

7.	Income Taxes

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Reform Act”) was signed into law. The 2017 Tax Reform Act significantly changed U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate from 35% to 21% beginning in 2018. As a result, we remeasured our deferred tax assets at the new lower corporate income tax rate and recorded a non-cash tax charge of $2.5 million in 2017. During 2018, we finalized certain tax positions when we filed our 2017 federal tax return, and determined no further adjustments were required to our net deferred tax asset balance of $8.8 million as of December 31, 2018.

Significant components of the net deferred tax assets as reflected on the Consolidated Balance Sheets are as follows:



	December 31,
(in thousands)	2018			2017

Deferred tax liabilities
Prepaid assets	$	(3,306	)	$	(3,957	)
Depreciation	(3,918		)	(2,021		)
Software development costs	(4,950		)	(3,732		)
Intangibles	(474		)	—
Total deferred tax liabilities	(12,648		)	(9,710		)

Deferred tax assets
Accrued incentive compensation	8,612			3,510
Net operating loss carryforward	709			774
Workers’ compensation accruals	4,739			4,586
Accrued rent	918			676
Stock-based compensation	6,183			4,233
Minority investment impairment	676			667
Other	305			216
Total deferred tax assets	22,142			14,662
Valuation allowance	(678		)	(669		)
Total net deferred tax assets	21,464			13,993

Net deferred tax assets	$	8,816		$	4,283

The components of income tax expense are as follows:



	Year Ended December 31,
(in thousands)	2018			2017		2016

Current income tax expense
Federal	$	40,347		$	30,009	$	31,045
State	11,133			5,988		5,190
Total current income tax expense	51,480			35,997		36,235

Deferred income tax (benefit) expense
Federal	(3,398		)	9,549		2,641
State	(1,135		)	193		310
Total deferred income tax (benefit) expense	(4,533		)	9,742		2,951
Total income tax expense	$	46,947		$	45,739	$	39,186

In the first quarter of 2016, we prospectively adopted ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting for calendar year 2016. We recognized an income tax benefit of $2.7 million in 2018, $6.8 million in 2017 and $1.5 million in 2016 related to excess tax benefits from the vesting of long-term incentive awards, restricted stock awards and non-qualified stock options.

The reconciliation of income tax expense computed at U.S. federal statutory tax rates to the reported income tax expense from continuing operations is as follows:



	Year Ended December 31,
(in thousands)	2018			2017			2016

Expected income tax expense at 21%, 35% and 35%, respectively	$	38,296		$	45,549		$	36,812
State income taxes, net of federal benefit	7,660			4,085			3,684
Nondeductible expenses	4,831			2,649			1,669
Section 199 benefits	—			(875		)	(686		)
Equity compensation	(2,737		)	(6,218		)	(1,338		)
Research and development credit	(856		)	(634		)	(751		)
Disaster employee retention credit	—			(669		)	—
Enactment of the 2017 Tax Reform Act	—			2,559			—
Other, net	(247		)	(707		)	(204		)
Reported total income tax expense	$	46,947		$	45,739		$	39,186

At December 31, 2018, we have net operating loss carryforwards totaling $2.8 million that expire from 2023 to 2030 related to an acquisition that occurred in 2010.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2018, 2017 and 2016, we made no provisions for interest or penalties related to uncertain tax positions. The tax years 2015 through 2017 remain open to examination by the Internal Revenue Service of the United States. The tax years 2014 through 2017 remain open to examination by various state tax authorities.