INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12.    

INCOME TAXES

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

For financial reporting purposes, income before income taxes were:

	Years Ended December 31
	2018		2017			2016
	(in thousands)
TOTAL	$	186,250	$	(15,136	)	$	345

The expense (benefit) for income taxes consists of:

	Years Ended December 31
	2018			2017			2016
	(in thousands)
Current:
Federal	$	42,805		$	(5,603	)		121	)
State		1,210			10			—
Deferred and other:
Federal		(40,805	)		5,603			(98	)
State					170			—
Total Tax Expense	$	3,210		$	180		$	23

The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory rate is as follows:

	Years Ended December 31
	2018			2017			2016
	(in thousands)
Income tax expense (benefit) at federal statutory rate	$	39,113		$	(5,603	)	$	121
State and local income taxes net of federal tax benefit		1,210			10			—
Permanent differences		(143	)		—			—
Timing differences
Installment note on land sale		(2,876	)		(1,917	)		—
Allowance for losses on notes		(383	)		(256	)		—
Deferred gains		(9,417	)		(7,723	)		—
Basis difference on fixed assets		23,675			10,082			—
Other basis/timing differences		(7,164	)		(16	)		—
Use/generation of net operating loss carryforwards		(42,805	)		5,603			(97	)
Calculated income tax expense		1,210			180			24
Effective Tax Rate		0.6	%		N/A			6.9	%

The company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2018, the Company’s tax years for 2017, 2016, and 2015 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2018, the Company is no longer subject to U.S federal, state, local, or foreign examinations by tax authorities for the years before 2015. 

The 2018 and 2017 effective tax rate is driven primarily by the passing of the Tax Cuts and Jobs Act by congress on December 22, 2017. This act reduced the statutory tax rate for corporations from 35% to 21% starting in 2018. As a result, the tax assets of TCI had to be re-priced to reflect the new tax rate for future years with the impact on the 2017 provision for income taxes.  

Components of the Net Deferred Tax Asset or Liability

	Years Ended December 31
	2018			2017
	(in thousands)
Allowance for losses on notes	$	—		$	383
Installment note on land sale		—			2,876
Deferred gain		—			6,814
Net operating loss carryforward		3,904			46,709
Subtotal		3,904			56,782
Less:  valuation allowance		—			(29,806	)
Total net deferred tax assets		3,904			26,976
Deferred gain		2,603			—
Basis differences for fixed assets		3,301			26,976
Total deferred tax liability		5,904			26,976
Net deferred tax asset (liability)		(2,000	)		—
Current net deferred tax asset		3,904			26,976
Long-term net deferred tax liability	$	5,904		$	26,976
Net deferred tax asset (liability)		(2,000	)		—

Operating Loss and Tax Credit Carryforwards

We have state NOLs in many of the various states in which we operate.

Valuation Allowance

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. At December 31, 2018, 2017 and 2016 TCI had a net deferred tax asset due to tax deductions available to it in future years. However, as management could not determine that it was more likely than not that TCI would realize the benefit of the deferred tax asset, a 100% valuation allowance was established.