Note 12—Income Taxes

Provision for Income Taxes

The Company is a limited liability company that has elected to be taxed as a corporation for income tax purposes.  All of our business activities, with the exception of our foreign investments and managing member interests in two remaining LIHTC Funds, are conducted by entities included in our consolidated corporate federal income tax return.    

The following table summarizes the components of our provision for income taxes for the years ended December 31, 2017, 2016 and 2015:





The following table reflects the effective income tax reconciliation from continuing operations for the years ended December 31, 2017, 2016 and 2015:





DTAs and DTLs

We recognize DTAs and DTLs for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under GAAP and their respective tax bases.

We evaluate our DTAs for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including our historical profitability and projections of future taxable income.

At December 31, 2017, we continued to conclude that the negative evidence in favor of non-recoverability of our DTAs outweighed the positive evidence and that it is not more likely than not that our DTAs will be realized.  Our framework for assessing the recoverability of DTAs requires us to weigh all available evidence, including, but not limited to:









The following table summarizes the carrying value of our DTAs, net of valuation allowance at December 31, 2017 and 2016:







The following table summarizes the change in the valuation allowance for the years ended December 31, 2017 and 2016:





At December 31, 2017 and 2016, the Company determined that it was not more likely than not that its deferred tax assets would be fully realized and, therefore, the Company recorded a deferred tax asset valuation allowance of $140.0 million and $203.8 million, respectively.  The Company considered information such as forecasted earnings, future taxable income and tax planning strategies in measuring the required valuation allowance.  The Company will continue to assess whether the deferred tax assets are realizable and will adjust the valuation allowance as needed.

For the tax year ending December 31, 2017 and 2016, the Company had income taxes payable (net of current taxes receivable) of $0.1 million and $0.3 million, respectively, reported through “Accounts payable and accrued expenses.” 

At December 31, 2017 and 2016, the Company had pre-tax federal NOLs of $378.9 million and $400.9 million, respectively, which are available to reduce future federal income taxes and begin to expire in 2027.    

On December 22, 2017, Public Law No. 115-97 (the “Tax Act”) was signed into law.  The Tax Act introduced significant changes to the Internal Revenue Code.

The Tax Act, among other things, contains significant changes to corporate taxation, including a reduction of the corporate tax rate from 35% to 21%.  In addition, any federal NOL arising in taxable years beginning after December 31, 2017 will be carried forward indefinitely pursuant to the Tax Act, though those losses will also be limited to 80% of taxable income in the year they are utilized.  There is no change to the carryforward limitations on federal NOL generated in periods ending prior to January 1, 2018 which represents the entirety of our NOL carryforward. 

Pursuant to the change in corporate tax rate from 35% to 21% for years during which the deferred tax assets will be realized, the Company reduced its deferred tax assets and related valuation allowance by approximately $54 million at December 31, 2017.  Due to the full valuation allowance, this did not impact our overall deferred tax asset position.  In accordance with SEC Staff Accounting Bulletin No. 118, the Company believes it has completed its accounting for the income tax effects of the Tax Act, including reasonable estimates where appropriate.  We continue to examine the impact the Tax Act may have on our business.  The overall impact of the Tax Act is uncertain and our business and financial condition could be adversely affected. 

Significant judgment is required in determining and evaluating income tax positions.  The Company establishes additional provisions for income taxes when there are certain tax positions that could be challenged and that may not be supportable upon review by taxing authorities.  At December 31, 2017, 2016 and 2015, the Company had a liability for uncertain tax positions of $0 million, $0.8 million and $0.8 million, respectively, including potential interest and penalties of $0 million, $0.4 million and $0.4 million, respectively, should the Company’s tax position not be sustained by the applicable reviewing authority.  This liability is reported in “Other liabilities” in the consolidated balance sheets.  The changes to tax positions that only affect timing are comprised of temporary differences that, if recognized, would increase the amount of the NOL carryforwards and would be subject to the Company’s full valuation allowance; therefore, a liability is not recorded for these uncertain tax positions.  A reconciliation of the beginning and ending amount for uncertain tax positions, including amounts that only affect timing, is as follows:





The impact of the uncertain tax positions that only affect timing on the carrying amount of the NOL carryforwards in 2018 will decrease by approximately $0.6 million as a result of the decrease in the federal tax rate under the new tax law.