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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
12.
Income Taxes

In December 2019, COVID-19 emerged and spread throughout the world causing severe disruption to the global economy. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law after COVID-19 was declared a pandemic. There were several income tax provisions and other non-tax matters incorporated into law as a result of the enactment of the CARES Act. The Company applied certain articles of the CARES Act in the income tax provision, including the increased interest deduction allowed up to 50 percent of adjusted taxable income for tax years 2019 and 2020. For the year ended December 31, 2019, the Company deducted an additional $4.7 million in interest expense in the 2019 federal income tax return as a result of the increased adjusted taxable income limitation. In addition, the Company elected to delay the employer-side of the FICA payments until 2021 as provided under the CARES Act, which were paid on September 15, 2021.

Income before income taxes consisted of:

 

 

For the Year Ended December 31,

 

 

($ in thousands)

 

2021

 

 

2020

 

 

2019

 

 

U.S.

 

$

77,101

 

 

$

6,429

 

 

$

33,655

 

 

Foreign

 

 

(9,200

)

 

 

(5,576

)

 

 

(2,998

)

 

Total income before incomes taxes

 

$

67,901

 

 

$

853

 

 

$

30,657

 

 

 

 

The income tax provision consisted of the following items:

 

 

 

For the Year Ended December 31,

 

($ in thousands)

 

2021

 

 

2020

 

 

2019

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

25,361

 

 

$

4,169

 

 

$

16,901

 

State

 

 

10,523

 

 

 

5,399

 

 

 

7,316

 

Foreign

 

 

160

 

 

 

652

 

 

 

673

 

Total current

 

 

36,044

 

 

 

10,220

 

 

 

24,890

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

(7,434

)

 

 

(1,308

)

 

 

(8,542

)

State

 

 

(1,627

)

 

 

(2,615

)

 

 

(2,092

)

Foreign

 

 

(531

)

 

 

(866

)

 

 

(675

)

Total deferred

 

 

(9,592

)

 

 

(4,789

)

 

 

(11,309

)

Income tax provision

 

$

26,452

 

 

$

5,431

 

 

$

13,581

 

 

A reconciliation to the income tax provision from the amounts computed by applying the statutory U.S. federal income tax rate is as follows:

 

 

For the Year Ended December 31,

 

($ in thousands)

 

2021

 

 

2020

 

 

2019

 

Income tax provision at statutory rate

 

$

14,259

 

 

$

179

 

 

$

6,438

 

State income taxes, net of federal income tax effect

 

 

6,748

 

 

 

1,188

 

 

 

2,360

 

Tax rate changes/ valuation of deferred tax items

 

 

586

 

 

 

1,353

 

 

 

998

 

162(m) limitation

 

 

1,325

 

 

 

1,179

 

 

 

1,289

 

Non-deductible expenses

 

 

174

 

 

 

1,786

 

 

 

450

 

Stock-based compensation

 

 

(752

)

 

 

(38

)

 

 

(716

)

Unrecognized tax benefits

 

 

174

 

 

 

(929

)

 

 

(741

)

Tax impact for change in fair value of warrants

 

 

1,596

 

 

 

237

 

 

 

3,416

 

Change in valuation allowance

 

 

1,435

 

 

 

924

 

 

 

317

 

Non-deductible transaction costs

 

 

1,078

 

 

 

19

 

 

 

270

 

Research and development credits

 

 

(125

)

 

 

(121

)

 

 

(232

)

Other

 

 

(46

)

 

 

(346

)

 

 

(268

)

Total income tax provision

 

$

26,452

 

 

$

5,431

 

 

$

13,581

 

 

 

Significant components of the Company’s deferred income tax assets and liabilities consist of the following at December 31:

 

($ in thousands)

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

Accrued expenses and other

 

$

7,334

 

 

$

1,027

 

Allowance for credit losses

 

 

4,927

 

 

 

4,838

 

Net operating loss carryforward

 

 

18,193

 

 

 

3,626

 

Interest expense limitation carryforward

 

 

5,935

 

 

 

1,070

 

Federal and state income tax credits

 

 

5,295

 

 

 

1,132

 

ASC 842 operating lease liabilities

 

 

9,578

 

 

 

8,679

 

Transaction costs

 

 

446

 

 

 

319

 

Other

 

 

1,042

 

 

 

1,210

 

Gross deferred tax assets

 

 

52,750

 

 

 

21,901

 

Valuation allowance

 

 

(3,785

)

 

 

(3,422

)

Deferred tax assets, net of valuation allowance

 

 

48,965

 

 

 

18,479

 

Deferred tax liabilities:

 

 

 

 

 

 

Intangible assets and transaction costs

 

 

(62,116

)

 

 

(16,358

)

Property and equipment

 

 

(13,562

)

 

 

(10,285

)

Financing costs

 

 

(3,077

)

 

 

(3,730

)

Prepaid assets

 

 

(1,235

)

 

 

(957

)

ASC 842 operating lease assets

 

 

(9,104

)

 

 

(8,297

)

481(a) adjustment, net

 

 

(857

)

 

 

—

 

Gross deferred tax liabilities

 

 

(89,951

)

 

 

(39,627

)

Total deferred tax liabilities, net

 

$

(40,986

)

 

$

(21,148

)

 

In accordance with ASC 740, Income Taxes, deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets can be affected by, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, the Company’s experience with utilizing operating losses and tax credit carryforwards by jurisdiction, and tax planning alternatives and strategies that may be available.

The Company performed an analysis of the reversal of the deferred tax assets and considered the overall business environment, historical earnings and the outlook for future years. The Company determined that it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards will not be realized as of the years ended December 31, 2021 and 2020, and as such provided a valuation allowance of $3.8 million and $3.4 million, respectively. The valuation allowance could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present.

The net operating loss carryforwards represent $158.7 million and $31.1 million of federal, state and foreign net operating losses at December 31, 2021 and 2020, respectively. The federal net operating loss carryforward at December 31, 2021 consists of $12.1 million of losses that were generated prior to 2018 and will expire by 2036 if not previously utilized and $26.0 million of losses that were generated after 2017 with no expiration date. The Company also has certain tax credits of $6.4 million and $1.5 million at December 31, 2021 and 2020, respectively, which if unused will begin to expire in 2025.

The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31:

 

($ in thousands)

 

2021

 

 

2020

 

Balance at the beginning of the year

 

$

953

 

 

$

1,735

 

Increases/(decreases) related to current year tax positions

 

 

447

 

 

 

126

 

Increases/(decreases) related to prior year tax positions

 

 

1,478

 

 

 

299

 

Expiration due to statute of limitations

 

 

—

 

 

 

(1,207

)

Balance at the end of the year

 

$

2,878

 

 

$

953

 

 

Included in the balance of unrecognized tax benefits as of December 31, 2021 were $1.7 million of tax benefits that, if recognized, would impact the effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. The Company recognized less than $0.1 million for fiscal year 2021 and $1.0 million for fiscal year 2020, in interest and penalties. At December 31, 2021 and 2020, the Company had accrued interest and penalties of less than $0.1 million at the end of both periods. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based on technical merits, it is more likely than not that the tax position will be sustained under examination.

The Company is subject to examination by the Internal Revenue Service and taxing authorities in various states. The Company files U.S. federal and various foreign income tax returns which are subject to examination by the taxing authorities in the respective jurisdictions, generally for three or four years after they are filed. The Company’s state income tax returns are generally no longer subject to income tax examination by tax authorities prior to 2017; however, the Company’s net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. The Company is currently under audit by various state tax jurisdictions for the years 2018 and 2019, however, no material adjustments are anticipated. The Company regularly assesses the likelihood of tax deficiencies in each of the tax jurisdictions and, accordingly, makes appropriate adjustments to the tax provision as deemed necessary.