Income Taxes

12 Months Ended

Dec. 31, 2018

On December 22, 2017, the US Congress enacted the Tax Act, which made significant changes to U.S. federal income tax law, including a reduction in the federal corporate tax rate from 35.0% to 21.0% effective January 1, 2018. Management has evaluated the relevant provisions of the Tax Act to the Company and accounted for the federal and state impacts in the financial statements and have therefore finalized the accounting for the tax effects of the Tax Act in 2018.

Deferred tax assets and liabilities as of December 31 are as follows:


	2019		2018
	(in thousands)
Deferred income tax assets:
Allowance for doubtful accounts	$	262	$	224
Accrued expenses	3,892		3,179
Stock-based compensation	178		92
Insurance accruals	15,054		15,415
State net operating loss carryforward	2,618		—
Federal net operating loss carryover and credits	8,793		—
Indirect tax benefits of unrecognized tax benefits	1,052		963
Other	3		2
Total gross deferred tax assets	31,852		19,875
Less valuation allowance	—		—
Net deferred tax assets	31,852		19,875
Deferred income tax liabilities:
Property and equipment	(101,843)		(74,794)
Goodwill and amortizable intangibles	(15,939)		(10,319)
Prepaid expenses	(1,762)		(1,268)
	(119,544)		(86,381)
Net deferred tax liability	$	(87,692)	$	(66,506)

The deferred tax amounts above have been classified in the accompanying consolidated balance sheets at December 31, 2019 and 2018 as follows:


	2019		2018
	(in thousands)
Noncurrent assets, net	$	6,006	$	4,535
Long-term liabilities, net	(93,698)		(71,041)
	$	(87,692)	$	(66,506)

We have not recorded a valuation allowance against any deferred tax assets at December 31, 2019 and 2018. In management’s opinion, it is more likely than not that we will be able to utilize these deferred tax assets in future periods as a result of our history of profitability, taxable income, and reversal of deferred tax liabilities.

Income tax expense consists of the following:


	2019		2018		2017
	(in thousands)
Current income taxes:
Federal	$	14,122	$	11,985	$	17,997
State	5,698		4,498		(1,495)
	19,820		16,483		16,502
Deferred income taxes:
Federal	5,595		5,537		(28,020)
State	(1,204)		(2,780)		843
	4,391		2,757		(27,177)
Total	$	24,211	$	19,240	$	(10,675)

The income tax provision differs from the amount determined by applying the U.S. federal tax rate as follows:


	2019		2018		2017
	(in thousands)
Federal tax at statutory rate (21%, 21%, 35% respectively)	$	20,406	$	19,302	$	22,574
State taxes, net of federal benefit	3,561		2,200		178
Permanent differences to return	540		408		309
Return to provision adjustment	(392)		(1,327)		(325)
Uncertain income tax penalties and interest, net	289		(1,067)		(1,208)
Enacted federal tax rate change	—		—		(32,789)
Other	(193)		(276)		586
	$	24,211	$	19,240	$	(10,675)

At December 31, 2019 and December 31, 2018, we had a total of $5.0 million and $4.6 million in gross unrecognized tax benefits, respectively, included in long-term income taxes payable in the consolidated balance sheets. Of this amount, $4.0 million and $3.6 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate as of December 31, 2019 and December 31, 2018, respectively. Unrecognized tax benefits were a net increase of $0.4 million and a net decrease of $1.3 million during the years ended December 31, 2019 and 2018, respectively, due mainly to the expiration of certain statutes of limitation net of additions and settlements with respective states. This had the effect of increasing the effective state tax rate in 2019 and reducing the effective state rate during 2018. The total net amount of accrued interest and penalties for such unrecognized tax benefits was $0.9 million and $1.0 million at December 31, 2019 and December 31, 2018, respectively, and is included in income taxes payable in the consolidated balance sheets. Net interest and penalties included in income tax expense for the years ended December 31, 2019, 2018 and 2017 was approximately zero, a benefit of $1.4 million, and a benefit of $0.9 million, respectively. Income tax expense is increased each period for the accrual of interest on outstanding positions and penalties when the uncertain tax position is initially recorded. Income tax expense is reduced in periods by the amount of accrued interest and penalties associated with reversed uncertain tax positions due to lapse of applicable statute of limitations, when applicable or when a position is settled. Income tax expense was reduced during the years ended December 31, 2019, 2018 and 2017 due to reversals of interest and penalties due to lapse of applicable statute of limitations and settlements, net of additions for interest and penalty accruals during the same period. These unrecognized tax benefits relate to risks associated with state income tax filing positions for our corporate subsidiaries.

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


	2019		2018
	(in thousands)
Balance at January 1,	$	4,585	$	5,839
Additions based on tax positions related to current year	1,138		700
Additions for tax positions of prior years	124		—
Reductions due to lapse of applicable statute of limitations	(701)		(1,954)
Settlements	(136)		—
Balance at December 31,	$	5,010	$	4,585

A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. We do not have any outstanding litigation related to tax matters. At this time, management’s best estimate of the reasonably possible change in the amount of gross unrecognized tax benefits is approximately no change to an increase of $1.0 million during the next twelve months, due to the combination of expiration of certain statute of limitations and estimated additions. The federal statute of limitations remains open for the years 2016 and forward. Tax years 2009 and forward are subject to audit by state tax authorities depending on the tax code and administrative practice of each state.