|9 Months Ended|
Sep. 30, 2018
|Income Tax Disclosure [Abstract]|
NOTE 10. INCOME TAXES
The Company’s effective tax rate for the three months ended September 30, 2018 and 2017 was (2.4)% and 27.6%, respectively. The Company’s effective tax rate for the nine months ended September 30, 2018 and 2017 was (2.1)% and (20.2)%, respectively. For the three and nine months ended September 30, 2018 and 2017, the Company calculated income tax expense based upon an annual effective tax rate forecast adjusted for discrete items that specifically relate to the interim period. Changes in tax laws or rates on deferred tax assets and liabilities are recognized as discrete items in the interim period that includes the enactment date.
The Company’s effective tax rate for the three and nine months ended September 30, 2018 was primarily based on the Company’s recognition of a deferred tax liability as of March 31, June 30, and September 30, 2018. The deferred tax liability is related to goodwill, which was assigned an indefinite life for book purposes, also known as a “naked credit” in the amount of $1,120, $1,007, and $1,128 as of March 31, June 30, and September 30, 2018, respectively.
On December 22, 2017, new legislation was signed into law, informally titled the Tax Cuts and Jobs Act, which included, among other things, a provision to reduce the federal corporate income tax rate to 21%. Under ASC 740, Accounting for Income Taxes, the enactment of the Tax Act also requires companies, to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. There is no further change to its assertion on maintaining a full valuation allowance against its U.S. deferred tax assets. The Company’s gross deferred tax assets have been revalued from 34% to 21% with a corresponding offset to the valuation allowance. Any potential other taxes arising due to the Tax Act will result in reductions to its net operating loss carryforward and valuation allowance. The reduction of the corporate tax rate resulted in a write-down of the gross deferred tax asset of approximately $4,700, and a corresponding write-down of the valuation allowance. Upon completion of the 2018 U.S. income tax return the Company may identify additional remeasurement adjustments to the deferred tax liability. The Company will continue to assess its provision for income taxes as future guidance is issued but does not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118.
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://fasb.org/us-gaap/role/ref/legacyRef