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INCOME TAXES | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES For the years ended December 31, 2021, 2020 and 2019, we recognized income tax expense comprised of the following (in thousands):
| December 31,
| 2021 |  | 2020 |  | 2019
Federal current tax | $ | — |  |  | $ | (256) |  |  | $ | (161) |
State current tax | (2,191) |  |  | (1,608) |  |  | 7,715 |
Other current tax | 18 |  |  | 27 |  |  | 22 |
Federal deferred tax | 9,831 |  |  | (303) |  |  | 3,396 |
State deferred tax | 6,902 |  |  | 3,035 |  |  | (4,743) |
Income tax expense | $ | 14,560 |  |  | $ | 895 |  |  | $ | 6,229 |
A reconciliation of the statutory U.S. federal rate and effective rates is as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
Federal tax | $ | 12,365 |  |  |  |  | $ | (179) |  |  |  |  | $ | 6,231 |  |  |
State franchise tax, net of federal benefit | 4,198 |  |  |  |  | 779 |  |  |  |  | 3,891 |  |  |
Non deductible expenses | 198 |  |  |  |  | 301 |  |  |  |  | 674 |  |  |
Noncontrolling interests in partnerships | (4,114) |  |  |  |  | (2,748) |  |  |  |  | (1,824) |  |  |
Changes in valuation allowance | (249) |  |  |  |  | (33) |  |  |  |  | (462) |  |  |
Return to provision | (2,530) |  |  |  |  | (2,252) |  |  |  |  | (1,324) |  |  |
PPP Loan | — |  |  |  |  | (850) |  |  |  |  | — |  |  |
Deferred true-ups and other | 5,013 |  |  |  |  | 4,839 |  |  |  |  | (761) |  |  |
Uncertain tax provisions | (321) |  |  |  |  | 1,036 |  |  |  |  | (217) |  |  |
Other | — |  |  |  |  | 2 |  |  |  |  | 21 |  |  |
Income tax expense | $ | 14,560 |  |  |  |  | $ | 895 |  |  |  |  | $ | 6,229 |  |  |
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards. Our deferred tax assets and liabilities comprise the following (in thousands):
| December 31,
Deferred tax assets: | 2021 |  | 2020
Net operating losses | $ | 57,663 |  |  | $ | 59,154 |
Accrued expenses | 3,275 |  |  | 3,948 |
Operating lease liability | 141,440 |  |  | 124,139 |
Equity compensation | 2,993 |  |  | 1,903 |
Allowance for doubtful accounts | 2,711 |  |  | 21,284 |
Other | 7,532 |  |  | 11,512 |
Valuation allowance | (5,066) |  |  | (5,315) |
Total Deferred Tax Assets | $ | 210,548 |  |  | $ | 216,625 |
Deferred tax liabilities: |  |  |
Property and equipment | (12,134) |  |  | (24,298) |
Goodwill | (33,973) |  |  | (28,457) |
Intangibles | (9,133) |  |  | (9,608) |
Operating lease right-of-use asset | (128,868) |  |  | (112,956) |
Other | (11,587) |  |  | (6,619) |
Total Deferred Tax Liabilities | $ | (195,695) |  |  | $ | (181,938) |
Net Deferred Tax Asset | $ | 14,853 |  |  | $ | 34,687 |
As of December 31, 2021, the we had federal net operating loss carryforwards of approximately $224.0 million, of which $152.1 million, which expire at various intervals from the years 2022 to 2037, and $71.9 million of net operating losses which do not expire. Federal net operating losses generated following December 31, 2017 carryover indefinitely and may be used to offset up to 80% of future taxable net income. The Company also had state net operating loss carryforwards of approximately $194.3 million, which expire at various intervals from the years 2021 through 2039. As of December 31, 2021, $24.9 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. and the 2019 acquisition of Nulogix Health, Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. We considered all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2021, we have determined that deferred tax assets of $210.5 million are more likely-than-not to be realized. We have also taken into consideration deferred tax liabilities of $34.0 million are related to book basis in goodwill that has an indefinite life. We file consolidated income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017. We are currently under audit in the state of California for the tax years of 2016 and 2017. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended are as follows (in thousands):
| December 31,
| 2021 |  | 2020 |  | 2019
Balance at beginning of year | $ | 5,484 |  |  | $ | 4,320 |  |  | $ | 4,629 |
Increases related to prior year tax positions | 317 |  |  | 1,382 |  |  | (34) |
Increases related to current year tax positions | — |  |  | 3 |  |  | 119 |
Expiration of the statute of limitations for the assessment of taxes | (713) |  |  | (221) |  |  | (393) |
Increase (decrease) related to change in rate | — |  |  | — |  |  | (1) |
Balance at end of year | $ | 5,088 |  |  | $ | 5,484 |  |  | $ | 4,320 |
At December 31, 2021, the Company has unrecognized tax benefits of $5.1 million of which $4.1 million will affect the effective tax rate if recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2021 the Company accrued approximately $0.04 million of interest and penalties. As of December 31, 2021, accrued interest and penalties amounted to approximately $0.4 million. We do not anticipate the uncertain tax position to change materially within the next 12 months. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. At December 31, 2020, the Company has taken advantage of the accelerated tax depreciation related to qualified improvement property and the Paycheck Protection Program loan allowed under the CARES Act. On December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”). The CAA includes provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders. The Company will continue to evaluate the impact of the CAA and its impact on our financial statements in 2021 and beyond. In June 29, 2020, the state of California passed Assembly Bill 85 which suspends the California net operating loss deduction for the 2020-2022 tax years and the R&D credit usage for the same period (for credit usages in excess of $5M). These suspensions were considered in preparation of the 2021 and 2020 financial statements.

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