Income Taxes

3 Months Ended

Mar. 31, 2018

INCOME TAXES

The Company’s effective income tax rate is based on expected income, statutory rates, valuation allowances against deferred tax assets, and any tax planning opportunities available to the Company. For interim financial reporting, the Company estimates the annual effective income tax rate based on full year projections and applies the annual effective income tax rate against year-to-date pretax income (loss) to record income tax expense (benefit), adjusted for discrete items, if any. The Company refines annual estimates as new information becomes available. Based on available guidance for the Tax Cuts and Jobs Act (the “Tax Act”), the Company does not expect to receive an income tax deduction for any stock-based compensation granted in 2018 but does expect to receive an income tax deduction for any stock-based compensation granted prior to December 31, 2017. Additionally, the Company expects a portion of its interest expense to be disallowed as a deduction in 2018 and does not expect any of this disallowed interest expense to be available for future use. As such, the Company established a valuation allowance for any disallowed interest. The Company’s annual effective tax rate has been computed using these expectations. As additional guidance is issued related to the Tax Act, the Company’s expectations may change which could result in additional uncertainty in the Company’s annual effective tax rate.

The Company’s income tax expense (benefit) consisted of the following:



	Three Months Ended
	March 31,
	2018			2017
Income (loss) before provision for income taxes	$	5,612		$	(7,007	)
Income tax expense (benefit) using estimated annual effective income tax rate	2,056			(2,639		)
Impact of discrete items, net	(108		)	(143		)
Income tax expense (benefit)	$	1,948		$	(2,782	)

The discrete item for the three months ended March 31, 2018 is related to an income tax deduction for stock-based compensation. The discrete item for the three months ended March 31, 2017 is primarily related to an income tax deduction as a result of adopting ASU 2016-09.

On December 22, 2017, the Tax Act was enacted and made significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 and limits interest expense deductions to 30% of taxable income before interest, depreciation and amortization from 2018 to 2021 and then taxable income before interest thereafter. The Tax Act permits disallowed interest expense to be carried forward indefinitely. The Company has calculated its best estimate of the impact of the Tax Act in its 2017 year-end income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of this filing. The Company’s estimate of the provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was $28,845 at December 31, 2017. The provisional estimates are based on the Company’s initial analysis of the Tax Act. Given the significant complexity of the Tax Act, anticipated guidance from the U.S. Treasury about implementing the Tax Act, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board related to the Tax Act, these estimates may be adjusted during 2018.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company continues to analyze the Tax Act and, at December 31, 2017, had determined that the deferred tax benefit of $28,845 recorded in connection with the remeasurement of certain deferred tax assets and liabilities was a provisional amount and a reasonable estimate. No changes were made to the estimate as of March 31, 2018.