Income Taxes

12 Months Ended

Dec. 31, 2020

INCOME TAXES

The provision for income taxes is comprised of (in thousands):


	Years ended December 31,
	2020		2019		2018
Current:
Federal	$	33,495	$	14,850	$	13,486
State	8,918		4,127		3,641
	42,413		18,977		17,127
Deferred:
Federal	(7,177)		4,585		221
State	(1,298)		884		90
	(8,475)		5,469		311
Total tax expense	$	33,938	$	24,446	$	17,438

The reconciliation between our effective tax rate on net income and the federal statutory rate is as follows (dollars in thousands):


	Years ended December 31,
	2020				2019				2018
Income tax at federal statutory rate	$	27,547	21.0	%	$	19,447	21.0	%	$	15,159	21.0	%
Stock compensation	331		0.3	%	(255)		(0.3)	%	(436)		(0.6)	%

Other permanent items	424		0.3	%	737		0.8	%	(667)		(0.8)	%
Change in valuation allowance	(207)		(0.2)	%	276		0.3	%	312		0.4	%
Change in uncertain tax positions	65		0.1	%	67		0.1	%	969		1.3	%
State income taxes, net of federal benefit	5,778		4.4	%	4,174		4.5	%	2,911		4.0	%
Rate impact of the Tax Act	—		—	%	—		—	%	(810)		(1.1)	%
Total tax expense	$	33,938	25.9	%	$	24,446	26.4	%	$	17,438	24.2	%

Components of the net deferred tax asset or liability are as follows (in thousands):


	As of December 31,
	2020		2019
Deferred Tax Assets
Long-term
Accrued liabilities and allowances	$	9,106	$	5,140
Allowance for doubtful accounts	987		514
Inventories	402		437
Property and equipment	280		303
Intangibles	6,582		5,615
Net operating loss carryforwards	1,206		1,240
Other	16		5
Long-term deferred tax assets	18,579		13,254
Less: Valuation allowance	(1,263)		(1,512)
Net deferred tax assets	17,316		11,742
Deferred Tax Liabilities
Long-term
Accrued liabilities and allowances	(151)		(252)
Property and equipment	(4,587)		(4,176)
Intangibles	(4,810)		(4,307)
Investment in partnership	(6,660)		(11,857)
Other	(650)		(325)
Long-term deferred tax liabilities	(16,858)		(20,917)
Net deferred tax assets (liabilities)	$	458	$	(9,175)

As of December 31, 2020, we have recorded a deferred tax asset of $1.2 million reflecting the benefit of $5.4 million in federal and state income tax net operating loss (NOL) carryforwards, the earliest of which expires in 2030.

Valuation Allowance

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets on a jurisdiction and by tax filing entity basis. A significant piece of objective negative evidence evaluated is cumulative losses incurred over the most recent three-year period. Such objective evidence limits our ability to consider other subjective positive evidence such as our projections for future growth.

Based on this evaluation, a valuation allowance has been recorded as of December 31, 2020 and 2019 for the net deferred tax assets recorded on certain of our wholly owned subsidiaries. Such deferred tax assets relate primarily to net operating losses that are not more likely than not realizable. However, the amount of the deferred tax asset considered realizable could be adjusted if our estimate of future taxable income during the carryforward period changes, or if objective negative evidence in the form of cumulative losses is no longer present. Additional weight may be given to subjective evidence such as our projections for growth in this situation.

Uncertain Tax Positions

We are subject to taxation in the United States and various state jurisdictions. As of December 31, 2020, our tax years for 2017 through 2019 are subject to examination by the tax authorities. A rollforward of the gross unrecognized tax benefits is as follows (in thousands):


Unrecognized tax benefit, January 1, 2018	$	4,450
Increase as a result of tax positions taken during the period	3,846
Decrease as a result of tax positions taken during the period	(2,850)
Decrease as a result of expiring statutes	(97)
Unrecognized tax benefit, Unrecognized tax benefit, December 31, 2018	$	5,349

Increase as a result of tax positions taken during the period	2,866
Decrease as a result of tax positions taken during the period	(2,482)
Decrease as a result of expiring statutes	(16)
Unrecognized tax benefit, Unrecognized tax benefit, December 31, 2019	$	5,717

Increase as a result of tax positions taken during the period	3,822
Decrease as a result of tax positions taken during the period	(2,873)
Increase as a result of expiring statutes	10
Unrecognized tax benefit, Unrecognized tax benefit, December 31, 2020	$	6,676

Unrecognized tax benefits of $2.8 million at December 31, 2020 would affect the effective tax rate. Interest expense and penalties accrued related to uncertain tax positions as of December 31, 2020 are $0.5 million.

We expect a decrease to the amount of unrecognized tax benefits (exclusive of penalties and interest) within the next twelve months of zero to $4.8 million.

Determining uncertain tax positions and the related estimated amounts requires judgment and carry estimation risk. If future tax law changes or interpretations should come to light, or additional information should become known, our conclusions regarding unrecognized tax benefits may change.

- 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.

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