Income Taxes

The U.S. Tax Cuts and Jobs Act ("TCJA") was signed into law on December 22, 2017. The TCJA significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35 percent to 21 percent, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The TCJA also enhanced and extended the option to claim accelerated depreciation deductions by allowing full expensing of qualified property, primarily equipment, through 2022. The Company reasonably estimated the effects of the TCJA and recorded provisional amounts in its financial statements as of December 31, 2017. In 2017, the Company recorded a provisional tax benefit for the impact of the TCJA of approximately $31.4 million. This amount was primarily comprised of the re-measurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21 percent from 35 percent, after taking into account the mandatory one-time tax on the accumulated earnings of our foreign subsidiaries. The amount of this one-time tax was not material. In 2018, the Company recorded an additional $3.0 million tax benefit and completed its determination of the accounting implications of the TCJA.

The provision for income taxes consists of the following (in thousands):



	Year Ended December 31,
	2018			2017			2016
Current:
Federal	$	20,550		$	33,623		$	38,103
State	10,617			7,717			6,685
Foreign	3,896			2,725			2,672
	35,063			44,065			47,460
Deferred:
Federal and State	11,471			(4,726		)	13,169
Foreign	(343		)	(120		)	(426		)
	11,128			(4,846		)	12,743
	$	46,191		$	39,219		$	60,203

Income from continuing operations before income taxes consists of the following (in thousands):



	Year Ended December 31,
	2018		2017		2016
United States	$	190,688	$	184,168	$	148,402
Foreign	13,487		12,925		8,997
	$	204,175	$	197,093	$	157,399

The components of deferred tax assets (liabilities) are as follows (in thousands):



	December 31,
	2018			2017
Intangibles	$	(90,834	)	$	(73,921	)
Depreciation expense	(14,983		)	(9,851		)
Allowance for doubtful accounts	1,600			2,615
Employee-related accruals	9,608			2,616
Stock-based compensation	9,506			4,766
Other	5,270			4,339
Net operating loss carryforwards–foreign	999			1,255
Valuation allowance	(999		)	(1,255		)
	$	(79,833	)	$	(69,436	)

The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of 21 percent in 2018 and 35 percent in 2017 and 2016 to income before income taxes, for each respective year, and the income tax provision is as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Income tax provision at the statutory rate	$	42,877		$	68,983		$	55,089
State income taxes, net of federal benefit	9,432			6,751			4,873
Disallowed meals and entertainment expenses	1,591			1,854			1,814
Excess stock-based compensation benefit	(2,193		)	(4,241		)	(165		)
Work opportunity tax credit	(3,081		)	(1,950		)	(1,463		)
Impact of TCJA	(2,992		)	(31,420		)	—
Other	557			(758		)	55
	$	46,191		$	39,219		$	60,203

As of December 31, 2018, the Company had no federal net operating losses, no state net operating losses, and $1.0 million of foreign net operating losses which begin to expire in 2021. The foreign net operating losses in the United Kingdom and Spain can be carried forward indefinitely. The Company has recorded a valuation allowance of approximately $1.0 million and $1.2 million at December 31, 2018 and 2017, related to net operating loss carryforwards.

The Company has not provided deferred income taxes on undistributed earnings and basis differences of its foreign subsidiaries as it intends to reinvest these earnings indefinitely. At December 31, 2018, undistributed earnings of foreign subsidiaries were $15.5 million. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to state income and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax liability is not practicable due to the complexities associated with this hypothetical calculation. The Company will remit non-indefinitely reinvested earnings where excess cash has accumulated and the Company determines that it is advantageous for business operations, tax or cash management reasons.

The Company had gross deferred tax assets of $32.5 million and $18.6 million and gross deferred tax liabilities of $111.3 million and $86.8 million at December 31, 2018 and 2017, respectively. Management has determined the gross deferred tax assets are realizable, with the exception of foreign net operating losses discussed above.

At December 31, 2018, 2017 and 2016, there were $0.4 million, $0.4 million and $1.3 million of unrecognized tax benefits, respectively, that if recognized would affect the annual effective tax rate. The gross unrecognized tax benefits are included in other long-term liabilities. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The amount of interest and penalties recognized in the financial statements is not significant. The Company believes that there will be no significant decrease in unrecognized tax benefits by the end of 2019. The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):



	Year Ended December 31,
	2018			2017			2016
Unrecognized tax benefit beginning of year	$	430		$	1,293		$	814
Gross increases - tax positions in current year	20			71			—
Gross increases - tax positions in prior year	69			—			479
Gross decreases - tax positions in prior year	—			(254		)	—
Lapse of the statute of limitations	(130		)	(680		)	—
Unrecognized tax benefit end of year	$	389		$	430		$	1,293

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The IRS has completed an examination of the Company's U.S. income tax return for 2014, resulting in no changes. The Company remains subject to U.S. federal income tax examinations for 2015 and subsequent years. For major U.S. states, with few exceptions, and generally for the foreign tax jurisdictions, the Company remains subject to examination for 2014 and subsequent years.