Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the provision for income taxes were as follows: 

	Years Ended December 31,
(in thousands)	2019		2018		2017
Current
Federal	$	23,066	$	18,864	$	15,670
State	6,129		3,668		1,985
Total current tax expense (benefit)	29,195		22,532		17,655
Deferred
Federal	3,535		5,901		20,895
State	2,447		4,528		1,940
Total deferred tax expense (benefit)	5,982		10,429		22,835
Total expense (benefit) for income taxes	$	35,177	$	32,961	$	40,490

The following presents a reconciliation of the provision (benefit) for income taxes computed at the federal statutory rate to the provision (benefit) for income taxes recognized in the Consolidated Statements of Operations for the years indicated: 

	Years Ended December 31,
(in thousands)	2019					2018					2017
Tax at statutory rate	$	29,544		21	%	$	22,899		21	%	$	28,150		35	%
State taxes, net of federal benefit	6,859			5		6,450			6		3,548			4
Effect of U.S. tax reform (the Tax Act)	—			—		—			—		13,074			16
Effect of net (income) loss attributable to noncontrolling interests	(968		)	(1	)	(171		)	—		(1,017		)	(1	)
Change in valuation allowance	(1,330		)	(1	)	4,508			4		(2,613		)	(3	)
Other, net	1,072			1		(725		)	(1	)	(652		)	(1	)
Income tax expense (benefit)	$	35,177		25	%	$	32,961		30	%	$	40,490		50	%

The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of 25%, 30% and 50% for the years ended December 31, 2019, 2018 and 2017, respectively. The Company's tax position for the years ended December 31, 2019, 2018 and 2017 was impacted by changes in the valuation allowance related to the unrealized and realized gains and losses on the Company’s investments.

Deferred taxes resulted from temporary differences between the amounts reported in the consolidated financial statements and the tax basis of assets and liabilities. The tax effects of temporary differences were as follows: 

	December 31,
(in thousands)	2019			2018
Deferred tax assets:
Intangible assets	$	5,279		$	7,352
Net operating losses	13,704			14,750
Compensation accruals	12,789			11,728
Lease liability	6,897			—
Investments	5,561			7,557
Capital losses	773			512
Other	581			942
Gross deferred tax assets	45,584			42,841
Valuation allowance	(6,844		)	(8,439		)
Gross deferred tax assets after valuation allowance	38,740			34,402
Deferred tax liabilities:
Intangible assets	(15,252		)	(12,286		)
Right of use asset	(5,263		)	—
Fixed assets	(1,372		)	—
Other investments	(975		)	—
Gross deferred tax liabilities	(22,862		)	(12,286		)
Deferred tax assets, net	$	15,878		$	22,116

At each reporting date, the Company evaluates the positive and negative evidence used to determine the likelihood of realization of its deferred tax assets. The Company maintained a valuation allowance in the amount of $6.8 million and $8.4 million at December 31, 2019 and 2018, respectively, relating to deferred tax assets on items of a capital nature as well as certain state deferred tax assets.

As of December 31, 2019, the Company had net operating loss carry-forwards for federal income tax purposes represented by an $8.5 million deferred tax asset. The related federal net operating loss carry-forwards are scheduled to begin to expire in the year 2031. As of December 31, 2019, the Company had state net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a $5.2 million deferred tax asset. The state net operating loss carry-forwards are scheduled to begin to expire in 2020.

Internal Revenue Code Section 382 ("Section 382") limits tax deductions for net operating losses, capital losses and net unrealized built-in losses after there is a substantial change in ownership in a corporation’s stock involving a 50 percentage point increase in ownership by 5% or larger stockholders. At December 31, 2019, the Company had pre-change losses represented by deferred tax assets totaling $10.6 million that are subject to Section 382 limits. The utilization of these assets is subject to an annual limitation of $1.1 million.

Activity in unrecognized tax benefits were as follows:

	Years Ended December 31,
(in thousands)	2019		2018		2017
Balance, beginning of year	$	—	$	—	$	—
Decrease related to tax positions taken in prior years	—		—		—
Increase related to positions taken in the current year	1,172		—		—
Balance, end of year	$	1,172	$	—	$	—

 If recognized, $0.9 million of the $1.2 million gross unrecognized tax benefit balance would favorably impact the Company’s effective income tax rate. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next 12 months.

The Company recognizes interest and penalties related to income tax matters within income tax expense. The Company recorded no interest or penalties related to unrecognized tax benefits at December 31, 2019, 2018 and 2017.

The earliest federal tax year that remains open for examination is 2016. The earliest open years in the Company’s major state tax jurisdictions are 2010 for Connecticut and 2016 for all of the Company's remaining state tax jurisdictions.