Income Taxes

12 Months Ended

Dec. 31, 2019

Earnings before income taxes includes the following components:



	Year Ended December 31,
(millions)	2019		2018		2017
United States	$	69.7	$	74.9	$	70.0
Foreign	1.4		1.1		2.2
Total	$	71.1	$	76.0	$	72.2

The components of income tax expense are as follows:



	Year Ended December 31,
(millions)	2019			2018			2017
Current provision
U.S. federal	$	9.6		$	9.9		$	21.5
Foreign	0.9			1.0			1.0
State	4.7			7.4			3.3
Total current	15.2			18.3			25.8
Deferred provision
U.S. federal	2.9			1.3			2.6
Foreign	(0.1		)	(0.3		)	0.6
State	1.4			0.3			(1.3		)
Total deferred	4.2			1.3			1.9
Income tax expense	$	19.4		$	19.6		$	27.7

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for U.S. GAAP purposes and the amount used for income tax purposes.

Components of the Company's deferred tax assets and liabilities are as follows:



	December 31,
(millions)	2019			2018
Deferred tax assets
Net operating loss carry forwards and tax credits	$	20.8		$	21.6
Lease liability	119.5			—
Accrued expenses	15.0			17.4
Accrued compensation	9.2			7.1
Unfavorable acquired lease contracts	—			6.4
Other	1.4			0.9
Total gross deferred tax assets	165.9			53.4
Valuation allowances	(8.3		)	(8.1		)
Total deferred tax assets	157.6			45.3
Deferred tax liabilities
Prepaid expenses	(0.1		)	(0.1		)
Right of use asset	(114.9		)	—
Undistributed foreign earnings	—			(0.1		)
Depreciation and amortization	(0.7		)	1.3
Goodwill amortization	(26.2		)	(22.3		)
Favorable acquired lease contracts	—			(4.6		)
Equity investments in unconsolidated entities	(5.1		)	(4.9		)
Total deferred tax liabilities	(147.0		)	(30.7		)
Net deferred tax asset	$	10.6		$	14.6

The accounting guidance for accounting for income taxes requires that the Company assess the realizability of deferred tax assets at each reporting period. These assessments generally consider several factors including the reversal of existing temporary differences, projected future taxable income, and potential tax planning strategies. The Company has valuation allowances totaling $8.3 million and $8.1 million at December 31, 2019 and 2018, respectively, primarily related to our state Net Operating Loss carryforwards ("NOLs"), foreign tax credits and state tax credits that the Company believes are not likely to be realized based on upon its estimates of future state taxable income, limitations on the uses of its state NOLs, and the carryforward life over which the state tax benefit is realized.

As of December 31, 2019, the Company recognized approximately $5.2 million of Canadian foreign and $6.4 million of Puerto Rico foreign earnings as permanently reinvested to meet working capital requirements in each jurisdiction. The amount of tax that may be payable on the future distribution of such earnings is approximately $0.3 million and $0.6 million of Canadian and Puerto Rico withholding taxes, respectively. No U.S. taxes will be incurred on future distributions of foreign earnings due to the participation exemption under the 2017 Tax Act.

Due to the adoption of ASU 2016-09 in 2017, the Company recognized excess tax benefits of $0.5 million and $1.0 million as income tax benefit for the year ended December 31, 2019 and 2018, respectively, and as a result of the required adoption of ASU 2016-09, the Company's effective tax rate may have increased volatility.

The Company has $18.2 million of tax effected state NOLs as of December 31, 2019, which will expire in the years 2020 through 2039. As noted above, the utilization of NOLs of the Company are limited due to the ownership change in June 2004 and due to the Central Merger.

The Company adopted Topic 842 as of January 1, 2019. The Company has recorded deferred taxes to include the associated deferred tax assets and liabilities for the corresponding right of use asset and lease liability accounts. The adjustments represent a change in the deferred tax categories only and the net deferred tax asset as of January 1, 2019 remained $14.6 million.

A reconciliation of the Company's reported income tax provision to the amount computed by multiplying earnings before income taxes by statutory United States federal income tax rate is as follows:



	Year Ended December 31,
(millions)	2019			2018			2017
Tax at statutory rate	$	14.9		$	16.0		$	25.3
Permanent differences	0.8			0.2			0.3
State taxes, net of federal benefit	4.5			6.3			2.5
Effect of foreign tax rates	0.6			0.6			—
Effect of 2017 Tax Act	—			(1.5		)	(1.0		)
Noncontrolling interest	(0.6		)	(0.7		)	(1.1		)
Current year adjustment to deferred taxes	0.8			0.4			1.6
Recognition of tax credits	(1.8		)	(2.7		)	(1.5		)
Other	—			—			1.1
	19.2			18.6			27.2
Change in valuation allowance (1)	0.2			1.0			0.5
Income tax expense	$	19.4		$	19.6		$	27.7
Effective tax rate	27.3		%	25.8		%	38.4		%

(1) The year ended December 31, 2017 includes $1.2 million of additional income tax expense related to an increase in the valuation allowance as a result of the 2017 Tax Act.

Taxes paid were $15.3 million, $15.3 million, and $26.5 million in the years ended December 31, 2019, 2018 and 2017, respectively.

The Company finalized its accounting for the income tax effects of the 2017 Tax Act during the year ended December 31, 2018 and recorded a tax benefit of $1.5 million for the transition tax on the mandatory deemed repatriation of foreign earnings. The tax benefit is the result of the Company finalizing its analysis of foreign earnings and profits and eligible foreign tax credits to be claimed to offset the tax liability.

The 2017 Tax Act also included a provision designed to tax Global Intangible Low Taxed Income (“GILTI”). The Company has elected the period cost method to account for any tax liability subject to GILTI. The GILTI amount recognized during the year ended December 31, 2019 was not significant.

As of December 31, 2019 the Company had not identified any uncertain tax positions that would have a material impact on the Company's financial position.

The Company would recognize potential interest and penalties related to uncertain tax positions, if any, in income tax expense. The tax years that remain subject to examination for the Company's major tax jurisdictions as of December 31, 2019 are shown below:



2016 - 2019	United States - federal income tax
2007 - 2019	United States - state and local income tax
2015 - 2019	Foreign - Canada and Puerto Rico