Income Taxes

Income before income taxes from continuing operations attributable to CoreLogic is as follows for the years ended December 31, 2017, 2016 and 2015:



(in thousands)	2017					2016					2015
	Continuing Operations Attributable to CoreLogic		Equity In Losses of Affiliates			Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates			Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates
United States	$	155,598	$	(1,920	)	$	143,749	$	2,630		$	155,345	$	23,790
Foreign	13,294		—			20,225		(1,121		)	16,729		(970		)
Total	$	168,892	$	(1,920	)	$	163,974	$	1,509		$	172,074	$	22,820

For the years ended December 31, 2017, 2016 and 2015, income before income taxes from continuing operations attributable to CoreLogic includes income of certain incorporated noncontrolling interests.

Provision for Income Taxes

The provision for taxes consists of the following for the years ended December 31, 2017, 2016 and 2015:



(in thousands)	2017						2016					2015
	Continuing Operations Attributable to CoreLogic			Equity In Losses of Affiliates			Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates
Current:
Federal	$	51,906		$	(638	)	$	28,232		$	871	$	17,108	$	7,910
State	3,872			(96		)	9,187			142		2,166		1,190
Foreign	4,268			—			2,881			—		3,394		—
	60,046			(734		)	40,300			1,013		22,668		9,100
Deferred:
Federal	(42,012		)	—			12,186			—		29,561		—
State	(2,293		)	—			(267		)	—		3,562		—
Foreign	2,431			—			2,305			—		1,603		—
	(41,874		)	—			14,224			—		34,726		—
Total income tax provision	$	18,172		$	(734	)	$	54,524		$	1,013	$	57,394	$	9,100

During the years ended December 31, 2017 and 2016, we identified prior period errors which had overstated our

provision for deferred income taxes by $9.4 million for the year ended December 31, 2015 and understated our provision for

deferred income taxes by $2.0 million prior to 2015. We corrected these items in the periods of identification by recording a

reduction to deferred income tax expense of $4.3 million and $3.1 million in the years ended December 31, 2017 and 2016,

respectively, within continuing operations. See further discussion in Note 2 – Significant Accounting Policies.

A reconciliation of the provision for taxes based on the federal statutory income tax rate on income from continuing operations attributable to CoreLogic to our effective income tax rate is as follows for the years ended December 31, 2017, 2016 and 2015:



	2017				2016				2015
	Continuing Operations Attributable to CoreLogic		Equity In Losses of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	2.7		3.3		4.0		6.1		3.4		3.4
Foreign taxes in excess of/(less than) federal rate	1.6		—		(0.9	)	26.0		0.4		1.5
Nontaxable gain on contingent payment reversal	—		—		(1.7	)	—		—		—
Nontaxable/nondeductible items	(1.9	)	—		0.6		—		0.5		—
Change from investee to subsidiary	—		—		—		—		(2.5	)	—
Change in uncertain tax positions	(1.0	)	—		(1.3	)	—		(0.7	)	—
Research and development credits	(2.2	)	—		(1.6	)	—		(2.6	)	—
Net impact of FAFC indemnity	0.1		—		(8.7	)	—		—		—
TCJA - Provisional remeasurement of federal deferred taxes	(22.5	)	—		—		—		—		—
Valuation allowance on impaired investments	—		—		8.2		—		—		—
Other items, net	(1.0	)	—		(0.3	)	—		(0.1	)	—
Effective income tax rate	10.8	%	38.3	%	33.3	%	67.1	%	33.4	%	39.9	%

For the years ended December 31, 2017 and 2016, we recognized income tax benefits of $3.3 million and $2.6 million respectively, related to domestic research and development credits. Additionally, due to the closure of the Internal Revenue Service (IRS) audit for examination of the years 2005-2009, we recognized a net tax benefit of $14.4 million, including interest and penalties, for the year ended December 31, 2016, which were accrued for and fully indemnified by FAFC.

Tax Cuts and Jobs Act

In December 2017, the U.S. passed the TCJA. Impacts of the TCJA for the year ended December 31, 2017 included remeasuring ending federal deferred tax assets and liabilities due to the reduction of U.S. corporate income tax rate from 35.0% to 21.0%, assessing a one-time transition tax on certain foreign earnings that were previously tax deferred and providing for the acceleration of depreciation for certain assets placed into service after September 2017. In connection with the TCJA, the Securities and Exchange Commission issued guidance which allows us a year to finalize the income tax effect of the TCJA.

As of December 31, 2017, we have not completed our accounting for the tax effects of the TCJA. We are still analyzing certain aspects of the TCJA and refining our calculations including its impact to deferred tax assets and liabilities and taxes on foreign earnings. In connection with the remeasurement of our federal deferred tax balances, we recorded a provisional tax benefit of $38.0 million for the year ended December 31, 2017. We remeasured the deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally at 21.0%.

As of December 31, 2017, we had $46.3 million cash in foreign jurisdictions that primarily reflects the estimated $56.3 million of undistributed foreign earnings from foreign subsidiaries that are intended to be indefinitely reinvested in foreign operations. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the TCJA transition tax, or for any additional outside basis difference inherent in these entities as determining an unrecognized deferred tax liability is not currently practicable.

In connection with the TCJA, a one-time transition tax is assessed on total post-1986 accumulated foreign earnings and profits that were previously deferred from U.S. income taxes, the amount of those earnings held in cash and other specified assets and foreign tax pools. We have not made sufficient progress on the analysis of our foreign subsidiaries to reasonably estimate the effects of the one-time transition tax and have not recorded a provisional amount.

During 2018 we will continue to analyze the TCJA and will consider the issuance of any new guidance, legislative actions and changes in accounting standards. Tax effects for these items, including the remeasurement of deferred tax assets and liabilities and the one-time transition tax on certain foreign earnings, will be recorded in the period of completion. We currently anticipate finalizing and recording any resulting adjustments by the end of 2018.

Deferred Tax Assets and Liabilities

Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the deferred income tax assets and liabilities as of December 31, 2017 and 2016 for continuing operations are as follows:



(in thousands)	2017			2016
Deferred tax assets:
Net losses and credit carryforwards	$	68,744		$	90,773
Deferred revenue	114,586			149,022
Investment in affiliates	4,375			14,501
Employee benefits	31,944			47,823
Accrued expenses and loss reserves	28,043			38,024
Other	12,296			20,692
Less: valuation allowance	(45,166		)	(44,879		)
	$	214,822		$	315,956
Deferred tax liabilities:
Depreciable and amortizable assets	299,578			415,879
Investment in affiliates	17,449			18,624
	$	317,027		$	434,503
Net deferred tax liability	$	(102,205	)	$	(118,547	)

As of December 31, 2017 and 2016, we had federal net operating losses (“NOLS”) of $171.6 million and $176.6 million, respectively, which begin to expire in 2021. The state NOLS were $281.8 million and $271.1 million as of December 31, 2017 and 2016, respectively, which begin to expire in 2018. The foreign NOLS were $10.7 million and $9.9 million as of December 31, 2017 and 2016, respectively. As of December 31, 2017, we had available federal and state capital losses of $37.6 million and $49.8 million, respectively, expiring at various times beginning in 2018. A portion of our NOL's and capital losses may be utilized prior to the expiration of carryover statutes. The change of ownership provisions of the Tax Reform Act of 1986 may limit utilization of a portion of our domestic NOL and tax credit carryforwards to future periods.

As of December 31, 2017 and 2016, we had valuation allowances of approximately $45.2 million and $44.9 million, respectively, against certain U.S. and foreign deferred tax assets. The increase in the valuation allowance was primarily due to the recording of a valuation allowance on various foreign tax attributes, offset by the release of domestic valuation allowance due to the remeasurement of deferred tax attributes pursuant to the TCJA.

Unrecognized Tax Benefits

A reconciliation of the unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015 are as follows:



(in thousands)	2017			2016			2015
Unrecognized tax benefits - opening balance	$	21,179		$	34,301		$	35,663
Gross increases - tax positions in prior period	503			1,835			13
Gross decreases - tax positions in prior period	—			(106		)	(2,152		)
Gross increases - current-period tax positions	654			528			896
Settlements with taxing authorities	—			(17		)	(119		)
FAFC indemnification release	—			(13,147		)	—
Expiration of the statute of limitations for the assessment of taxes	(2,011		)	(2,215		)	—
Unrecognized tax benefits - ending balance	$	20,325		$	21,179		$	34,301

As of December 31, 2017 and 2016, our unrecognized tax benefits of $20.3 million and $21.2 million, respectively, include $12.0 million and $13.0 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate.

We recognize a provision for interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017 and 2016, we had $9.5 million and $9.3 million, respectively, accrued for the payment of interest and penalties. These balances are gross amounts before any tax benefits and are included in other liabilities in the accompanying consolidated balance sheets. For the years ended December 31, 2017, 2016 and 2015, we recognized approximately $0.2 million, $0.7 million and $0.2 million, respectively, in interest and penalties in the accompanying consolidated statements of income.

In November 2016, we closed our 2005-2009 IRS exam which resulted in a reversal of approximately $13.2 million of unrecognized tax benefits and a reversal of approximately $8.7 million of accrued interest and penalties. These reversals reduced the total FAFC indemnification receivable to $14.0 million pursuant to the Tax Sharing Agreement entered in connection with the Separation. The remaining reserves subject to indemnification of $8.3 million and the associated accrued interest and penalties of $6.2 million are related to various taxing jurisdictions for the years 2006-2009. Any future activity in this reserve would not have a material impact to net income.

We are currently under examination for the tax years 2010 through 2012 by the U.S., our primary taxing jurisdiction, and various taxing authorities. It is reasonably possible the amount of the unrecognized benefit with respect to certain unrecognized positions that are not subject to the FAFC indemnification could significantly increase or decrease within the next twelve months and would have an impact on net income. Currently, the Company expects expirations of statutes of limitations, excluding indemnified amounts, on reserves of approximately $7.0 million within the next twelve months.