Income Taxes

12 Months Ended

Sep. 30, 2018

11.	Income Taxes

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse. Deferred tax assets are evaluated for the estimated future tax effects of deductible temporary differences and tax operating loss carryovers. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized.

The components of income tax benefit are as follows:

	Fiscal Year Ended			Nine Months Ended			Year Ended
	September 30, 2018			September 30, 2017			December 31, 2016
Current:
Federal	$	(5,264	)	$	23,217		$	8,476
State		2,376			2,444			2,083
Deferred:
Federal		(54,528	)		(30,695	)		(38,286	)
State		(8,832	)		(4,251	)		(4,776	)
Total income tax benefit	$	(66,248	)	$	(9,285	)	$	(32,503	)

Income tax benefit differs from the amount computed at the federal statutory corporate tax rate as follows:

	Fiscal Year Ended			Nine Months Ended			Year Ended
	September 30, 2018			September 30, 2017			December 31, 2016
Federal tax at statutory rate	$	(19,952	)	$	(8,140	)	$	(29,456	)
State tax, net of federal tax benefit		(5,199	)		(392	)		(4,966	)
Tax effect of:
Equity-based compensation		2,360			1,059			971
Provision to return and deferred tax adjustments		(646	)		(48	)		938
Non-deductible promotional and entertainment expense		974			510			1,199
Fuel tax credit and other credits		(740	)		(563	)		(1,527	)
Change in uncertain tax positions		579			(1,251	)		—
Non-deductible IPO costs		1,622			—			—
Domestic production activities deduction^(a)		(1,741	)		—			—
Rate change^(b)		(43,429	)		—			—
Other, net		(76	)		(460	)		338
Income tax benefit	$	(66,248	)	$	(9,285	)	$	(32,503	)

(a)

In 2018, the Company calculated refund claims related to the domestic production activities deduction. The refund claims reduced the tax provision by $1,741.

(b)

In 2018, the inclusion of the revaluation of the net deferred tax liability attributable to the 2017 Tax Act reduced the tax provision by $43,429.

The components of the Company’s net deferred tax asset and liability accounts resulting from temporary differences between the tax and financial reporting basis of assets and liabilities are as follows:

	September 30, 2018		September 30, 2017
Deferred tax assets:
Interest rate swaps	$	4,509	$	14,088
Self-insurance reserves		22,371		34,314
Deferred compensation		2,899		3,860
Deferred rent		190		323
Leases		—		615
Payroll related accruals		9,934		10,267
Other accrued expenses		2,485		3,864
Allowance for doubtful accounts		1,525		3,340
Net operating loss carryforward		4,460		2,274
Other non-current deferred tax assets		191		378
Total non-current deferred tax assets		48,564		73,323
Valuation allowance		—		—
Total deferred tax assets	$	48,564	$	73,323

Deferred tax liabilities:
Intangible assets	$	68,457	$	134,490
Property and equipment		35,671		47,037
Inventories		4,123		6,264
Deferred revenue		6,782		10,112
Prepaid assets		137		428
Other non-current deferred tax liabilities		613		131
Total non-current deferred tax liabilities		115,783		198,462
Total deferred tax liabilities ⁽¹⁾	$	67,219	$	125,139

(1)

The 2017 Tax Act impacted the comparison of the 2018 to the 2017 deferred tax changes by $43,429 as a result of the U.S. tax rate reduction and the change in the ASC 740-30 deferred liability balance.

Income Tax Reform

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the 2017 Tax Act. The 2017 Tax Act made broad and complex changes to the U.S. tax code that affects the Company’s fiscal year ending September 30, 2018, including but not limited to, (1) reducing the U.S. federal corporate tax rate and (2) bonus depreciation that will allow for full expensing of qualified property. The 2017 Tax Act reduced the Company’s federal corporate tax rate to 21 percent in the fiscal year ending September 30, 2018. Section 15 of the Internal Revenue Code stipulates that the Company’s fiscal year ending September 30, 2018 has a blended corporate tax rate of 24.5 percent, which is based on the applicable tax rates before and after the 2017 Tax Act and the number of days in the year.

As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the 2017 Tax Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a $43,429 tax benefit in the Company’s Consolidated Statement of Operations for the year ended September 30, 2018.

Net Operating Losses

The Company has state income tax net operating losses of $83,996 which expire in tax years from 2019 through 2038. The Company believes it is more likely than not it will be able to utilize all losses to offset future income.

Uncertain Income Tax Positions

As of September 30, 2018 and 2017, the Company had $1,016 and $284, respectively, of unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate. The total amount of unrecognized tax benefits could change within the next twelve months for a number of reasons including audit settlements, tax examination activities and the recognition and measurement considerations under this guidance.

The following table represents a reconciliation of the Company’s total unrecognized tax benefits balances for the year ended September 30, 2018 and the nine months ended September 30, 2017:

	September 30, 2018		September 30, 2017
Beginning of period	$	284	$	1,749
Increases (decreases) as a result of tax positions taken in a prior period		732		(1,708	)
Increases as a result of tax positions taken during the current period		—		243
End of period	$	1,016	$	284

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company’s returns are no longer subject to U.S. federal and state tax examination for years before 2015 and 2014, respectively.