INCOME TAXES

Income taxes attributable to continuing operations consist of the following (amounts in millions):



	For the Years Ended December 31,
	2018		2017			2016
Current income tax expense/(benefit):
Federal	$	16.4	$	(2.0	)	$	(0.5	)
State and local	2.1		(0.1		)	(0.1		)
	18.5		(2.1		)	(0.6		)
Deferred income tax expense/(benefit):
Federal	14.5		51.2			22.1
State and local	5.8		1.0			2.4
	20.3		52.2			24.5
Income tax expense	$	38.8	$	50.1		$	23.9

Total income tax expense for the years ended December 31, 2018, 2017 and 2016 was allocated as follows (amounts in millions):



	For the Years Ended December 31,
	2018		2017			2016
Income from continuing operations	$	38.8	$	50.1		$	23.9
Interest expense	0.1		—			(0.1		)
Stockholders’ equity	—		(0.3		)	(7.2		)
	$	38.9	$	49.8		$	16.6

A reconciliation of significant differences between the reported amount of income tax expense and the expected amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of 21 percent in 2018 and 35 percent in 2017 and 2016 to income before taxes is as follows:



	For the Years Ended December 31,
	2018		2017		2016
Income tax expense at U.S. federal statutory rate (1)	21.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	4.8		3.8		4.8
Excess tax benefits from share-based compensation (2)	(1.6	)	(3.5	)	—
Tax rate change (3)	—		26.5		—
Other items, net (4)	0.2		0.2		(0.9	)
Income tax expense/(benefit)	24.4	%	62.0	%	38.9	%


(1)	On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act was enacted, which eliminated the progressive U.S. federal corporate tax rate structure with a maximum corporate tax rate of 35% and replaced it with a flat tax rate of 21%, effective January 1, 2018.

(2)

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplified the accounting for share-based payment award transactions, including income tax consequences. The new guidelines required excess tax benefits and tax deficiencies to be recorded in the income statement when stock awards vest or are settled. As a result, the Company recognized a $2.5 million and $2.9 million federal income tax benefit in the consolidated statement of operations (rather than additional paid-in capital) for the years ended December 31, 2018 and December 31, 2017, respectively, from share-based compensation excess tax benefits.

(3)

According to Accounting Standard Codification ("ASC") 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate, pursuant to the Tax Cuts and Jobs Act, resulted in a $21.4 million deferred income tax expense during the three-month period ended December 31, 2017.


(4)	Includes various items such as, non-deductible expenses, non-taxable income, tax credits, valuation allowance, uncertain tax positions and return-to-accrual adjustments.

As of December 31, 2018 and 2017, the Company had income taxes receivable of $1.6 million and $3.4 million, respectively, included in other current assets. The income tax receivable at December 31, 2017 includes a $2.3 million Alternative Minimum Tax ("AMT") credit carryforward. The Tax Cuts and Jobs Act repealed the AMT for corporations and made it refundable in years 2018 through 2020. As a result, the company utilized its AMT credit carryforward to reduce taxable income in 2018. The AMT credit carryforward was reclassified from deferred income taxes to other current assets as of December 31, 2017.

Deferred tax assets (liabilities) consist of the following components (amounts in millions):



	As of December 31,
	2018			2017 (1)
Deferred tax assets:
Allowance for doubtful accounts	$	5.6		$	5.3
Accrued payroll & employee benefits	11.2			9.0
Workers’ compensation	8.3			7.9
Amortization of intangible assets	14.7			26.0
Share-based compensation	6.9			6.1
Net operating loss carryforwards (2)	5.9			20.1
Tax credit carryforwards (3)	2.8			4.6
Other	2.9			2.4
Gross deferred tax assets	58.3			81.4
Less: valuation allowance	(0.7		)	(0.7		)
Net deferred tax assets	57.6			80.7
Deferred tax (liabilities):
Property and equipment	(4.4		)	(4.0		)
Deferred revenue	(13.5		)	(18.0		)
Investment in partnerships	(3.1		)	(2.1		)
Other liabilities	(0.8		)	(0.5		)
Gross deferred tax liabilities	(21.8		)	(24.6		)
Net deferred tax assets (liabilities)	$	35.8		$	56.1

(1)

According to ASC 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate, pursuant to the Tax Cuts and Jobs Act, resulted in a $21.4 million deferred income tax expense during the three-month period ended December 31, 2017.

(2)

According to ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to settle taxes that would result from the disallowance of the tax position. Otherwise, to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional incomes taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is presented in the financial statements as a liability and is not combined with deferred tax assets. As of December 31, 2017, the net operating loss (“NOL”) carryforwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the NOL carryforwards, as of December 31, 2017, were presented net of unrecognized tax benefits of $2.1 million. As of December 31, 2018, however, the unrecognized tax benefits of $2.1 million were reclassified to other long-term obligations, since the Company utilized its remaining federal NOL carryforward and much of its remaining state NOL carryforwards in 2018.

(3)

According to ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to settle taxes that would result from the disallowance of the tax position. Otherwise, to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional incomes taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is presented in the financial statements as a liability and is not combined with deferred tax assets. As of December 31, 2017, the tax credit carryforwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the tax credit carryforwards, as of December 31, 2017, were presented net of unrecognized tax benefits of $0.7 million. As of December 31, 2018, however, the unrecognized tax benefits of $0.7 million were reclassified to other long-term obligations, since the Company utilized its remaining federal tax credit carryforwards in 2018.

The Company utilized its remaining U.S. NOL carryforwards, research and development tax credits and employment tax credits and approximately half of its remaining state NOL carryforwards and tax credits in 2018. As of December 31, 2018, we have state NOL carryforwards of $118.8 million that are available to reduce future taxable income and $3.6 million of various state tax credits available to reduce future state income taxes. The state NOL and tax credit carryforwards begin to expire at various times.

The valuation allowance for deferred tax assets which is primarily related to certain state NOLs and state tax credit carryforwards was $0.7 million as of December 31, 2018, unchanged from the year ended December 31, 2017. The net change in the total valuation allowance for the year ended December 31, 2017 was an increase of $0.3 million.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those jurisdictions during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income before the expiration of the carryforwards governed by the tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of future taxable income needed to support the realization of the deferred tax assets. As a result, as of December 31, 2018, management believes that it is more likely than not that we will realize the benefits of these deferred tax assets, net of the existing valuation allowances. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

Uncertain Tax Positions

We account for uncertain tax positions in accordance with the authoritative guidance for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in millions):



	For the Years Ended December 31,
	2018		2017
Balance at beginning of period	$	2.7	$	4.1
Additions for tax positions related to current year	—		—
Additions for tax positions related to prior year	—		—
Reductions for tax positions related to prior years	—		—
Lapse of statute of limitations	—		(0.3		)
Change in statutory tax rate (1)	—		(1.1		)
Settlements	—		—
Balance at end of period	$	2.7	$	2.7

(1) The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate as a result of the recent tax reform resulted in a $1.1 million reduction in its uncertain tax positions recorded in net deferred tax assets at December 31, 2017.

According to ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to settle taxes that would result from the disallowance of the tax position. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional incomes taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is presented in the financial statements as a liability and is not combined with deferred tax assets. As of December 31, 2018, the Company no longer has a federal net operating loss nor tax credit carryforwards available to settle taxes that would result from the disallowance of its uncertain tax positions; therefore, the Company reclassified the unrecognized tax benefits of $2.7 million from deferred income taxes to other long-term obligations as of December 31, 2018, that if recognized in future periods, would impact our effective tax rate.

We are subject to income taxes in the U.S. and in many of the 50 individual states, with significant operations in Louisiana, Alabama, Georgia, Massachusetts and Tennessee. We are open to examination in the U.S. and in various individual states for tax years ended December 31, 2014 through December 31, 2018. We are also open to examination in various states for the years ended 2004 – 2018 resulting from net operating losses generated and available for carryforward from those years.