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Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

10.  Income Taxes

 

Income tax expense was $35.2 million for the three months ended September 30, 2018 compared to $32.0 million for the same period in 2017. The effective tax rates were 26.1% and 43.2% for each of the respective periods. The decrease in the effective tax rate between the two periods was primarily due to (i) the Tax Act, which reduced the federal corporate income tax rate from 35% to 21%, or a 14.0% decrease, (ii) a $1.4 million decrease in permanent differences between the two periods, which contributed a 2.7% decrease in the effective tax rate, (iii) and an increase in nontaxable earnings of $0.5 million which resulted in a 0.8% decrease in the effective tax rate.

 

Income tax expense was $86.0 million for the nine months ended September 30, 2018 compared to $58.4 million for the same period in 2017. The effective tax rates were 26.9% and 38.0% for each of the respective periods. The decrease in the effective tax rate between the two periods was primarily attributable to (i) the Tax Act, which reduced the federal corporate income tax rate from 35% to 21%, or a 14.0% decrease, (ii) a $2.3 million decrease in permanent differences, resulting in a 2.5% decrease in the 2018 effective tax rate compared to prior year, (iii) transaction costs attributable to Nexstar’s merger with Media General that were determined to be nondeductible for tax purposes and resulted in an income tax expense of $1.7 million in 2017, or a 1.1% decrease in the 2018 effective tax rate compared to prior year, and (iv) the liquidation of Media General legal entities that merged with Nexstar in 2017 and resulted in an income tax expense of $1.5 million in 2017, or a 1.0% decrease in the 2018 effective tax rate compared to prior year.

These decreases were partially offset by (i) a $7.8 million income tax benefit in 2017 that resulted from divestiture of stations previously owned by Nexstar, or a 5.1% increase in the 2018 effective tax rate compared to prior year, (ii) a release of an uncertain tax position in 2017 that resulted in an income tax benefit of $1.6 million, or a 1.1% increase in the 2018 effective tax rate compared to prior year, (iii) higher excess tax benefits related to stock-based compensation in 2017 amounting to $0.3 million, or a 0.5% increase in the 2018 effective tax rate compared to prior year, and (iv) a decrease in nontaxable earnings of $0.9 million that contributed a 0.4% increase in the 2018 effective tax rate compared to prior year.

 

In December 2017, the Tax Act was signed into law which significantly changed the U.S. corporate income tax system, including reducing the federal corporate income tax rate from 35% to 21%. During the three-month period ended September 30, 2018, the Company recorded a measurement period adjustment in accordance with Staff Accounting Bulletin No. 118. The measurement period adjustment related to the remeasurement of the Company’s net deferred tax liability from 35% to 21% and resulted in an income tax benefit of $2.1 million. The $2.1 million income tax benefit reduced the effective income tax rate for the three-month period ended September 30, 2018 by 1.5% and the effective income tax rate for the nine-month period ended September 30, 2018 by 0.6%. The accounting for the Tax Act was completed as of September 30, 2018.