provided for the state loss carryforwards for these specific legal entities. The valuation allowance on these state loss carryforwards decreased $2 during 2016, but the valuation allowance increased $11 during 2015.

Income Tax Contingencies

The Company, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction, various states and Canada. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian examinations by tax authorities for years before 2012.
     
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

 
Liability for
 
Unrecognized Tax
 
Benefits
Balance at December 31, 2013
$
1,339

Reductions for settlement with state taxing authorities
(697
)
Additions for tax positions of prior years - TQI
63

Additions for tax positions of current year
66

Balance at December 31, 2014
771

Reductions for settlement with state taxing authorities
(64
)
Additions for tax positions of current year
66

Balance at December 31, 2015
773

Reductions for settlement with state taxing authorities
(247
)
Additions for tax positions of current year
56

Balance at December 31, 2016
$
582



Included in the liability for unrecognized tax benefits at December 31, 2016 and December 31, 2015 are tax positions of $582 and $773, respectively, which represents tax positions where the realization of the ultimate benefit is uncertain and the disallowance of which would affect the Company’s annual effective income tax rate.

Included in the liability for unrecognized tax benefits at December 31, 2016 and December 31, 2015, are accrued penalties of $103 and $156, respectively.  The liability for unrecognized tax benefits at December 31, 2016 and December 31, 2015 also included accrued interest of $184 and $371, respectively.