

13.	INCOME TAXES

Provision For Income Taxes

The Company and its subsidiaries are based in the U.S. and file federal and various state income tax returns. The components of the provision for income taxes were as follows:



	Years Ended December 31,
	2019			2018		2017
Current tax expense	$	1,182		$	288	$	118
Deferred tax (benefit) expense	(27,398		)	1,450		—
Income tax (benefit) expense	$	(26,216	)	$	1,738	$	118

Due to the net operating loss carryforwards described below, the Company has not had current federal tax expense for any of the years presented. The Company has incurred current expense in states in which the Company does not have net operating loss carry forwards.

Effective Tax Rate

The items comprising the difference between income taxes computed at the U.S. federal statutory rates in effect for 2019, 2018 an 2017 and our effective tax rates were as follows:



	Years Ended December 31,
	2019					2018					2017
	Amount			%		Amount			%		Amount			%
Tax expense (recovery) at the U.S. federal statutory rate	$	3,041		21.0	%	$	6,568		21.0	%	$	5,577		35.0	%
State tax based on income, net of refunds and federal benefits	1,670			11.5		364			1.2		(264		)	(1.7	)
Taxes on subsidiaries’ and joint ventures’ earnings allocated to noncontrolling interests owners	(2,241		)	(15.5	)	(4,097		)	(13.1	)	(5,504		)	(34.5	)
Valuation allowance	(29,375		)	(202.9	)	(1,013		)	(3.3	)	(18,006		)	(113.0	)
Tax credits	(397		)	(2.7	)	(286		)	(0.9	)	(349		)	(2.2	)
Tax rate change	—			—		(281		)	(0.9	)	19,545			122.7
Return to provision	48			0.3		21			0.1		(62		)	(0.4	)
Earn-out liability	—			—		—			—		460			2.9
Equity compensation	805			5.6		26			0.1		(1,371		)	(8.6	)
Other permanent differences	233			1.6		436			1.4		92			0.6
Income tax (benefit) expense	$	(26,216	)	(181.1	)%	$	1,738		5.6	%	$	118		0.8	%

The decrease from the U.S. federal statutory rate in 2019 was primarily a result of the reversal of the valuation allowance on our net deferred tax assets. The 2018 effective income rate varied from the statutory rate primarily as a result of a change in the valuation allowance on our net deferred tax assets exclusive of deferred tax liabilities on indefinite lived assets and net income attributable to noncontrolling interest owners, which is taxable to those owners rather than the Company. The 2017 effective income rate varied from the statutory rate primarily as a result of the change in federal tax rate under the U.S. government Tax Cuts and Jobs Act (the “Act”), offset by a change in the valuation allowance, net income attributable to noncontrolling interest owners, and equity compensation. The Act was enacted on December 22, 2017 and resulted in the U.S. federal corporate tax rate decreasing from 35 percent in 2017 to 21 percent thereafter and primarily resulted in a reduction in the value of deferred tax assets by $19,300 and corresponding reduction in valuation allowance in 2017.

Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities were as follows:



	Long Term
	As of December 31,
	2019			2018
Assets related to:
Accrued compensation and other	$	3,981		$	3,707
Goodwill	—			—
Noncontrolling interests	1,812			1,687
Deferred revenue	922			232
Members interest liabilities	11,328			11,570
Right of use liabilities	3,253			—
Net operating loss carryforwards	19,801			22,818
Total deferred tax assets	41,097			40,014
Valuation allowance for deferred tax assets	—			(31,718		)
Net deferred tax assets	$	41,097		$	8,296

Liabilities related to:
Depreciation of property and equipment	(7,911		)	(7,709		)
Right of use assets	(3,232		)	—
Amortization of tax basis goodwill	(3,091		)	(1,450		)
Other	(851		)	(587		)
Net deferred tax liabilities	$	(15,085	)	$	(9,746	)

Net total deferred tax asset (liability)	$	26,012		$	(1,450	)

Net Operating Loss—We have federal and state net operating loss (“NOL”) carryforwards of $83,270 and $44,857, respectively, which expire at various dates in the next 18 years for U.S. federal income tax and in the next 8 to 18 years for the various state jurisdictions where we operate. Such NOL carryforwards expire beginning in 2028 through 2038.

Valuation Allowance—The Company performs an analysis at the end of each reporting period to determine whether it is more likely than not deferred tax assets will be realized in future years. In performing its assessments in prior periods, a full valuation allowance was recorded as a result of objective negative evidence which included historical losses from 2013 to 2016 and the first quarter of 2017 and associated limits on ability to consider other subjective evidence such as projections for future growth. During 2019, the Company achieved eleven of the last twelve consecutive quarters of pre-tax income and is projecting sufficient future taxable income to be available to utilize all NOLs prior to their expiration. Deferred tax liabilities were a consideration in the analysis of whether to apply a valuation allowance because taxable temporary differences may be used as a source of taxable income to support the realization of deferred tax assets. A deferred tax liability that relates to an asset with an indefinite life, such as goodwill, may not be considered a source of income and should not be netted against deferred tax assets for valuation allowance purposes. As a result of this analysis, the Company now believes sufficient positive evidence outweighs any negative evidence and therefore released the full valuation allowance in the fourth quarter of 2019, resulting in $29,375 being recorded as a reduction to income tax expense.

Uncertain Tax Positions

As a result of the Company’s analysis, management has determined that the Company does not have any material uncertain tax positions. The Company’s U.S. federal income tax returns for 2016 and later years are open and subject to examination by the I.R.S. In addition, the Company’s state income tax returns for 2015 and later years are open and subject to examination.