CJ 2017 Annual Report

rate reduction going from 35% to 21%. This rate reduction required the revaluation of the Company's deferred tax assets and liabilities as of the U.S. Tax Reform enactment date. The revaluation reflects an assumption that the new federal corporate income tax rate will remain in place for the years in which temporary differences are expected to reverse. The Company estimates that the reduction in the federal tax rate applicable to deferred tax balances will reduce the net deferred tax asset balance, before valuation allowance, by approximately $160.0 million, with a corresponding reduction in the recorded valuation allowance by approximately $162.3 million. As a result of the change in the federal income tax rate, the Company recorded an income tax benefit of approximately $2.3 million during the fourth quarter of 2017. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118"). SAB 118 provides the registrant with up to a one year period to finalize the accounting for the impacts of U.S. Tax Reform. During the one year period in which the initial accounting for U.S. Tax Reform impacts is incomplete, a registrant may include a provisional amount when reasonable estimates can be made or continue to apply the prior tax law if a reasonable estimate cannot be made. As discussed above, the Company has estimated the provisional tax impacts related to the corporate income tax rate reduction and the impact on its deferred tax assets and liabilities, after corresponding adjustments to the reported valuation allowance. The deferred tax assets and liabilities table below includes the adjustments from the revaluation of deferred tax balances to reflect the rate reduction for the year ended December 31, 2017. Before U.S. Tax Reform adjustments, the ending net deferred tax liability would have been $6.2 million compared to the reflected ending net deferred tax liability of $3.9 million as of December 31, 2017. The ultimate impact of remeasuring the deferred tax assets and liabilities may differ from the provisional amounts due to gathering additional information to more precisely compute the amount of tax, changes in interpretations and assumptions, additional regulatory guidance that may be issued, and actions the Company may take. The Company expects to finalize accounting for the impacts of U.S. Tax Reform when the 2017 U.S. corporate income tax return is filed in 2018. The provision for income taxes consisted of the following (in thousands): Successor Predecessor Year Ended December 31, On January 1, Years Ended December 31, 2017 2017 2016 2015 Current provision: Federal $ (8,475) $ — $ 2,047 $ (23,784) State (162) — (1,588) (2,265) Foreign 121 — 64 100 Total current provision (8,516) — 523 (25,949) Deferred (benefit) provision: Federal (28,950) (4,613) (122,302) (248,279) State (2,294) — (8,864) (20,553) Foreign — — 1,633 (4,312) Total deferred provision (31,244) (4,613) (129,533) (273,144) Provision for income taxes $ (39,760) $ (4,613) $ (129,010) $ (299,093) The following table reconciles the statutory tax rates to the Company’s effective tax rate: C&J ENERGY SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 98