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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company accounts for income taxes under ASC 740 - Income Taxes, which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry-forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Income tax expense (benefit) attributable to income from continuing operations was $75.5 million, $16.4 million and $(24.2) million for the years ended December 31, 2024, 2023 and 2022, respectively, and differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations as a result of the following:
(in thousands, except percentage data) |  | 2024 |  | 2023 |  | 2022
Federal income tax expense (benefit) at the statutory rate |  | 21.0 | % |  | $ | 129,517 |  |  | 21.0 | % |  | $ | 58,296 |  |  | (21.0) | % |  | $ | (150,785) |
State income taxes, net of federal tax expense |  | 1.8 | % |  | 10,872 |  |  | 0.9 | % |  | 2,559 |  |  | (1.6) | % |  | (11,495) |
Executive compensation deduction limitation |  | 3.4 | % |  | 21,241 |  |  | 0.9 | % |  | 2,587 |  |  | 1.0 | % |  | 7,358 |
Excess tax benefit related to share-based compensation |  | (0.4) | % |  | (2,696) |  |  | 0.2 | % |  | 470 |  |  | — | % |  | 285 |
Nondeductible other expenses |  | 0.2 | % |  | 1,349 |  |  | 0.6 | % |  | 1,798 |  |  | — | % |  | 14 |
Change in valuation allowance |  | (12.6) | % |  | (77,960) |  |  | (18.9) | % |  | (52,502) |  |  | 18.2 | % |  | 130,462 |
Prior year true-ups |  | — | % |  | — |  |  | 1.2 | % |  | 3,346 |  |  | — | % |  | 127 |
Other, net |  | (1.1) | % |  | (6,828) |  |  | — | % |  | (128) |  |  | — | % |  | (198) |
Income tax expense (benefit) from continuing operations |  | 12.3 | % |  | $ | 75,495 |  |  | 5.9 | % |  | $ | 16,426 |  |  | (3.4) | % |  | $ | (24,232) |
The components of the provision for income taxes are as follows:
|  | For the Year Ended December 31,
(in thousands) |  | 2024 |  | 2023 |  | 2022
Current income tax expense |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  | 2,278 |  |  | 1,140 |  |  | 733 |
Total current income tax expense |  | 2,278 |  |  | 1,140 |  |  | 733 |
Deferred tax expense (benefit) |  |  |  |  |  |
Federal |  | 142,087 |  |  | 66,129 |  |  | (143,598) |
State |  | 9,090 |  |  | 1,659 |  |  | (11,829) |
Total deferred tax expense (benefit) |  | 151,177 |  |  | 67,788 |  |  | (155,427) |
Change in valuation allowance |  | (77,960) |  |  | (52,502) |  |  | 130,462 |
Net deferred tax expense after valuation allowance (benefit) |  | 73,217 |  |  | 15,286 |  |  | (24,965) |
Income tax provision (benefit) |  | $ | 75,495 |  |  | $ | 16,426 |  |  | $ | (24,232) |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 are presented below:
(in thousands) |  | December 31, 2024 |  | December 31, 2023
Deferred tax assets: |  |  |  |
Tax credit carryforwards |  | $ | 2,201 |  |  | $ | 517 |
Net operating loss carryforwards |  | 120,224 |  |  | 144,081 |
Intangible assets |  | 5,836 |  |  | 1,602 |
Property and equipment |  | 10,463 |  |  | — |
Stock compensation |  | 10,435 |  |  | 3,898 |
Disallowed interest |  | 2,254 |  |  | 3,093 |
Bad debt reserve |  | 9,830 |  |  | 9,957 |
Research and development costs |  | 7,867 |  |  | 1,619 |
Accruals, reserves and other |  | 3,589 |  |  | 286 |
Impairment loss |  | — |  |  | 36,100 |
Capital losses |  | 283 |  |  | 11,950 |
Gain on hedge instruments |  | 4,243 |  |  | 3,798 |
Total gross deferred tax assets |  | 177,225 |  |  | 216,901 |
Less valuation allowance |  | — |  |  | (77,960) |
Net deferred tax assets |  | 177,225 |  |  | 138,941 |
Deferred tax liabilities: |  |  |  |
Gain on investment |  | (912) |  |  | — |
Property and equipment, net |  | — |  |  | (117,094) |
Digital assets |  | (264,816) |  |  | (37,133) |
Total gross deferred liabilities |  | (265,728) |  |  | (154,227) |
Net deferred tax liability |  | $ | (88,503) |  |  | $ | (15,286) |
The valuation allowance for deferred tax assets as of December 31, 2023 was $78.0 million. There was a zero valuation allowance for deferred tax assets as of December 31, 2024, resulting in a decrease of the total valuation allowance of $78.0 million for the year ended December 31, 2024. For the year ended December 31, 2024, the Company concluded, based upon all available evidence, it was more likely than not that it would have sufficient future taxable income to realize the Company’s federal and state deferred tax assets. As a result, the Company is releasing the valuation allowance against deferred tax assets that are supported by reversing deferred tax liabilities. At December 31, 2024, the Company has federal and state net operating loss carryforwards of $612.8 million, which are available to offset future taxable income. In addition, the Company has interest carryforwards of $10.5 million. The Company has the following attributes and credit carryforwards:
(in thousands) |  | Gross Amount |  | Expiring
Federal net operating loss carryforwards |  | $ | 3,314 |  |  | 2034-2035
Federal net operating loss carryforwards |  | 563,555 |  |  | Indefinite
State net operating loss carryforwards |  | 45,926 |  |  | Various
Interest expense carryforwards |  | 10,474 |  |  | Indefinite
Federal tax credit carryforwards |  | 2,160 |  |  | 2040-2044
State tax credit carryforwards |  | 40 |  |  | Indefinite
Section 382 and Section 383 of the Internal Revenue Code limit the utilization of U.S. tax attribute carryforwards following a change of control. Based on the Company’s analysis under Section 382, approximately $84.5 million of tax attributes are limited by Section 382/383 as of December 31, 2024. The Section 382/383 limitation in conjunction with the twenty-year carryforward limitation caused $33.7 million of attributes to be deemed worthless, which resulted in a write-off of the related deferred tax assets in 2021. A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the tax years ended December 31, 2024, 2023 and 2022 is as follows:
|  | For the Year Ended December 31,
(in thousands) |  | 2024 |  | 2023 |  | 2022
Balance, beginning of year |  | $ | 5,296 |  |  | $ | 5,252 |  |  | $ | 44.00 |
Increase (decrease) related to prior year tax positions |  | 1 |  |  | (31) |  |  | 21 |
Increase related to current year tax positions |  | 560 |  |  | 75 |  |  | 5,187 |
Balance, end of year |  | $ | 5,857 |  |  | $ | 5,296 |  |  | $ | 5,252 |
The Company has established a reserve against its federal research and development tax credits generated in 2024 and previous years. The Company has also established a reserve related to its executive compensation deduction limitation in 2022. As of December 31, 2024, the total amount of unrecognized tax benefits was $5.9 million, all of which was offset against deferred tax assets. If the unrecognized tax benefits were recognized as of December 31, 2024, there would be a $5.9 million favorable impact that would affect the effective rate on income from continuing operations. The Company did not accrue either interest or penalties for the years ended December 31, 2024 and 2023. The Company does not currently expect any of its remaining unrecognized tax benefits to be recognized in the next twelve months. The Company files federal and state income tax returns. The 2020-2023 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.

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