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Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 8.    INCOME TAXES

Deferred Income Tax Assets and Liabilities

Deferred income tax assets and liabilities are provided to record the effects of temporary differences between the tax basis of an asset or liability and its amount as reported in our consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.

 

The components comprising our deferred income tax assets and liabilities are as follows:

 

  

December 31,

(In thousands)

 

2022

 

2021

Deferred income tax assets

        

State net operating loss carryforwards

 $53,889 $73,884

Operating lease liability

 178,014 189,180

Share-based compensation

 13,119 13,811

Other

 40,144 66,378

Gross deferred income tax assets

 285,166 343,253

Valuation allowance

 (59,398) (67,525)

Deferred income tax assets, net of valuation allowance

 225,768 275,728
         

Deferred income tax liabilities

        

Difference between book and tax basis of property and intangible assets

 328,062 307,194

State tax liability

 32,720 40,216

Right-of-use asset

 174,373 185,691

Other

 9,222 7,539

Gross deferred income tax liabilities

 544,377 540,640

Deferred income tax liabilities, net

 $318,609 $264,912

 

At December 31, 2022, we have state income tax net operating loss carryforwards of approximately $906.2 million, which may be used to reduce future state income taxes. The majority of the state net operating loss carryforwards will expire in various years ranging from 2023 to 2041, if not fully utilized, and the remaining may be used indefinitely.

 

Valuation Allowance on Deferred Tax Assets

Management assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. In evaluating our ability to recover deferred tax assets, we consider whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.

 

We have maintained a valuation allowance against certain federal and state deferred tax assets as of December 31, 2022 due to uncertainties related to our ability to realize the tax benefits associated with these assets. The balance of this valuation allowance is $59.4 million as of  December 31, 2022. This is a decrease of $8.1 million from the prior year primarily due to a reduction in state tax rates which lowered our underlying state tax deferred assets in certain states. In assessing the need to establish a valuation allowance, we consider, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above.

 

Provision (Benefit) for Income Taxes

A summary of the provision (benefit) for income taxes is as follows:

 

  

Year Ended December 31,

(In thousands)

 

2022

 

2021

 

2020

Current

            

Federal

 $129,424 $— $—

State

 10,843 6,100 (58)

Total current taxes provision (benefit)

 140,267 6,100 (58)

Deferred

            

Federal

 44,115 122,796 (35,231)

State

 5,047 11,197 (1,025)

Total deferred taxes provision (benefit)

 49,162 133,993 (36,256)

Provision (benefit) for income taxes

 $189,429 $140,093 $(36,314)

 

The following table provides a reconciliation between the federal statutory rate and the effective income tax rate, expressed as a percentage of income (loss) before income taxes:

 

  

Year Ended December 31,

(In thousands)

 

2022

 

2021

 

2020

Tax at federal statutory rate

 21.0% 21.0% 21.0%

State income taxes, net of federal benefit

 1.5% 2.3% 0.5%

Compensation-based credits

 (0.3)% (0.1)% 0.6%

Nondeductible expenses

 0.2% 0.1% (0.4)%

Tax exempt interest

 —% (0.1)% 0.2%

Company provided benefits

 0.4% (0.1)% (1.3)%

Other, net

 0.1% 0.1% 0.6%

Effective tax rate

 22.9% 23.2% 21.2%

 

Our tax provision for the year ended December 31, 2022 was unfavorably impacted by state taxes and certain nondeductible expenses, including nondeductible compensation and employee benefit expenses, which were partially offset by tax credits and the inclusion of excess tax benefits related to equity compensation as a component of the provision for income taxes.

 

Our tax provision for the year ended  December 31, 2021 was favorably impacted by benefits related to equity compensation and tax credits and unfavorably impacted by state taxes, nondeductible expenses including nondeductible compensation and employee benefit expenses.

 

Our tax benefit for the year ended  December 31, 2020 was favorably impacted by state audit settlements in connection with our Louisiana tax examinations and the realization of certain unrecognized tax benefits, inclusive of the reversal of related accrued interest. Our tax benefit was also favorably impacted by benefits related to equity compensation and tax credits and unfavorably impacted by nondeductible expenses.

 

Status of Examinations

We generated net operating losses on our federal income tax returns for years 2011 through 2013 and in 2020. These returns remain subject to federal examination until the statute of limitations expires for the year in which the net operating losses are utilized. We utilized all our federal net operating losses in 2021.

 

As it relates to our material state tax returns, we are subject to examination for tax years ended on or after December 31, 2013. The statute of limitations will expire over the period October 2023 through November 2026.

 

We believe that we have adequately reserved for any tax liability; however, the ultimate resolution of these examinations may result in an outcome that is different than our current expectation. We do not believe the ultimate resolution of these examinations will have a material impact on our consolidated financial statements.

 

Other Long-Term Tax Liabilities

The impact of an uncertain income tax position taken in our income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. Our liability for uncertain tax positions is recorded as other long-term tax liabilities in our consolidated balance sheets.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

  

Year Ended December 31,

(In thousands)

 

2022

 

2021

 

2020

Unrecognized tax benefit, beginning of year

 $— $— $2,482

Additions:

            

Tax positions related to current year

 — — —

Reductions:

            

Tax positions related to prior years

 — — (2,482)

Unrecognized tax benefit, end of year

 $— $— $—

 

During the third quarter of 2020, we settled our Louisiana tax audits for the years ended 2001 through 2009. As a result of the resolution of theses audits, we reduced our unrecognized tax benefits by $2.5 million of which $2.0 million impacted our effective tax rate. We reversed the accrual of interest related to unrecognized tax benefits in our income tax provision. There is no accrual required for interest and penalties at both  December 31, 2022 and 2021 in our consolidated balance sheets.

 

We do not anticipate any material changes to our unrecognized tax benefits over the next twelve-month period.