Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income from continuing operations before (benefit) provision for income taxes consisted of the following (in thousands):
Years Ended December 31,
2023 2022 2021
United States $ (39,708) $ 143,815  $ 193,147 
Foreign (693) (1,786) 156 
$ (40,401) $ 142,029  $ 193,303 
The (benefit) provision for income taxes consisted of the following (in thousands):
Years Ended December 31,
2023 2022 2021
Federal:
Current $ (220) $ 34,968  $ 48,785 
Deferred (5,342) (4,973) (9,600)
(5,562) 29,995  39,185 
State:
Current 277  8,857  13,903 
Deferred (1,087) (1,100) (2,243)
(810) 7,757  11,660 
Foreign:
Current —  —  — 
Deferred 6  52  (12)
6  52  (12)
$ (6,366) $ 37,804  $ 50,833 
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
December 31,
2023 2022
Deferred Tax Assets:    
Accrued expenses and bonuses $ 3,201  $ 6,406 
Advances and loans and other reserves 12,612  9,655 
Deferred compensation and commissions 17,764  21,018 
Operating lease ROU assets, net 23,359  20,798 
Stock-based compensation 7,106  7,273 
Net operating and capital loss carryforwards 13,664  3,835 
Other comprehensive income 580  1,676 
Amortizable intangibles and other 2,687  2,221 
Deferred tax assets before valuation allowance 80,973  72,882 
Valuation allowance (5,296) (4,935)
Deferred Tax Assets 75,677  67,947 
Deferred Tax Liabilities:    
Property and equipment (4,366) (5,715)
Operating lease liabilities (20,781) (18,523)
Prepaid expenses (841) (1,180)
State taxes (1,385) (472)
Goodwill and other (1,374) (736)
Deferred Tax Liabilities (28,747) (26,626)
Deferred Tax Assets, Net $ 46,930  $ 41,321 
As of December 31, 2023, the Company had $7.8 million of net operating loss carryforwards, which are available to reduce future federal income taxes, and have no expiration date. Under the Coronavirus Aid Relief and Economic Security Act (CARES Act) and Tax Cuts and Jobs Act (2017 Tax Act), federal NOLs incurred after December 31,2017 carried forward indefinitely and can offset up to 80% of future taxable income for tax years after December 31, 2020. State NOLs of $1.7 million is also available to reduce future state income taxes and will expire between 2034 and 2044. As of December 31, 2023, and 2022, the Company had Canadian net operating loss carryforwards of approximately $4.2 million and $3.8 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, 2023 and 2022, $5.3 million and $4.9 million, respectively, of the deferred tax assets related to 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 $361,000, $337,000 and $179,000 during 2023, 2022 and 2021, respectively. The increases are primarily related to the Company’s Canadian operations.
The (benefit) provision for income taxes differs from the amount computed by applying the U.S. federal statutory rate to income before provision for income taxes and consisted of the following (dollars in thousands):
Years Ended December 31,
2023 2022 2021
Amount Rate Amount Rate Amount Rate
Income tax (benefit) expense at the federal statutory rate $ (8,484) 21.0  % $ 29,826  21.0  % $ 40,594  21.0  %
State income tax (benefit) expense, net of federal benefit (602) 1.5  % 6,127  4.3  % 9,210  4.8  %
Shortfall (windfall) tax benefits, net related to stock-based compensation 1,260  (3.1) % (2,714) (1.9) % (555) (0.3) %
Change in valuation allowance 388  (0.9) % 337  0.2  % 179  0.1  %
Permanent and other items (1)
1,072  (2.7) % 4,228  3.0  % 1,405  0.7  %
$ (6,366) 15.8  % $ 37,804  26.6  % $ 50,833  26.3  %
(1)
Permanent items relate principally to compensation charges, qualified transportation fringe benefits, meals and entertainment, and other items.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits consisted of the following (in thousands):
Years Ended December 31,
2023 2022 2021
Beginning balance $ —  $ 304  $ 55 
Gross increases/ (decreases) as a result of positions taken:      
Prior periods —  (304) 1 
Current period —  —  304 
Expiration of applicable statutes of limitation —  —  (56)
Ending balance $ —  $ —  $ 304 
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2023, and 2022.
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 2019 to 2023. The Company is currently under income tax examination by the state of Illinois, and the examination by the state of New York was 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.