Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
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,
2022 2021 2020
United States $ 143,815  $ 193,147  $ 62,206 
Foreign (1,786) 156  (2,842)
$ 142,029  $ 193,303  $ 59,364 
The provision for income taxes consisted of the following (in thousands):
Years Ended December 31,
2022 2021 2020
Federal:
Current $ 34,968  $ 48,785  $ 12,437 
Deferred (4,973) (9,600) 310 
29,995  39,185  12,747 
State:
Current 8,857  13,903  3,616 
Deferred (1,100) (2,243) 163 
7,757  11,660  3,779 
Foreign:
Current —  —  — 
Deferred 52  (12) — 
52  (12) — 
$ 37,804  $ 50,833  $ 16,526 
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
December 31,
2022 2021
Deferred Tax Assets:    
Accrued expenses and bonuses $ 6,406  $ 6,822 
Bad debt and other reserves 9,655  6,989 
Deferred compensation 21,018  18,287 
Operating lease ROU assets, net 20,798  20,937 
Stock-based compensation 7,273  7,031 
Net operating and capital loss carryforwards 3,835  3,769 
State taxes —  92 
Other comprehensive income (loss) 1,676  — 
Amortizable intangibles and other 2,221  1,577 
Deferred tax assets before valuation allowance 72,882  65,504 
Valuation allowance (4,935) (4,599)
Deferred Tax Assets 67,947  60,905 
Deferred Tax Liabilities:    
Fixed assets (5,715) (6,552)
Operating lease liabilities (18,523) (18,697)
Prepaid expenses (1,180) (1,513)
State taxes (472) — 
Other comprehensive income (loss) —  (195)
Goodwill and other (736) (212)
Deferred Tax Liabilities (26,626) (27,169)
Deferred Tax Assets, Net $ 41,321  $ 33,736 
As of December 31, 2022, and 2021, the Company had state and Canadian net operating loss carryforwards of approximately $14.2 million and $14.7 million, respectively, principally all of which will begin to expire in 2035.
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 as appropriate, depending on jurisdiction, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. The Company determined that as of December 31, 2022 and 2021, $4.9 million and $4.6 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 $337,000, $179,000 and $497,000 during 2022, 2021 and 2020, 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,
2022 2021 2020
Amount
Rate
Amount
Rate
Amount
Rate
Income tax expense at the federal statutory rate $ 29,826  21.0  % $ 40,594  21.0  % $ 12,466  21.0  %
State income tax expense, net of federal benefit 6,127  4.3  % 9,210  4.8  % 2,983  5.0  %
(Windfall) shortfall tax benefits, net related to stock-based compensation (2,714) (1.9) % (555) (0.3) % 240  0.4  %
Change in valuation allowance 337  0.2  % 179  0.1  % 497  0.8  %
Permanent and other items (1)
4,228  3.0  % 1,405  0.7  % 340  0.6  %
  $ 37,804  26.6  % $ 50,833  26.3  % $ 16,526  27.8  %
(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,
2022 2021 2020
Beginning balance $ 304  $ 55  $ 775 
Gross increases/ (decreases) as a result of positions taken:      
Prior periods (304) 1  — 
Current period —  304  — 
Expiration of applicable statutes of limitation —  (56) (720)
Ending balance $ —  $ 304  $ 55 
Unrecognized tax benefits balance decreased by $304,000 due to the reversal of a prior year uncertain tax position. The Company records interest and penalties related to unrecognized tax benefit in provision of income taxes. As of December 31, 2022 and 2021, the Company has recorded $6,000 in the 2022 and 2021 years related to interest expense in provision of income taxes. During the years ended December 31, 2022 and 2021, penalties of $0 and $0, 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 2018 to 2022. The
Company is currently under income tax examination by the state of Illinois, and the audit by the state of New York is closed without any assessment. 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.