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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For the year ended December 31, 2020, we recorded income tax expense of $38.4 million. The tax provision for the year ended December 31, 2020 includes tax expense of $51.3 million relating to the MyCase Transaction which includes $52.3 million of current tax expense on the gain on the sale of MyCase, less a $1.0 million benefit on the reversal of deferred tax liabilities relating to MyCase. For tax purposes, we plan to file an election to treat the transaction as a sale of assets. As such, the tax impact takes into consideration the tax basis of the assets on the date of sale and the availability of net operating losses and research and development tax credits. The effective tax rate as compared to the U.S. federal statutory rate of 21% differs primarily due to state income taxes and the benefits associated with stock-based compensation expense and research and development tax credits. Set forth below is a reconciliation of the components that caused our provision for income taxes to differ from amounts computed by applying the United States federal statutory rate for the years ended December 31, 2020, 2019, and 2018:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
U.S. federal statutory income tax rate | 21 | % |  | 21 | % |  | 21 | %
State and local income taxes, net of federal benefit | 3 |  |  | (53) |  |  | (3) |
Stock-based compensation expense | (3) |  |  | (88) |  |  | (7) |
Meals and entertainment | — |  |  | 7 |  |  | 1 |
Change in valuation allowance | — |  |  | (475) |  |  | (1) |
Other permanent differences | 1 |  |  | — |  |  | — |
Research and development tax credits | (2) |  |  | (64) |  |  | (9) |
Provision for (benefit from) income taxes | 20 | % |  | (652) | % |  | 2 | %
The provision for (benefit from) income tax consists of the following (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Current |  |  |  |  |
Federal | $ | 3,982 |  |  | $ | — |  |  | $ | — |
State and local | 5,444 |  |  | (15) |  |  | 339 |
Total current | 9,426 |  |  | (15) |  |  | 339 |
Deferred |  |  |  |  |
Federal | 27,982 |  |  | (18,761) |  |  | 65 |
State and local | 1,020 |  |  | (12,683) |  |  | 16 |
Total deferred | 29,002 |  |  | (31,444) |  |  | 81 |
Total income tax provision (benefit) | $ | 38,428 |  |  | $ | (31,459) |  |  | $ | 420 |
The components of deferred tax assets (liabilities) were as follows (in thousands):
| December 31,
| 2020 |  | 2019
Deferred income tax assets: |  |  |
Net operating loss carryforwards | $ | 4,112 |  |  | $ | 22,525 |
Research and development tax credits | 9,467 |  |  | 17,700 |
Stock-based compensation | 2,783 |  |  | 2,895 |
Lease asset | 9,992 |  |  | 8,291 |
Other | 2,196 |  |  | 1,692 |
Total deferred tax assets | 28,550 |  |  | 53,103 |
Deferred tax liabilities: |  |  |
Property, equipment and software | (13,412) |  |  | (7,965) |
Intangible assets | (2,693) |  |  | (3,767) |
Capitalized commissions | (2,708) |  |  | (2,492) |
State taxes | (2,350) |  |  | (2,563) |
Lease liability | (8,064) |  |  | (7,152) |
Other | (751) |  |  | (1,590) |
Total deferred tax liabilities | (29,978) |  |  | (25,529) |
Total net deferred tax (liabilities) assets | $ | (1,428) |  |  | $ | 27,574 |
At December 31, 2020, we had no federal net operating loss carryforwards. At December 31, 2020, we had state net operating loss carryforwards of $46.5 million, which will begin to expire in 2028. At December 31, 2020, we also had federal and state research and development credit carryforwards of $4.1 million and $11.5 million, respectively. The federal credit carryforwards will begin to expire in 2040, while the state credit carryforwards apply indefinitely. The Internal Revenue Code of 1986, as amended (“IRC”), imposes substantial restrictions on the utilization of tax attributes in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use pre-change tax attributes may be limited as prescribed under IRC Section 382. Events which may cause limitation in the amount of the tax attributes that we utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a rolling three-year period. We have undertaken an IRC Section 382 analysis and have determined that there are no limitations on the tax attributes at December 31, 2020. For the years ended December 31, 2019 and 2018, we recorded an income tax benefit of $31.5 million and income tax expense of $0.4 million. During the second quarter of 2019, we evaluated all available positive and negative evidence, including our sustained profitability in 2018 and 2019, the impact of recent acquisitions and future projections of profitability. As a result, we determined that all of our deferred tax assets were more likely than not to be realized and reversed the valuation allowance against those deferred tax assets accordingly. The change in the valuation allowance for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Valuation allowance, at beginning of year | $ | — |  |  | $ | 23,002 |  |  | $ | 23,827 |
Decrease in valuation allowance | — |  |  | (23,002) |  |  | (825) |
Valuation allowance, at end of year | $ | — |  |  | $ | — |  |  | $ | 23,002 |
The following is a reconciliation of the total amounts of reserves for unrecognized tax benefits from uncertain tax positions (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Unrecognized tax benefit beginning of year | $ | 4,421 |  |  | $ | 2,977 |  |  | $ | 2,105 |
Increases-tax positions in current year | 1,720 |  |  | 1,444 |  |  | 872 |
Unrecognized tax benefit end of year | $ | 6,141 |  |  | $ | 4,421 |  |  | $ | 2,977 |
The unrecognized tax benefits are recorded as a reduction to the deferred tax assets and liabilities. At December 31, 2020 and 2019, we had no accrued interest and penalties related to uncertain income tax positions. We do not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months. We are subject to taxation in the United States and various states. Due to the net operating loss carryforwards, our federal and state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. We are not currently under audit by any taxing authorities.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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