10.

INCOME TAXES:

A reconciliation of the statutory federal income taxes to the recorded (benefit from) provision for income taxes from continuing operations is as follows:

	For the Years Ended December 31,
	2017		2016

	(In thousands)
Statutory tax (@ 35% rate)	$	(3,745)	$	3,604
Effect of state taxes, net of federal benefit		(203)		534
Effect of state rate and tax law changes		(11,459)		(1,123)
Return to provision adjustments		2,824		2,043
Other permanent items		1,135		739
Non-deductible officer’s compensation		3,048		3,251
Change in entity classification – TV One		—		(3,753)
Change in valuation allowance		(115,919)		(139,797)
Expiring NOLs		50		142,801
Forfeiture of stock-based compensation		861		56
Uncertain tax positions		(27)		1,184
Other		272		41
(Benefit from) provision for income taxes	$	(123,163)	$	9,580

The components of the (benefit from) provision for income taxes from continuing operations are as follows:

	For the Years Ended December 31,
	2017		2016
	(In thousands)
Federal:
Current	$	677	$	158
Deferred		(125,040)		7,212
State:
Current		301		308
Deferred		899		1,902
(Benefit from) provision for income taxes	$	(123,163)	$	9,580

The significant components of the Company’s deferred tax assets and liabilities are as follows:

	As of December 31,
	2017		2016

	(In thousands)
Deferred tax assets/(liabilities):
Allowance for doubtful accounts	$	1,979	$	2,675
Accruals		2,055		2,446
Fixed assets		1,042		1,419
Stock-based compensation		1,472		1,620
Net operating loss carryforwards		123,029		207,657
Charitable contribution carryforward		—		347
Intangible assets		(150,774)		(241,379)
Partnership interests		(44)		(18)
Qualified film expenditures		(3,470)		(5,568)
Alternative minimum tax credit		971		294
Other		1,018		(437)
Valuation allowance		(125,870)		(241,789)
Net deferred tax liability	$	(148,592)	$	(272,733)

On December 22, 2017, U.S. Federal tax reform was enacted with the signing of the Tax Cuts and Jobs Act, (the “Act”). Notable provisions of the Act include significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits.

The SEC issued a Staff Accounting Bulletin No. 118 (“SAB 118”), which allows a provisional estimate when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act. SAB 118 allows for adjustments to provisional amounts during a measurement period of up to one year. In accordance with SAB 118, the Company has made reasonable estimates related to the remeasurement of deferred tax balances and other deferred tax adjustments based on provisions of the Act, as follows.

Revaluation of deferred tax assets and liabilities: We estimate a provisional tax benefit of approximately $92.7 million for the remeasurement of deferred taxes as of December 31, 2017 to reflect the reduced tax rate that will apply in future periods when these deferred taxes are settled or realized. Although the tax rate reduction is known, we have collected all the necessary data to complete our analysis of the effect of the Act on the underlying deferred taxes, and as such, the amounts recorded as of December 31, 2017 are provisional.

Valuation allowances: The Company must assess whether its valuation allowance analyses for deferred tax assets are impacted by various elements of the Act. Since the Company has recorded provisional amounts related to certain portions of the Act, any corresponding determination of the need for change in a valuation allowance is also provisional. Prior to 2017, the Company had recorded a valuation allowance for certain of its tax assets that the Company estimated were not more likely than not to be realized. Based on the preliminary review of the impacts of the Act, the Company has recorded a provisional release of valuation allowance for approximately $25.2 million with a corresponding deferred tax benefit.

The Company is continuing to evaluate how the provisions of the Act will be accounted for under ASC 740, “ Income Taxes”. The analysis is provisional and is subject to change due to the additional time required to accurately calculate and review the complex tax law. The Company will assess any regulatory guidance that may be issued which could have an impact on the provisional estimates. The Company will continue to gather information and perform additional analysis on these estimates, including, but not limited to, remeasurement of deferred taxes and other deferred tax adjustments until the filing of its associated federal and state income tax returns. Any measurement period adjustments will be reported as a component of provision for incomes taxes in the reporting period the amounts are determined.

As of December 31, 2017, the Company had federal and state net operating loss (“NOL”) carryforward amounts of approximately $872.9 million and $639.2 million, respectively. The state NOLs are applied separately from the federal NOL as the Company generally files separate state returns for each subsidiary. Additionally, the amount of the state NOLs may change if future apportionment factors differ from current factors. During the quarter ended December 31, 2016, the Company performed an Internal Revenue Code (“IRC”) Section 382 study and concluded that there was an ownership shift during calendar year 2009 which resulted in an estimated limitation on our federal and state NOLs for approximately $361.1 million and $262.7 million, respectively. The Company continues to assess potential tax strategies which, if successful, may reduce the impact of the annual limitations and potentially recover NOLs which otherwise would expire. The federal and state NOLs expire from 2018 to 2036.

Deferred income taxes reflect the impact of temporary differences between the assets and liabilities recognized for financial reporting purposes and amounts recognized for tax purposes. Deferred taxes are based on tax laws as currently enacted.

The Company concluded it was more likely than not that the benefit from certain of its deferred tax assets (“DTAs”) would not be realized. The Company considered its historically profitable jurisdictions, its sources of future taxable income and tax planning strategies in determining the amount of valuation allowance recorded. As part of that assessment, the Company also determined that it was not appropriate under GAAP to benefit its DTAs with deferred tax liabilities (“DTLs”) related to indefinite-lived intangibles that cannot be scheduled to reverse in the same requisite period. Because the DTLs in this case would not reverse until some future indefinite period when the intangibles are either sold or impaired, any resulting temporary differences cannot be considered a source of future taxable income to support realization of the DTAs. As a result of the assessment, and given the current total three year cumulative loss position, the uncertainty of future taxable income and the feasibility of tax planning strategies, the Company recorded a valuation allowance of approximately $125.9 million and $241.8 million as of December 31, 2017 and 2016, respectively.

The Company had unrecognized tax benefits of approximately $5.6 million related to state NOLs as of December 31, 2017.

The nature of the uncertainties pertaining to the Company’s income taxes is primarily due to various state NOL positions. As of December 31, 2017, the Company had unrecognized tax benefits of approximately $5.8 million, of which a net amount of approximately $4.5 million, if recognized, would impact the effective tax rate if there was no valuation allowance. The Company estimated $42,000 decrease of unrecognized tax benefits for the year ended December 31, 2017. The Company recognized accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. The Company does not anticipate any significant increases or decreases to the total unrecognized tax benefits within the next twelve months subsequent to December 31, 2017. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2017		2016
	(In thousands)

Balance as of January 1	$	5,800	$	4,036
(Deductions) additions for tax positions related to current years		—		—
(Deductions) additions for tax positions related to prior years		(42)		1,764
Balance as of December 31	$	5,758	$	5,800

As of December 31, 2017, the Company’s previously open income tax examinations were closed without material adjustments. The Company’s open tax years for federal income tax examinations include the tax years ended December 31, 2014 through 2017. For state and local purposes, the open years for tax examinations include the tax years ended December 31, 2013 through 2017. To the extent that net operating losses are utilized, the year of the loss is open to examination.