Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
12.
Income Taxes
The components of income from continuing operations before provision for income taxes consisted of the following (in thousands):

 
 
  
Years Ended December 31,
 
 
  
2021
 
  
2020
 
  
2019
 
United States
  
$

 193,147    
$

 62,206    
$

 112,425  
Foreign
  
 
 156    
 
 (2,842 )   
 
 (4,913 ) 
    
 
 
     
 
 
     
 
 
  
   
$

 193,303    
$

 59,364    
$
 107,512  
    
 
 
     
 
 
     
 
 
  
The provision for income taxes consisted of the following (in thousands):
 
    
Years Ended December 31,
  
    
2021
     
2020
     
2019
  
Federal:
                           
Current
    $ 48,785      $ 12,437      $ 22,638  
Deferred
      (9,600 )       310        665  
    
 
 
     
 
 
     
 
 
  
       39,185        12,747        23,303  
    
 
 
     
 
 
     
 
 
  
State:
                           
Current
      13,903        3,616        7,718  
Deferred
      (2,243 )       163        (507 ) 
    
 
 
     
 
 
     
 
 
  
       11,660        3,779        7,211  
    
 
 
     
 
 
     
 
 
  
Foreign:
                           
Current
      —          —          —    
Deferred
      (12 )       —          68  
    
 
 
     
 
 
     
 
 
  
       (12 )       —          68  
    
 
 
     
 
 
     
 
 
  
     $ 50,833      $ 16,526      $ 30,582  
    
 
 
     
 
 
     
 
 
  
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
 
    
December 31,
  
    
2021
     
2020
  
Deferred Tax Assets:
                  
Accrued expenses and bonuses
    $ 6,822      $ 3,078  
Bad debt and other reserves
      6,989        4,889  
Deferred compensation
      18,287        12,536  
Operating lease ROU assets, net
      20,937        21,125  
Stock-based compensation
      7,031        7,403  
Net operating and capital loss carryforwards
      3,769        3,932  
State taxes
      92        (163 ) 
Amortizable intangibles and other
      1,577        1,070  
    
 
 
     
 
 
  
Deferred tax assets before valuation allowance
      65,504        53,870  
Valuation allowance
      (4,599 )       (4,418 ) 
    
 
 
     
 
 
  
Deferred Tax Assets
      60,905        49,452  
    
 
 
     
 
 
  
Deferred Tax Liabilities:
                  
Fixed assets
      (6,552 )       (6,814 ) 
Operating lease liabilities
      (18,697 )       (19,357 ) 
Prepaid expenses
      (1,513 )       (533 ) 
Other comprehensive income
      (195 )       (800 ) 
Goodwill and other
      (212 )       (574 ) 
    
 
 
     
 
 
  
Deferred Tax Liabilities
      (27,169 )       (28,078 ) 
    
 
 
     
 
 
  
Deferred Tax Assets, Net
    $ 33,736      $ 21,374  
    
 
 
     
 
 
  
As of December 31, 2021, and 2020, the Company had state and Canadian net operating loss carryforwards of approximately $14.7 million and $15.4 million, respectively, principally all of which will begin to expire in 2033.
A valuation allowance is required when it is more-likely-than not that all or a portion of a deferred tax asset will not be realized. Realization of a deferred tax asset is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. The Company determined that as of December 31, 2021 and 2020, $4.6 million and $4.4 million, respectively, of the deferred tax assets related to state and Canadian losses do not satisfy the recognition criteria. The Company has therefore recorded a valuation allowance for this amount. The valuation allowance for deferred tax assets was increased by $179,000, $497,000 and $1.4 million during 2021, 2020 and 2019, respectively. The increases are primarily related to the Company’s Canadian operations.
 
The provision for income taxes differs from the amount computed by applying the statutory federal corporate income tax rate to income before provision for income taxes and consisted of the following (dollars in thousands):
 
 
 
Years Ended December 31,
 
 
 
2021
 
 
2020
 
 
2019
 
 
 
Amount
 
 
Rate
 
 
Amount
 
 
Rate
 
 
Amount
 
 
Rate
 
Income tax expense at the federal statutory rate
   $
40,594
       21.0 %    $ 12,466       21.0 %    $ 22,578       21.0 % 
State income tax expense, net of federal benefit
     9,210       4.8 %      2,983       5.0 %      5,698       5.3 % 
(Windfall) shortfall tax benefits, net related to stock-based compensation
     (555 )      (0.3 )%      240       0.4 %      (196 )      (0.2 )% 
Change in valuation allowance
     179       0.1 %      497       0.8 %      1,351       1.3 % 
Permanent and other items
(1)
     1,405       0.7 %      340       0.6 %      1,151       1.0 % 
    
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
  
    $ 50,833       26.3 %    $ 16,526       27.8 %    $ 30,582       28.4 % 
   
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
  
 
 
(1)
 
Permanent items relate principally to compensation charges, qualified transportation fringe benefits, reversal of uncertain tax positions and meals and entertainment.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits consisted of the following (in thousands):

 
 
  
Years Ended December 31,
 
 
  
2021
 
  
2020
 
  
2019
 
Beginning balance
    $ 55    
 
 $ 775    
 
$
1,246
  
Gross increase as a result of positions taken:
                         
Prior periods
      1       —         —    
Current period
      304       —         —    
Settlement with tax authorities
      —         —         —    
Expiration of applicable statutes of limitation
      (56 )      (720 )      (471 ) 
    
 
 
    
 
 
    
 
 
  
Ending balance
   
$
304
     $ 55     $ 775  
    
 
 
    
 
 
    
 
 
  
Unrecognized tax benefits balance decreased by $56,000 due to the expiration of the statute of limitations and increased by $304,000 due to the tax positions in the current period. Of the total amount of unrecognized tax benefit, if recognized, $0 would affect the effective tax rate. During the years ended December 31, 2021 and 2020, penalties of $0 and $13,000 respectively, were recorded relating to unrecognized tax benefits.
The Company is subject to tax in various jurisdictions and, as a matter of ordinary course, the Company may be subject to income tax examinations by the federal, state and foreign taxing authorities for the tax years 2017 to 2021. The Company is currently under income tax examination by the state of New York.
The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as this subsidiary is operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative translation adjustments.