SEACOR Holdings Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2017



8.	INCOME TAXES

Income (loss) before income tax expense (benefit) and equity in earnings (losses) of 50% or less owned companies derived from U.S. and foreign companies for the years ended December 31 were as follows (in thousands):



	2017		2016			2015
United States	$	28,546	$	(93,145	)	$	(1,785	)
Foreign	4,748		(1,105		)	(934		)
Eliminations and other	1,911		2,014			968
	$	35,205	$	(92,236	)	$	(1,751	)

As of December 31, 2017, cumulative undistributed net losses of foreign subsidiaries included in the Company’s consolidated retained earnings were $87.8 million.

The Company files a consolidated U.S. federal tax return. The components of income tax expense (benefit) for the years ended December 31 were as follows (in thousands):



	2017			2016			2015
Current:
State	$	1,136		$	4,830		$	1,772
Federal	(17,181		)	6,998			19,518
Foreign	333			379			63
	(15,712		)	12,207			21,353
Deferred:
State	12			(2,280		)	(1,674		)
Federal	(51,489		)	(46,652		)	(19,429		)
	(51,477		)	(48,932		)	(21,103		)
	$	(67,189	)	$	(36,725	)	$	250

The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax rate for the years ended December 31:



	2017		2016		2015
Statutory rate	35.0	%	35.0	%	35.0	%
Income subject to tonnage tax	(5.9	)%	—	%	—	%
Dorian distribution	22.8	%	—	%	—	%
Reversal of uncertain tax position	(28.7	)%	—	%	—	%
U.S. federal income tax statutory changes	(190.2	)%	—	%	—	%
Non-deductible expenses	0.8	%	1.0	%	8.2	%
Noncontrolling interests	(22.4	)%	6.3	%	11.4	%
Losses of foreign subsidiaries not benefited	(6.6	)%	(1.4	)%	(92.8	)%
State taxes	1.2	%	(0.9	)%	29.9	%
Share award plans	2.0	%	—	%	(5.5	)%
Other	1.1	%	(0.2	)%	(0.5	)%
	(190.9	)%	39.8	%	(14.3	)%

On December 22, 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%, eliminating or capping certain deductions, imposing a mandatory one-time tax on accumulated earnings in foreign subsidiaries, introducing new tax regimes and changing how foreign earnings are subject to U.S. taxation. The statutory corporate tax rate reduction is effective for tax years beginning on or after January 1, 2018. During the fourth quarter, the Company recorded a net income tax benefit of $66.9 million as a consequence of reducing its net deferred tax liabilities to reflect the change in the statutory tax rate.

The Company records an additional income tax benefit or expense based on the difference between the fair market value of share awards at the time of grant and the fair market value at the time of vesting or exercise. For the years ended December 31, 2016 and 2015, an additional net income tax expense was recorded in stockholders’ equity of $2.3 million and $0.1 million, respectively.

During the year ended December 31, 2013, the Company provided for income taxes of $10.1 million relating to potential tax exposures surrounding the spin-off of Era Group Inc. (“Era Group”) by means of a dividend to SEACOR’s shareholders of all the issued and outstanding common stock of Era Group (the “Era Spin-off”). During the year ended December 31, 2017, the Company reversed this provision as the statute of limitations expired. In addition, the Company reversed accumulated accrued interest of $2.0 million related to this provision, included as a reduction in interest expense in the accompanying consolidated statements of income (loss).

The components of the net deferred income tax liabilities for the years ended December 31 were as follows (in thousands):



	2017			2016
Deferred tax liabilities:
Property and equipment	$	92,127		$	153,214
Long-term debt	22,519			44,782
Unremitted earnings of foreign subsidiaries	—			179
Investments in 50% or less owned companies	811			1,346
Intangible assets	1,006			1,908
Other	96			138
Total deferred tax liabilities	116,559			201,567
Deferred tax assets:
Share award plans	3,476			7,952
Losses on marketable securities	5,986			17,758
Deductible goodwill	312			1,611
Debt and equity issuance costs	406			7,638
Other	11,652			12,767
Total deferred tax assets	21,832			47,726
Valuation allowance	(6,695		)	(3,600		)
Net deferred tax assets	15,137			44,126
Net deferred tax liabilities	$	101,422		$	157,441

During the year ended December 31, 2017, the Company increased its valuation allowance for state net operating loss carryforwards from $3.6 million to $6.7 million.