7. Income Taxes

The following summarizes our income tax provision (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Total current income tax provision	$	(1,592)	$	(713)	$	(55,581)	$	(2,056)
Total deferred income tax provision		(14,960)		(8,198)		(26,655)		(29,010)
Income tax provision	$	(16,552)	$	(8,911)	$	(82,236)	$	(31,066)

For the nine months ended September 30, 2017 and 2016, our income tax provision for each period is computed by applying an expected effective annual tax rate against the pre-tax results for each period (after adjusting for certain tax items that are discrete to each period). For the three months ended September 30, 2017 and 2016, this amount is then reduced by the tax provision recorded for the six months ended June 30, 2017 and 2016. For the nine months ended September 30, 2017, in accordance with authoritative guidance for accounting for income taxes in interim periods, we applied separate expected effective annual tax rates against our pre-tax loss from continuing operations and our equity in net income of Telesat, combining the results of both computations with the tax items discrete to the nine months ended September 30, 2017, such as the income tax provision related to the Telesat distribution. For the nine months ended September 30, 2016, we applied a single expected effective annual tax rate, which included tax expense on the equity income of Telesat, against our pre-tax loss from continuing operations for the nine months. This change in how we calculated the estimate was made to improve the accuracy and consistency of the expected effective annual tax rate calculated in interim periods.

The current income tax provision for the nine months ended September 30, 2017 primarily includes our anticipated income tax liability related to the cash distribution received from Telesat after use of available benefits from our alternative minimum tax credits and net operating loss carryforwards and foreign tax credits from Telesat. Based upon our analysis, the amount of foreign tax credits generated from the cash distribution allowed to be utilized against our current tax liability will be limited, thereby resulting in a carryforward of unused foreign tax credits. Since, at the current time, sufficient positive evidence does not exist to support full recovery of the foreign tax credit carryforward, we recorded a full valuation allowance against this deferred tax asset during the nine months ended September 30, 2017. We will continue to maintain this valuation allowance until sufficient positive evidence exists to support full or partial reversal. Such a reversal could be material in future periods.

Effective January 1, 2017, we adopted ASU No. 2016-09, and upon adoption previously unrecognized excess tax benefits of $4.7 million were recognized as a cumulative-effect adjustment to increase retained earnings and deferred tax assets (see Note 2).

Subsequent to the Sale, to the extent that profitability from operations is not sufficient to realize the benefit from our remaining net deferred tax assets, we would generate sufficient taxable income from the appreciated value of our Telesat investment, which currently has a nominal tax basis, in order to prevent federal net operating losses from expiring and realize the benefit of all remaining deferred tax assets.

The following summarizes amounts for uncertain tax positions (“UTPs”) included in our income tax provision (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Current provision for UTPs	$	(704)	$	(636)	$	(2,069)	$	(1,774)
Deferred benefit for UTPs		226		289		701		801
Tax provision for UTPs	$	(478)	$	(347)	$	(1,368)	$	(973)

As of September 30, 2017, we had unrecognized tax benefits relating to UTPs of $68 million. The Company recognizes interest and penalties related to income taxes in income tax expense on a quarterly basis. As of September 30, 2017, we have accrued approximately $9.7 million and $6.0 million for the payment of potential tax-related interest and penalties, respectively.

With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years prior to 2012. Earlier years related to certain foreign jurisdictions remain subject to examination. Various foreign income tax returns are currently under examination. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carryforward. While we intend to contest any future tax assessments for uncertain tax positions, no assurance can be provided that we would ultimately prevail. During the next twelve months, the statute of limitations for assessment of additional tax will expire with regard to certain UTPs related to our state income tax returns filed for 2012, potentially resulting in a $14.0 million reduction to our unrecognized tax benefits. Pursuant to the Purchase Agreement for the Sale, we are obligated to indemnify SSL for taxes related to periods prior to the closing of the transaction.

The following summarizes the changes to our liabilities for UTPs included in long-term liabilities in the condensed consolidated balance sheets (in thousands):


	Nine Months Ended
	September 30,
	2017		2016
Liabilities for UTPs:
Opening balance — January 1	$	68,658	$	69,511
Current provision for potential additional interest		2,069		1,779
Statute expirations		—		(5)
Ending balance	$	70,727	$	71,285

As of September 30, 2017, if our positions are sustained by the taxing authorities, the Company’s income tax provision from continuing operations would be reduced by approximately $31.5 million. Other than as described above, there were no significant changes to our UTPs during the nine months ended September 30, 2017 and 2016, and we do not anticipate any other significant changes to our unrecognized tax benefits during the next twelve months.