Income Taxes

The Tax Cuts and Jobs Act ("TCJA") was enacted on December 22, 2017. The TCJA introduces significant changes in tax law, with certain provisions being effective for the year ended December 31, 2017, however most are effective for tax years beginning after December 31, 2017. Companies are required to recognize the effect of tax law changes in the period of enactment, however, due to the complexities involved in accounting for the enactment of TCJA, SEC Staff Accounting Bulletin ("SAB") 118 allows us to record provisional amounts to reflect the impacts of the TCJA during a one year "measurement period". The Company recorded certain provisional amounts based upon reasonable estimates and completed the analysis of the impacts of the TCJA in order to finalize the measurement period adjustments.

The Company recorded a tax benefit of $67.9 million which represents the one-time impact of the change in the corporate tax rate on deferred tax assets and liabilities in the year ended December 31, 2017. Although the accounting related to the rate change was complete, as a result of return to provision adjustments and refining our calculations, the Company recognized an additional benefit of $5.8 million in the year ended December 31, 2018.

The one-time transition tax is based on total post-1986 earnings and profits ("E&P") which the Company has previously deferred from U.S. income taxes. An estimated amount was recorded in the year ended December 31, 2017 for the one-time transition tax liability, net of the foreign taxes deemed paid, resulting in an increase in income tax expense of $11.0 million. On the basis of revised E&P computations that were completed during the reporting period, the Company recognized an additional measurement period adjustment of $3.3 million resulting in an additional increase in tax expense. The Company has sufficient foreign tax credits to offset the transition tax.

In continuing the analysis of the impact of the TCJA on deferred tax amounts, the Company recorded a discrete tax expense of $15.6 million in the period ended March 31, 2018, resulting from an updated assessment in response to guidance contained in a recently issued IRS notice. This expense relates to a valuation allowance against foreign tax credit carry forwards. There has been no change to this measurement period adjustment and it is determined to be complete.

The Company intends to maintain its indefinite reinvestment assertion.

The Company’s final policy election is to treat the global intangible low taxed income ("GILTI") tax as a period expense.

Income (loss) from continuing operations before income taxes consists of the following components:



(In thousands)	Years Ended December 31,
(In thousands)	2018		2017		2016
Domestic	$	587,346	$	618,955	$	500,757
Foreign	32,927		21,423		(45,932		)
Total	$	620,273	$	640,378	$	454,825

Income tax expense attributable to continuing operations consists of the following components:



(In thousands)	Years Ended December 31,
(In thousands)	2018			2017			2016
Current expense (benefit):
Federal	$	80,360		$	162,639		$	120,634
State	13,663			14,301			11,252
Foreign	25,001			17,382			22,946
	119,024			194,322			154,832
Deferred expense (benefit):
Federal	34,636			(38,416		)	12,140
State	3,627			(2,436		)	2,515
Foreign	(4,896		)	(7,813		)	(3,013		)
	33,367			(48,665		)	11,642
Tax expense (benefit) relating to uncertain tax positions, including accrued interest	3,915			5,084			(1,612		)
Income tax expense	$	156,306		$	150,741		$	164,862

A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:



(In thousands)	Years Ended December 31,
(In thousands)	2018		2017		2016
U.S. federal statutory income tax rate	21	%	35	%	35	%
State and local income taxes, net of federal benefit	2		2		2
Effect of foreign operations	—		(1	)	(1	)
Effect of rate changes on deferred taxes	(2	)	(11	)	—
Transition tax, net of foreign taxes deemed paid	—		2		—
Nontaxable income attributable to noncontrolling interests	(1	)	(1	)	(1	)
Changes in the valuation allowance	3		—		5
Domestic production activity deduction	—		(3	)	(3	)
Tax expense relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	—		1		(1	)
Other	2		—		—
Effective income tax rate	25	%	24	%	36	%

The tax effects of temporary differences that give rise to significant components of deferred tax assets or liabilities at December 31, 2018 and 2017 are as follows:



(In thousands)	December 31,
	2018			2017
Deferred Tax Asset (Liability)
Noncurrent
NOLs and tax credit carry forwards	$	123,487		$	69,771
Compensation and benefit plans	29,294			30,880
Allowance for doubtful accounts	981			370
Fixed assets and intangible assets	24,150			24,737
Interest rate swap contracts	—			1,893
Accrued interest expense	8,832			13,049
Other liabilities	24,594			12,562
Deferred tax asset	211,338			153,262
Valuation allowance	(95,185		)	(57,121		)
Net deferred tax asset, noncurrent	116,153			96,141
Prepaid liabilities	(514		)	(501		)
Fixed assets and intangible assets	(90,960		)	(61,127		)
Investments in partnerships	(121,156		)	(103,474		)
Other assets	(29,694		)	(20,657		)
Deferred tax liability, noncurrent	(242,324		)	(185,759		)
Total net deferred tax liability	$	(126,171	)	$	(89,618	)

At December 31, 2018, the Company had foreign tax credit carry forwards of approximately $24.1 million, expiring on various dates from 2019 through 2028, which have been reduced by a valuation allowance of $24.1 million as it is more likely than not that these carry forwards will not be realized. The Company had net operating loss carry forwards of approximately $552.2 million, related primarily to federal net operating losses acquired as a result of the purchase of the outstanding shares of RLJE of approximately $124.6 million and to net operating loss carryforwards of our foreign subsidiaries. The deferred tax asset related to the federal net operating loss carryforward of approximately $25.8 million has expiration dates ranging from 2024 through 2036 and has been reduced by a valuation allowance of approximately $4.6 million that was recorded through goodwill as part of purchase accounting. Although the foreign net operating loss carry forward periods range from 5 years to unlimited, the related deferred tax assets of approximately $67.1 million for these carry forwards have been reduced by a valuation allowance of approximately $62.5 million as it is more likely than not that these carry forwards will not be realized. The remainder of the valuation allowance at December 31, 2018 relates primarily to deferred tax assets attributable to temporary differences of certain foreign subsidiaries for which it is more likely than not that these deferred tax assets will not be realized.

For the year ended December 31, 2018, $1.3 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a 'with-and-without' approach).

At December 31, 2018, the liability for uncertain tax positions was $23.2 million, excluding the related accrued interest liability of $6.1 million and deferred tax assets of $6.0 million. All of such unrecognized tax benefits, if recognized, would reduce the Company's income tax expense and effective tax rate.

A reconciliation of the beginning to ending amount of the liability for uncertain tax positions (excluding related accrued interest and deferred tax benefit) is as follows:



(In thousands)
Balance at December 31, 2017	$	21,797
Increases related to current year tax positions	4,038
Increases related to prior year tax positions	—
Decreases related to prior year tax positions	(1,085		)
Decreases due to settlements/payments	(1,581		)
Balance at December 31, 2018	$	23,169

Interest expense (net of the related deferred tax benefit) of $1.3 million was recognized during the year ended December 31, 2018 and is included in income tax expense in the consolidated statement of income. At December 31, 2018 and 2017, the liability for uncertain tax positions and related accrued interest noted above are included in other liabilities in the consolidated balance sheets.

Under the Company's Tax Disaffiliation Agreement with Cablevision, Cablevision is liable for all income taxes of the Company for periods prior to the spin-off from Cablevision except for New York City Unincorporated Business Tax. The Company is currently being audited by the State and City of New York and various other states or jurisdictions, with most of the periods under examination relating to tax years 2011 and forward.