INCOME TAXES (Block)

12 Months Ended

Dec. 31, 2015

14. INCOME TAXES

Effective Tax Rate - Overview

The Company’s effective income tax rate may be impacted by: (1) changes in the level of income in any of the Company’s taxing jurisdictions; (2) changes in the statutes and rules applicable to taxable income in the jurisdictions in which the Company operates; (3) changes in the expected outcome of income tax audits; (4) changes in the estimate of expenses that are not deductible for tax purposes; (5) income taxes in certain states where the states’ current taxable income is dependent on factors other than the Company’s consolidated net income; and (6) adding facilities in states that on average have different income tax rates from states in which the Company currently operates and the resulting effect on previously reported temporary differences between the tax and financial reporting bases of the Company’s assets and liabilities. The Company’s annual effective tax rate may also be materially impacted by tax expense associated with non-amortizable assets such as broadcasting licenses and goodwill and changes in the deferred tax valuation allowance.

An impairment loss for financial statement purposes will result in an income tax benefit during the period incurred as the amortization of broadcasting licenses and goodwill is deductible for income tax purposes.

Expected And Reported Income Taxes (Benefit)

Income tax expense (benefit) computed using the United States federal statutory rates is reconciled to the reported income tax expense (benefit) as follows:

		Years Ended December 31,
			2015	2014		2013
			(amounts in thousands)

Federal statutory income tax rate			35%		35%		35%

Computed tax expense at federal statutory rates on income
	before income taxes	$	16,667	$	16,357	$	16,975
State income tax expense, net of federal benefit			1,333		2,491		3,399
Non-recognition of expense due to full valuation allowance			(244)		-		54
Tax benefit shortfall associated with share-based awards			12		62		997
Nondeductible expenses and other			669		1,001		1,051
Income taxes		$	18,437	$	19,911	$	22,476

For 2015

The effective income tax rate was 38.7%. This rate was higher than the federal statutory rate of 35% primarily due to the combination of: (1) an increase in net deferred tax liabilities associated with non-amortizable assets such as broadcasting licenses and goodwill; (2) an adjustment for expenses that are not deductible for tax purposes; and (3) a tax benefit shortfall associated with share-based awards.

The income tax rate has been trending down as expenses not deductible for tax purposes have decreased due to the issuance to senior management of a higher percentage of awards that were market based. Effective during the second half of 2015, the estimated annual income tax rate increased due to the impact of acquisitions on the Company’s state income apportionments to states with higher income tax rates. This increase was offset by a discrete state income tax credit due to recent legislation that allowed for the release of a partial valuation allowance in a certain single member state.

For 2014

The effective income tax rate was 42.6%. This rate was higher than the federal statutory rate of 35% primarily due to the combination of: (1) an increase in net deferred tax liabilities associated with non-amortizable assets such as broadcasting licenses and goodwill; (2) an adjustment for expenses that are not deductible for tax purposes; and (3) a tax benefit shortfall associated with share-based awards. In addition, the Company recorded a discrete tax benefit from legislatively reduced income tax rates in certain states.

For 2013

The effective income tax rate was 46.3%. This rate was higher than the federal statutory rate of 35% primarily due to the combination of: (1) an increase in net deferred tax liabilities associated with non-amortizable assets such as broadcasting licenses and goodwill; (2) an adjustment for expenses that are not deductible for tax purposes; and (3) a tax benefit shortfall associated with share-based awards.

Income Tax Expense

Income tax expense (benefit) for each year is summarized as follows:

				Years Ended December 31,
				2015		2014		2013

	Current:
		Federal		$	25	$	-	$	-
		State			90		100		54
			Total current		115		100		54

	Deferred:
		Federal			17,042		17,373		19,051
		State			1,280		2,438		3,371
			Total deferred		18,322		19,811		22,422

Total income taxes (benefit)				$	18,437	$	19,911	$	22,476

Deferred Tax Assets And Deferred Tax Liabilities

The income tax accounting process to determine the Company’s deferred tax assets and liabilities involves estimating all temporary differences between the tax and financial reporting bases of the Company’s assets and liabilities based on tax laws and statutory tax rates applicable to the period in which the differences are expected to affect taxable income. These estimates include assessing the likely future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Changes to these estimates could have a future impact on the Company’s financial position or results of operations.

The tax effects of significant temporary differences that comprise the net deferred tax assets and liabilities are as follows:

			December 31,
			2015		2014
			(amounts in thousands)
Deferred tax assets:
	Employee benefits		$	783	$	678
	Deferred compensation			988		588
	Provision for doubtful accounts			835		959
	Deferred gain on tower transaction			235		236
	Other			987		505
	Total current deferred tax assets before valuation allowance			3,828		2,966
	Valuation allowance			(231)		(620)
	Total current deferred tax assets - net			3,597		2,346
	Federal and state income tax loss carryforwards			129,944		130,074
	Share-based compensation			3,218		2,648
	Investments - impairments			499		498
	Lease rental obligations			3,440		2,289
	Deferred compensation			3,968		4,322
	Deferred gain on tower transaction			3,039		3,281
	Other non-current			1,014		1,154
	Total non-current deferred tax assets before valuation allowance			145,122		144,266
	Valuation allowance			(20,407)		(20,146)
	Total non-current deferred tax assets - net			124,715		124,120
	Total deferred tax assets		$	128,312	$	126,466

Deferred tax liabilities:
	Advertiser broadcasting obligations		$	(133)	$	(98)
	Total current deferred tax liabilities			(133)		(98)
	Deferral of gain recognition on the extinguishment of debt			(4,568)		(6,119)
	Property, equipment and certain intangibles (other
		than broadcasting licenses and goodwill)		4,804		5,579
	Broadcasting licenses and goodwill			(206,594)		(187,050)
	Total non-current deferred tax liabilities			(206,358)		(187,590)
	Total deferred tax liabilities		$	(206,491)	$	(187,688)

	Total net deferred tax liabilities		$	(78,179)	$	(61,222)

Valuation Allowance For Deferred Tax Assets

Judgment is required in estimating valuation allowances for deferred tax assets. Deferred tax assets are reduced by a valuation allowance if an assessment of their components indicates that it is more likely than not that all or some portion of these assets will not be realized. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in the carryforward periods under tax law. The Company periodically assesses the need for valuation allowances for deferred tax assets based on more-likely-than-not realization threshold criteria. In the Company’s assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, forecasts of future profitability, the duration of statutory carryforward periods and any ownership change limitations under Internal Revenue Code Section 382 on the Company’s future income that can be used to offset historic losses.

As changes occur in the Company’s assessments regarding its ability to recover its deferred tax assets, the Company’s tax provision is increased in any period in which the Company determines that the recovery is not probable.

The following table presents the changes in the deferred tax asset valuation allowance for the periods indicated:

Increase

(Decrease)

Charged

(Credited)

Balance At

To Income

Balance At

Beginning

Taxes

Balance

End Of

Year Ended

Of Year

(Benefit)

Sheet

Year

(amounts in thousands)

December 31, 2015

20,766

(165)

20,638

December 31, 2014

20,238

528

20,766

December 31, 2013

18,333

1,905

20,238

Liabilities For Uncertain Tax Positions

The Company recognizes liabilities for uncertain tax positions based on whether evidence indicates that it is more likely than not that the position will be sustained on audit. It is inherently difficult and subjective to estimate such amounts, as this requires the Company to estimate the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. Changes in assumptions may result in the recognition of a tax benefit or an additional charge to the tax provision.

The Company classifies interest and penalties that are related to income tax liabilities as a component of income tax expense. The income tax liabilities and accrued interest and penalties are presented as non-current liabilities, as payments are not anticipated within one year of the balance sheet date. These non-current income tax liabilities are recorded in other long-term liabilities in the consolidated balance sheets.

The Company’s liabilities for uncertain tax positions are reflected in the following table:

		December 31,
		2015		2014
		(amounts in thousands)
Liabilities for uncertain tax positions
	Tax	$	67	$	67
	Interest and penalties		170		150
	Total	$	237	$	217

The amounts for interest and penalties expense reflected in the statements of operations were eliminated in the statements of cash flows under net deferred taxes (benefit) and other as no cash payments were made during these periods.

The following table presents the expense (income) for uncertain tax positions, which amounts were reflected in the consolidated statements of operations as an increase (decrease) to income tax expense:

	Years Ended December 31,
	2015		2014		2013
	(amounts in thousands)

Interest and penalties (income)		20		18		11
Total income taxes (benefit)
from uncertain tax positions	$	20	$	18	$	11

The increase in liabilities for uncertain tax positions for 2015 primarily reflects the addition of interest related to existing uncertain tax positions.

The following table presents the gross amount of changes in unrecognized tax benefits:

		Years Ended December 31,
		2015		2014		2013
		(amounts in thousands)

Beginning of year balance		$	(7,690)	$	(7,690)	$	(7,690)
Prior year positions
	Gross Increases		-		-		-
	Gross Decreases		-		-		-
Current year positions
	Gross Increases		-		-		-
	Gross Decreases		-		-		-
Settlements with tax authorities			-		-		-
Reductions due to statute lapse			-		-		-
End of year balance		$	(7,690)	$	(7,690)	$	(7,690)

Ending liability balance included above that was
	reflected as an offset to deferred tax assets	$	(7,623)	$	(7,623)	$	(7,623)

The gross amount of the Company’s unrecognized tax benefits is reflected in the above table which, if recognized, would impact the Company’s effective income tax rate in the period of recognition. The total amount of unrecognized tax benefits could increase or decrease within the next 12 months for a number of reasons including the expiration of statutes of limitations, audit settlements and tax examination activities.

As of December 31, 2015, there were no significant unrecognized net tax benefits (exclusive of interest and penalties) that over the next 12 months are subject to the expiration of various statutes of limitation. Interest and penalties accrued on uncertain tax positions are released upon the expiration of statutes of limitations.

Federal And State Income Tax Audits

The Company is subject to federal and state income tax audits from time to time that could result in proposed assessments. Management believes that the Company has made sufficient tax provisions for tax periods that are within the statutory period of limitations not previously audited and that are potentially open for examination by the taxing authorities. Potential liabilities associated with these years will be resolved when an event occurs to warrant closure, primarily through the completion of audits by the taxing jurisdictions, or if the statute of limitations expires. To the extent audits or other events result in a material adjustment to the accrued estimates, the effect would be recognized during the period of the event. There can be no assurance, however, that the ultimate outcome of audits will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

The Company cannot predict with certainty how these audits will be resolved and whether the Company will be required to make additional tax payments, which may include penalties and interest. During 2010, the Company concluded an audit by the IRS with no proposed adjustment for the tax years of 2004 through 2008. For most states where the Company conducts business, the Company is subject to examination for the preceding three to six years. In certain states, the period could be longer.

Income Tax Payments, Refunds And Credits

The Company accrued a $0.1 million Alternative Minimum Tax (“AMT”) associated with expected income subject to tax for 2015, before the offset of available net operating loss carryforwards (“NOLs”). The AMT is available to be carried forward indefinitely to be used as a credit to offset future income tax liabilities.

The following table provides the amount of income tax payments and income tax refunds for the periods indicated:

	Years Ended December 31,
	2015		2014		2013
	(amounts in thousands)

State income tax payments	$	81	$	79	$	69
Federal and state income tax refunds	$	-	$	10	$	5

Net Operating Loss Carryforwards

The Company has recorded a valuation allowance for certain of its state NOLs as the Company does not expect to obtain a benefit in future periods. In addition, utilization in future years of the NOL carryforwards may be subject to limitations due to the changes in ownership provisions under Section 382 of the Internal Revenue Code and similar state provisions.

Windfall tax benefits will be recognized for book purposes and recorded to paid-in capital only when realized. The Company does not recognize a deferred tax asset for unrealized tax benefits associated with the tax deductions in excess of the compensation recorded (excess tax benefit). The Company applies the “with and without” approach for utilization of tax attributes upon realization of NOLs in the future. This method allocates stock-based compensation benefits last among other tax benefits recognized.

The NOLs reflected in the following table exclude these windfall stock compensation deductions. In addition, the NOLs reflect an estimate of the NOLs for the 2015 tax filing year as these returns will not be filed until later in 2016:

	Net Operating Losses
	December 31, 2015
			Suspended
	NOLs		Windfall		NOL Expiration Period
	(amounts in thousands)				(in years)

Federal NOL carryforwards	$	292,800	$	10,799	2030	to	2035
State NOL carryforwards	$	614,834	$	8,806	2016	to	2034
State income tax credit	$	1,248				to	2018