Income Taxes

12 Months Ended

Dec. 31, 2019

INCOME TAXES

Components of the provision for income taxes are as follows:


	Years Ended December 31,
(in millions)	2019		2018		2017
Current provision:
Federal	$	19.2	$	10.1	$	29.5
State and local	6.0		3.8		3.0
	25.2		13.9		32.5
Deferred provision (benefit):
Federal	16.1		35.0		(53.0)
State and local	15.5		2.5		0.8
Foreign	—		(0.1)		(0.2)
	31.6		37.4		(52.4)
	$	56.8	$	51.3	$	(19.9)

Income from continuing operations before provision for income taxes were as follows:


	Years Ended December 31,
(in millions)	2019		2018		2017
Domestic	$	196.4	$	234.2	$	102.2
Foreign	—		(0.3)		0.3
	$	196.4	$	233.9	$	102.5

Our income tax expense is different from the amount computed by applying the federal statutory income tax rate to income from continuing operations before taxes as follows:


	Years Ended December 31,
(in millions)	2019		2018		2017
Federal statutory tax on earnings before income taxes	$	41.2	$	49.1	$	35.9
State income taxes, net of federal income tax benefit	8.0		5.4		2.5
Non-deductible officer's compensation	5.5		2.6		4.7
Re-measurement of deferred taxes	8.3		—		(57.7)
Windfall deduction from equity compensation	(5.2)		(4.7)		(5.2)
Other	(1.0)		(1.1)		(0.1)
	$	56.8	$	51.3	$	(19.9)

During 2019, the Company recognized $8.3 million of income tax expense from the re-measurement of our net deferred tax liabilities based on an increase in income attributable to states with higher tax rates compared to the prior period.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into law. The Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a one-time tax on accumulated earnings of foreign subsidiaries as of 2017, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property.

In 2017, the Company recognized $56.9 million of future tax benefits from the re-measurement of its deferred tax assets and liabilities at December 22, 2017, using the maximum U.S. federal tax rate of 21%, and $0.8 million of tax benefits in relation to the mandatory deemed repatriation of its foreign earnings and profits pursuant to the Tax Act in combination with the reversal of deferred tax liabilities that had been maintained on foreign earnings. In 2018 and 2019, the Company's federal income tax expense was based on the new 21% corporate tax rate.

In accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), the Company recorded provisional tax expense of $5.6 million in 2017 related to non-deductible officer’s compensation and the tax consequences of mandatory deemed repatriation required by the Tax Act. The Company also recorded a provisional tax benefit of $19.7 million for the accelerated cost recovery allowance granted by the Tax Act, effective September 27, 2017. In the fourth quarter of 2018, the Company finalized its accounting for these estimates and recorded immaterial adjustments as of December 31, 2018, including any subsequent impact to the re-measurement of deferred taxes at a reduced tax rate of 21%.

Components of our deferred tax assets and liabilities were as follows:


	As of December 31,
(in millions)	2019		2018
Deferred tax assets:
Lease liabilities	$	6.8	$	—
Deferred compensation plans	5.9		5.8
Deferred income	4.8		5.6
Net operating losses and credit carryforward	3.4		3.7
Deferred liabilities	2.7		2.2
Allowance for uncollectible receivables	1.0		0.9
Deferred tax assets	24.6		18.2
Valuation allowance	(0.2)		(0.2)
Net deferred tax asset	24.4		18.0
Deferred tax liabilities:
Equity investments in excess of tax basis	114.8		6.9
Intangible assets in excess of tax basis	60.2		49.3
Property and equipment in excess of tax basis	53.4		38.7
Right-of-use assets	6.8		—
Other	2.0		1.3
Deferred tax liabilities	237.2		96.2
Net deferred tax liability	$	(212.8)	$	(78.2)

As of December 31, 2019, we had federal net operating losses of $3.2 million which were acquired in conjunction with the 2010 acquisition of Youbet.com. The utilization of these losses, which expire in 2025 and 2026, is limited on an annual basis pursuant to Internal Revenue Code § 382. We believe that we will be able to fully utilize all of these losses. We also have state net operating losses valued at $0.7 million. We have recorded a valuation allowance of $0.2 million against the state net operating losses due to the fact that it is unlikely that we will generate income in certain states which is necessary to utilize the assets.

The Internal Revenue Service has completed audits through 2012. Tax years 2016 and after are open to examination. State and local tax years open for examination vary by jurisdiction.

As of December 31, 2019, we had approximately $1.8 million of total gross unrecognized tax benefits, excluding interest of $0.1 million. If the total gross unrecognized tax benefits were recognized, there would be a $1.8 million effect to the annual effective tax rate. We anticipate a decrease in our unrecognized tax positions of approximately $0.6 million during the next twelve months primarily due to the expiration of statutes of limitation.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


(in millions)	2019		2018		2017
Balance as of January 1	$	2.8	$	2.9	$	2.3
Additions for tax positions related to the current year	0.1		0.1		0.5
Additions for tax positions of prior years	—		0.1		0.3
Reductions for tax positions of prior years	(1.1)		(0.3)		(0.2)
Balance as of December 31	$	1.8	$	2.8	$	2.9