Income Taxes

Income tax for the years ended December 31, 2017, 2016 and 2015 consisted of the following (dollars in thousands):



	2017			2016			2015
Current income tax expense
State and local	$	4,504		$	1,678		$	2,422
Total current income tax	$	4,504		$	1,678		$	2,422

Deferred tax benefit
Federal	$	(157,277	)	$	(19,496	)	$	(48,123	)
State and local	(10,953		)	(8,336		)	(139		)
Total deferred tax	(168,230		)	(27,832		)	(48,262		)
Total income tax benefit	$	(163,726	)	$	(26,154	)	$	(45,840	)

Total income tax differed from the amount computed by applying the federal statutory tax rate of 35.0% for the years ended December 31, 2017, 2016 and 2015 as a result of the following (dollars in thousands):



	2017			2016			2015
Pretax loss at federal statutory rate	$	(129,602	)	$	(187,906	)	$	(207,317	)
State income tax, net federal	(11,729		)	(1,812		)	(1,385		)
Meals and entertainment	350			429			380
Bankruptcy costs	5,478			—			—
Change in state tax rates	255			(1,618		)	1,605
Section 162 disallowance	1,867			538			110
Change in federal tax rate	(91,384		)	—			—
Impairment charges on goodwill with no tax basis	—			163,630			153,371
Increase in valuation allowance	58,254			32			190
Other	2,785			553			7,206
Net income tax benefit	$	(163,726	)	$	(26,154	)	$	(45,840	)

The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act, among other changes, reduces the US federal corporate tax rate from 35% to 21% for tax years after 2017. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, it has made a reasonable estimate of the effects on its existing deferred tax balances.

The Company remeasured certain deferred tax assets and liabilities based on the federal rate at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the Act, including full expensing of certain capital expenditures, the impact of executive compensation tax changes, and analysis of state tax implications and corresponding impact to changes in state valuation allowances. Additional guidance and clarification from regulatory authorities could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the Company’s deferred tax balance was a tax benefit of approximately $91.4 million, which is included as a component of income tax benefit from continuing operations. Given the substantial changes with the Act, the estimated financial impacts are provisional and subject to further interpretation and clarification of the Act during 2018. In accordance with Staff Accounting Bulletin 118 (“SAB 118”), changes to these provisional amounts will be finalized within the next 12 months and will be recorded in the period in which the analysis is complete. As of December 31, 2017 the Company has recorded no estimate under SAB 118 for the state tax implications and corresponding state tax valuation allowance impact while the Company continues to refine its analysis of state tax conformity with various provisions of the Act.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2017 and 2016 are presented below (dollars in thousands):



	2017			2016
Noncurrent deferred tax assets:
Accounts receivable	$	948		$	1,422
Advertising relationships	954			2,548
Other liabilities	20,486			27,014
Debt costs	6,987			—
Tax credits	2,249			2,042
Net operating loss	75,832			111,778
Noncurrent deferred tax assets	107,456			144,804
Less: valuation allowance	(75,460		)	(17,205		)
Net noncurrent deferred tax assets	31,996			127,599
Noncurrent deferred tax liabilities:
Intangible assets	242,822			482,620
Property and equipment	8,417			20,485
Cancellation of debt income	—			12,544
Other	7			—
Noncurrent deferred tax liabilities	251,246			515,649
Net noncurrent deferred tax liabilities	219,250			388,050
Net deferred tax liabilities	$	219,250		$	388,050

Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carryforwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

As of December 31, 2017, the valuation allowance increased by $58.3 million to $75.5 million. The increase in the valuation allowance relates to the impact of the Company's Bankruptcy Petition and corresponding changes in judgment regarding the Company's ability to recover its federal and state net operating loss carryforwards and certain other tax attributes. Approximately $43.9 million of the increase in valuation allowance relates to the establishment of a full valuation on federal loss carryforwards and approximately $14.4 million relates to certain state net operating loss carryforwards which the Company does not believe are more likely than not to be realized as a result of the expected expiration of these attributes prior to utilization. As of December 31, 2016, the Company maintained a valuation allowance of $17.2 million. The changes in the valuation allowance for 2016 consisted of a decrease of approximately $0.2 million related to state rate changes, an increase of $0.8 million related to the Company's estimates of its inability to recover certain state net operating losses and a decrease of $0.6 million related to the expected expiration of certain state net operating losses.

At December 31, 2017, Company has federal net operating loss carryforwards, which are available to offset future taxable income, of approximately $232.0 million, and which will expire in the years 2030 through 2032. At December 31, 2017 the Company has state net operating loss carryforwards available to offset future income of approximately $1.1 billion which, if not utilized, will expire 2018 through 2037. During the first quarter 2017 the Company adopted ASU 2016-09 and recorded an additional deferred tax asset for approximately $1.5 million of net operating loss carryforwards that were previously unrecognized, related to windfall tax benefits associated with the Company's stock based compensation plan. The recognition of this deferred tax asset of approximately $0.6 million was recorded through accumulated deficit.

The Company records interest and penalties related to unrecognized tax benefits in income tax expense. For interest and penalties, the Company recorded income tax benefit of $1.8 million and $2.9 million for the years ended December 31, 2017 and 2016, respectively. The total interest and penalty accrued was $0.3 million and $2.1 million as of December 31, 2017 and 2016, respectively. The $1.8 million overall decrease in accrued interest and penalties during the year ended December 31, 2017 is a result of increases in accruals for interest and penalties on prior year positions of $0.3 million and reductions to interest and penalty accruals of $2.1 million related to the reversal of positions associated with the expiration of certain statutes of limitations and liabilities no longer deemed payable.

The total unrecognized tax benefits and accrued interest and penalties at December 31, 2017 was $8.9 million. Of this total, $8.1 million represents the unrecognized tax benefits and accrued interest and penalties that, if recognized, would favorably affect the effective income tax rate in future periods. Of the $8.9 million total unrecognized tax benefits and accrued interest and penalties, $0.4 million relates to items which are expected to change significantly within the next 12 months. Substantially all federal, state, and local income tax returns have been closed for the tax years through 2013; however, the various tax jurisdictions may adjust the Company's net operating loss carryforwards.

The following table reconciles unrecognized tax benefits during the relevant years (in thousands):



Balance at January 1, 2016	$	12,629
Increase for prior year positions	275
Lapse of statute of limitations	(1,014		)
Balance at December 31, 2016	$	11,890
Increase for prior year positions	447
Decrease for prior year positions	(3,316		)
Lapse of statute of limitations	(434		)
Balance at December 31, 2017	$	8,587