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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES For the years ended December 31, 2022, 2021 and 2020, we have the following income (loss) before income taxes (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
US Domestic | $ | 59,529 |  |  | $ | 58,806 |  |  | $ | (986) |
Foreign | (16,560) |  |  | 73 |  |  | 132 |
Income (loss) before income taxes | $ | 42,969 |  |  | $ | 58,879 |  |  | $ | (854) |
For the years ended December 31, 2022, 2021 and 2020, we recognized income tax expense comprised of the following (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
Federal current tax | $ | — |  |  | $ | — |  |  | $ | (256) |
State current tax | 371 |  |  | (2,191) |  |  | (1,608) |
Foreign current tax | 87 |  |  | 18 |  |  | 27 |
Federal deferred tax | 6,470 |  |  | 9,831 |  |  | (303) |
State deferred tax | 5,863 |  |  | 6,902 |  |  | 3,035 |
Foreign deferred tax | (3,430) |  |  | — |  |  | — |
Income tax expense | $ | 9,361 |  |  | $ | 14,560 |  |  | $ | 895 |
A reconciliation of the statutory U.S. federal rate and effective rates is as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Federal tax | $ | 9,023 |  |  |  |  | $ | 12,365 |  |  |  |  | $ | (179) |  |  |
State franchise tax, net of federal benefit | 595 |  |  |  |  | 4,198 |  |  |  |  | 779 |  |  |
Other Non deductible expenses | 305 |  |  |  |  | (93) |  |  |  |  | 224 |  |  |
Officer Compensation | 759 |  |  |  |  | 291 |  |  |  |  | 77 |  |  |
Noncontrolling interests in partnerships | (4,821) |  |  |  |  | (4,114) |  |  |  |  | (2,748) |  |  |
Changes in valuation allowance | 6,124 |  |  |  |  | (249) |  |  |  |  | (33) |  |  |
Return to provision | 234 |  |  |  |  | (2,530) |  |  |  |  | (2,252) |  |  |
PPP Loan | — |  |  |  |  | — |  |  |  |  | (850) |  |  |
Deferred true-ups and other | (1,451) |  |  |  |  | 5,009 |  |  |  |  | 4,840 |  |  |
Foreign rate differential | (737) |  |  |  |  | 4 |  |  |  |  | (1) |  |  |
Uncertain tax provisions | (749) |  |  |  |  | (321) |  |  |  |  | 1,036 |  |  |
Other differences | 79 |  |  |  |  | — |  |  |  |  | 2 |  |  |
Income tax expense | $ | 9,361 |  |  |  |  | $ | 14,560 |  |  |  |  | $ | 895 |  |  |
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: | 2022 |  | 2021
Net operating losses | $ | 68,124 |  |  | $ | 57,663 |
Accrued expenses | 3,941 |  |  | 3,275 |
Operating lease liability | 142,347 |  |  | 141,440 |
Equity compensation | 4,387 |  |  | 2,993 |
Allowance for doubtful accounts | 3,071 |  |  | 2,711 |
Other | 6,541 |  |  | 7,532 |
Valuation allowance | (12,095) |  |  | (5,066) |
Total Deferred Tax Assets | $ | 216,316 |  |  | $ | 210,548 |
Deferred tax liabilities: |  |  |
Property and equipment | (9,214) |  |  | (12,134) |
Goodwill | (38,820) |  |  | (33,973) |
Intangibles | (18,640) |  |  | (9,133) |
Operating lease right-of-use asset | (129,802) |  |  | (128,868) |
Outside basis difference | (20,015) |  |  | — |
Other | (9,081) |  |  | (11,587) |
Total Deferred Tax Liabilities | $ | (225,572) |  |  | $ | (195,695) |
Net Deferred Tax (Liability) Asset | $ | (9,256) |  |  | $ | 14,853 |
As of December 31, 2022, we had federal net operating loss carryforwards of approximately $231.5 million, which is comprised of definite and indefinite net operating losses. We had federal net operating loss carryforwards of approximately $165.2 million, which expire at various intervals from the years 2026 to 2037, and had carryforwards of $66.3 million of net operating losses which do not expire. Federal net operating losses generated in tax years following December 31, 2017 carryover indefinitely and may be used to offset up to 80% of future taxable net income. We also had state net operating loss carryforwards of approximately $271.7 million, which expire at various intervals from the years 2024 through 2042. As of December 31, 2022, $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 also had foreign net operating loss carryforwards of approximately $19.8 million, which begin to expire from years 2023 to 2027, in addition to $11.0 million which do not expire and are carried over indefinitely. 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, 2022, we have determined that deferred tax assets of $216.3 million are more likely-than-not to be realized. We have also determined deferred tax liabilities of $38.8 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 2018. We do not anticipate the results of any open examinations would result in a material change to our financial position. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended are as follows (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
Balance at beginning of year | $ | 5,088 |  |  | $ | 5,484 |  |  | $ | 4,320 |
Increases related to prior year tax positions | 55 |  |  | 317 |  |  | 1,382 |
Increases related to current year tax positions | — |  |  | — |  |  | 3 |
Expiration of the statute of limitations for the assessment of taxes | (999) |  |  | (713) |  |  | (221) |
Increase (decrease) related to change in rate | — |  |  | — |  |  | — |
Balance at end of year | $ | 4,144 |  |  | $ | 5,088 |  |  | $ | 5,484 |
At December 31, 2022, we had unrecognized tax benefits of $4.1 million of which $3.4 million will affect the effective tax rate if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2022 the Company accrued approximately $2 thousand of interest and penalties. As of December 31, 2022, 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, we have 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 Inflation Reduction Act 2022 which incorporates a Corporate Alternative Minimum Tax (CAMT) was signed on August 16, 2022. The changes will affect for the tax years beginning after December 31, 2022. The new tax will require companies to compute two separate calculations for federal income tax purposes and pay the greater of the new minimum tax or their regular tax liability. We will be monitoring the impacts of the act to determine if this will have a impact on us for years beginning after December 31, 2022. As of year-end it is not expected to have a material impact for us. The Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 was signed into law on August 9, 2022 to boost domestic semiconductor manufacturing and encourage US research activities. The act provided a 25% investment credit intended to promote domestic production of semiconductors. This act is not expected to have a material impact for us. The Tax Cuts and Jobs Act of 2017 subjects a U.S. shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. An entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. We have elected to account for GILTI in the year the tax is incurred.

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