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Income Taxes
9 Months Ended
Sep. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

4. INCOME TAXES

Income tax expense or benefit is recognized based on the Company’s estimated annual effective tax rate which is based upon the tax rate expected for the full calendar year applied to the pretax income or loss of the interim period. The Company’s consolidated effective tax rate for the three and nine months ended September 30, 2017 was 38.0% and 29.0%, respectively.  The income tax rate for the three months ended September 30, 2017 differs from the statutory federal income tax rate primarily due to state income taxes. The income tax rate for the nine months ended September 30, 2017 differs from the statutory federal income tax rate primarily due to nondeductible goodwill impairment and equity-based compensation recorded in the second quarter of 2017. The Company’s consolidated effective tax rate for the three and nine months ended September 30, 2016 was 52.2% and 102.3%, respectively.  The income tax rate for the three months ended September 30, 2016 differs from the statutory federal income tax rate primarily due to the impacts of permanent items on the limited pretax income projected for the year.  The income tax rate for the nine months ended September 30, 2016 differs from the statutory federal income rate primarily due to equity-based compensation that was recorded in the first quarter of 2016 due to certain performance-vesting restricted shares which vested on April 1, 2016 (see further discussion in Note 11–Equity- Based Compensation), and state income taxes.

The Company has determined that there are no positions currently taken that would rise to a level requiring an amount to be recorded or disclosed as an unrecognized tax benefit. If such positions do arise, it is the Company’s intent that any interest or penalty amount related to such positions will be recorded as a component of the income tax provision (benefit) in the applicable period.

During the three months ended June 30, 2017, an ownership shift of more than 50 percent as defined by the Internal Revenue Code (“IRC”) Section 382 occurred. The Company determined that, while an ownership shift occurred and limits were determined under Section 382 and the regulations and guidance thereunder, the applicable limits would not impair the value or anticipated use of the Company’s federal and state net operating losses. Although realization is not assured, management believes it is more likely than not that any limitation under IRC Section 382 will not impair the realizability of the deferred income tax assets related to federal and state tax net operating loss carryforwards.

On October 18, 2017, the Pennsylvania Supreme Court held in Nextel Communications of Mid-Atlantic, Inc. v. Commonwealth that the net loss carryover deduction allowed for purposes of the Pennsylvania corporate net income tax violates the Uniformity Clause of the Pennsylvania Constitution. As a result the current law in Pennsylvania that places a fixed dollar limitation on the net loss carryover deduction was struck down, while retaining a percentage limitation on the net loss carryover deduction.

The Company has assessed the impact of this case on available positive and negative evidence to determine whether sufficient future taxable income in Pennsylvania will be generated to permit use of the existing deferred tax assets related to Pennsylvania net loss carryover.  Based on this evaluation, the Company has determined that in the fourth quarter of 2017 a valuation allowance of approximately $3,400 will be recorded to recognize only the portion of the deferred tax asset related to the Pennsylvania net loss carryover that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if negative evidence is no longer present due to changes in the tax law in Pennsylvania.