|12 Months Ended|
Dec. 31, 2017
|Income Tax Disclosure [Abstract]|
The components of current and deferred federal and state income tax (benefit) expense for continuing operations for the years ended December 31, consisted of the following (in thousands):
An overall reconciliation between the expected tax benefit using the federal statutory rate of 34% and the benefit for income taxes from continuing operations as reported in the accompanying Consolidated Statement of Operations is provided below (in thousands).
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, the elimination of alternative minimum tax (“AMT”) for corporations and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. As of December 31, 2017, the Company has estimated its provision for income taxes in accordance with the Tax Act and guidance available resulting in the recognition of approximately $1,695,000 of income tax benefit in the fourth quarter of 2017, the period in which the legislation was enacted. The tax benefit of $1,695,000 consists of $916,000 related to the re-measurement of deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future and $779,000 related to the reversal of valuation allowance and refunding of AMT credit carryforwards.
While the Tax Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.
The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017.
The BEAT provisions in the Tax Act eliminates the deduction of certain base-erosion payments made to related foreign corporations, and imposes a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax and therefore has not included any tax impacts of BEAT in its consolidated financial statements for the year ended December 31, 2017.
The Tax Act imposes a one-time transition tax on previously untaxed earnings and profits of foreign subsidiaries. As of December 31, 2017, the Company has current and accumulated deficits in earnings and profits for all of its foreign subsidiaries. As such, the Company does not expect any exposure to the one-time transition tax.
The changes to existing U.S. tax laws as a result of the Tax Act, which the Company believes have the most significant impact on the Company’s federal income taxes are as follows:
Reduction of the U.S. Corporate Income Tax Rate
The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were re-measured to reflect the reduction in the U.S. corporate income tax rate from 34% to 21%, resulting in a deferred tax benefit of $916,000 for the year ended December 31, 2017 and a corresponding $916,000 decrease in net deferred tax liabilities as of December 31, 2017. This benefit is attributable to the Company being in a net deferred tax liability position at the time of re-measurement.
Repeal of Alternative Minimum Tax and Refund of existing AMT Credits
The Tax Act fully repeals the corporate alternative minimum tax beginning in 2018. Additionally, any AMT credits generated in prior years will be refundable between 2018 and 2021. The Company had AMT credits in the amount of $779,000 that it was carrying with a full valuation allowance. As a result of the Tax Act, the valuation allowance against these credits is reversed and the credits are reclassified from a deferred tax asset to current and long-term tax receivables.
The Company had temporary differences and net operating loss carry forwards from both our continuing and discontinued operations, which gave rise to deferred tax assets and liabilities at December 31, 2017 and 2016 as follows (in thousands):
In 2017 and 2016, the Company concluded that it was more likely than not that $10,259,000 and $12,528,000 of our deferred income tax assets would not be realized, and as such, a full valuation allowance was applied against those deferred income tax assets.
The Company has estimated net operating loss carryforwards (“NOLs”) for federal and state income tax purposes of approximately $10,099,000 and $57,956,000, respectively, as of December 31, 2017. The estimated consolidated federal and state NOLs include approximately $2,618,000 and $3,769,000, respectively, of our majority-owned subsidiary, PF Medical, which is not part of our consolidated group for tax purposes. These net operating losses can be carried forward and applied against future taxable income, if any, and expire in various amounts starting in 2021. However, as a result of various stock offerings and certain acquisitions, which in the aggregate constitute a change in control, the use of these NOLs will be limited under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended. Additionally, NOLs may be further limited under the provisions of Treasury Regulation 1.1502-21 regarding Separate Return Limitation Years.
The tax years 2014 through 2016 remain open to examination by taxing authorities in the jurisdictions in which the Company operates.
No uncertain tax positions were identified by the Company for the years currently open under statute of limitations, including 2017 and 2016.
The Company had no federal income tax payable for the years ended December 31, 2017 and 2016.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef