XML 34 R20.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 13. INCOME TAXES Pretax income from continuing operations for the years ended December 31, 2021, 2020 and 2019 was $149.1 million, $146.8 million and $93.0 million, respectively. The provision for income taxes from continuing operations for the years ended December 31, 2021, 2020 and 2019 consists of the following (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 19,143 |  |  | $ | - |  |  | $ | - |
State and local |  |  | 4,956 |  |  |  | 2,110 |  |  |  | 754 |
Total current provision |  |  | 24,099 |  |  |  | 2,110 |  |  |  | 754 |
Deferred provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 13,389 |  |  |  | 15,425 |  |  |  | 19,230 |
State and local |  |  | 1,942 |  |  |  | 4,941 |  |  |  | 2,444 |
Total deferred provision |  |  | 15,331 |  |  |  | 20,366 |  |  |  | 21,674 |
Total provision for income taxes |  | $ | 39,430 |  |  | $ | 22,476 |  |  | $ | 22,428 |
A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate for continuing operations for the years ended December 31, 2021, 2020 and 2019 is as follows:
|  | For the Year Ended December 31, |  |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |
Statutory U.S. federal income tax rate |  |  | 21.0 |  | % |  | 21.0 |  | % |  | 21.0 |  | %
State and local income taxes |  |  | 2.6 |  |  |  | 2.7 |  |  |  | 2.7 |  |
Stock-based compensation |  |  | 1.0 |  |  |  | (0.3 | ) |  |  | (1.3 | ) |
Capital loss |  |  | (2.1 | ) |  |  | - |  |  |  | - |  |
Valuation allowance |  |  | 2.1 |  |  |  | (10.9 | ) |  |  | - |  |
State audit settlement |  |  | - |  |  |  | - |  |  |  | (0.5 | ) |
Tax credits |  |  | (0.3 | ) |  |  | (0.1 | ) |  |  | (0.1 | ) |
Other |  |  | 2.1 |  |  |  | 2.9 |  |  |  | 2.3 |  |
Effective income tax rate |  |  | 26.4 |  | % |  | 15.3 |  | % |  | 24.1 |  | %
The effective tax rate for the year ended December 31, 2021 includes a $1.6 million unfavorable adjustment associated with the tax effect of stock-based compensation, which increased the effective tax rate by 1.0%. The 2021 effective tax rate also reflects a $0.5 million favorable adjustment related to federal and state credits claimed for the 2020 tax return and anticipated for the 2021 tax year, which decreased the effective tax rate by 0.3% and a $3.1 million favorable adjustment associated with a capital loss incurred for tax purposes on the elimination of a wholly-owned subsidiary, which decreased the effective tax rate by 2.1%. Since utilization of the capital loss is not anticipated, a valuation allowance of $3.1 million was established against the full amount of the deferred tax balance for the capital loss carryforward, which increased the effective tax rate by 2.1%. The effective tax rate for the year ended December 31, 2020 includes a $16.0 million favorable adjustment related to the release of a valuation allowance maintained against the portion of the foreign tax credit carryforward supported by an overall domestic loss (“ODL”) account balance, which decreased the effective tax rate by 10.9%. The 2020 effective tax rate also reflects a $0.4 million favorable adjustment associated with the tax effect of stock-based compensation, which decreased the effective tax rate by 0.3%. The effective tax rate for the year ended December 31, 2019 includes a $1.2 million favorable adjustment associated with the tax effect of stock-based compensation, which decreased the effective tax rate by 1.3% and a $0.5 million net benefit associated with the results of a Florida income tax audit covering the years ended December 31, 2014 through December 31, 2016, which decreased the effective tax rate by 0.5%. The 2019 effective tax rate also reflects the deductibility of $29.7 million of the FTC settlement, which is the amount paid for the purpose of restitution. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits as of December 31, 2021, 2020 and 2019 is as follows (dollars in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Gross unrecognized tax benefits, beginning of the year |  | $ | 11,794 |  |  | $ | 9,859 |  |  | $ | 9,009 |
Additions for tax positions of prior years |  |  | 941 |  |  |  | - |  |  |  | - |
Additions for tax positions related to the current year |  |  | 4,250 |  |  |  | 2,954 |  |  |  | 1,957 |
Reductions for tax positions of prior years |  |  | - |  |  |  | (51 | ) |  |  | (58 | )
Reductions due to lapse of applicable statute of limitations |  |  | (1,034 | ) |  |  | (968 | ) |  |  | (1,049 | )
Subtotal |  |  | 15,951 |  |  |  | 11,794 |  |  |  | 9,859 |
Interest and penalties |  |  | 2,020 |  |  |  | 1,919 |  |  |  | 1,901 |
Total gross unrecognized tax benefits, end of the year |  | $ | 17,971 |  |  | $ | 13,713 |  |  | $ | 11,760 |
The total amount of net unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods was $14.2 million and $10.8 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, our short and long-term reserves, recorded within current accrued income taxes and other non-current liabilities, respectively, related to FASB’s interpretation No. 48 of ASC Topic 740-10, Accounting for Uncertainty in Income Taxes or (“FIN 48”), were $1.2 million and $14.8 million, respectively. We record interest and penalties related to unrecognized tax benefits within provision for income taxes on our consolidated statements of income. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was $2.0 million and $1.9 million as of the years ended December 31, 2021 and 2020, respectively. For the years ended December 31, 2021, 2020 and 2019, we recognized less than $0.1 million of expense each year, related to interest and penalties from unrecognized tax benefits in our consolidated results of continuing operations. Perdoceo and its subsidiaries file income tax returns in the U.S. and in various state and local jurisdictions and are routinely examined by tax authorities in these jurisdictions. As of December 31, 2021, Perdoceo had been examined by the Internal Revenue Service through our tax year ending December 31, 2014. Due to the expiration of various statutes of limitations, it is reasonably possible that Perdoceo’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $1.6 million. Deferred income tax assets and liabilities result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes, and from the recognition of the tax benefits of net operating loss and tax credit carry forwards. Components of deferred income tax assets and liabilities for continuing operations as of December 31, 2021 and 2020 are as follows (dollars in thousands):
|  | December 31, |
|  | 2021 |  |  | 2020 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Accrued occupancy |  | $ | 11,012 |  |  | $ | 13,028 |
Foreign tax credits |  |  | 16,958 |  |  |  | 27,321 |
Valuation allowance foreign tax credits |  |  | (16,958 | ) |  |  | (16,958 | )
Compensation and employee benefits |  |  | 6,371 |  |  |  | 7,054 |
Tax net operating loss carry forwards |  |  | 17,832 |  |  |  | 19,183 |
Valuation allowance |  |  | (12,090 | ) |  |  | (12,069 | )
Allowance for doubtful accounts |  |  | 5,721 |  |  |  | 5,363 |
Accrued settlements and legal |  |  | 199 |  |  |  | 203 |
Accrued restructuring and severance |  |  | 343 |  |  |  | 353 |
Equity method for investments |  |  | 401 |  |  |  | 406 |
General business tax credits |  |  | - |  |  |  | 1,620 |
Capital loss |  |  | 3,130 |  |  |  | - |
Capital loss valuation allowance |  |  | (3,130 | ) |  |  | - |
Amortization |  |  | 3,486 |  |  |  | 5,656 |
Depreciation |  |  | 851 |  |  |  | - |
Other |  |  | 1,587 |  |  |  | 1,388 |
Total deferred income tax assets |  |  | 35,713 |  |  |  | 52,548 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | - |  |  |  | 111 |
Right of use asset, net |  |  | 9,244 |  |  |  | 10,611 |
Other |  |  | 1,355 |  |  |  | 1,475 |
Total deferred income tax liabilities |  |  | 10,599 |  |  |  | 12,197 |
Net deferred income tax assets |  | $ | 25,114 |  |  | $ | 40,351 |
As of December 31, 2021, the Company has a gross deferred tax asset before valuation allowance of $179.2 million and a gross deferred tax liability of $44.7 million. As of December 31, 2020, the Company had a gross deferred tax asset before valuation allowance of $194.4 million and a gross deferred tax liability of $51.5 million. For the tax year ended December 31, 2021, we expect to fully utilize $10.2 million of foreign tax credit carryforward and $1.8 million of general business tax credit carryforward to offset the federal tax liability that would otherwise be due in 2021. As for the remaining $17.0 million of foreign tax credit carryforward, which expires during 2022 and 2023 and is not supported by an ODL account balance, we continue to maintain a full valuation allowance. During the year ended December 31, 2021, the Company incurred a capital loss for tax purposes of $13.2 million on the elimination of a wholly-owned subsidiary. Given the absence of offsetting capital gains, the capital loss has no impact on the federal and state tax liability for both the current and prior years, and a valuation allowance has been established against the full amount of the deferred tax balance for the capital loss carryforward. We have state net operating loss (“NOL”) carryforwards of approximately $291.8 million, which expire between 2022 and 2037. Of this amount, approximately $180.5 million relates to separate state NOL carryforwards and $16.0 million relates to combined state NOL carryforwards, which we anticipate will not be used due to the teach-out of the schools in the applicable combined filing jurisdictions. Valuation allowances have been established against the full amounts of the deferred tax balances for the separate state NOL and the combined state NOL. In assessing the continued need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. Topic 740 provides that important factors in determining whether a deferred tax asset will be realized include whether sufficient taxable income is expected in future years in order to use the deferred tax asset. In evaluating the realizability of deferred income tax assets, we consider, among other things, historical levels of taxable income along with possible sources of future taxable income, which include: the expected timing of the reversals of existing temporary reporting differences, the existence of taxable income in prior carryback years, the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits and expected future taxable income. Changes in, among other things, income tax legislation, statutory income tax rates, or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, we record a valuation allowance, or release all or a portion of the valuation allowance if it is more likely than not the deferred tax assets are expected to be realized. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. As of December 31, 2020 and for the first three quarters of 2021, a valuation allowance of $29.0 million was maintained with respect to our foreign tax credits and state net operating losses based on a consideration at each period end of both positive and negative evidence related to the realization of the deferred tax assets. During the quarter ended December 31, 2021, the Company incurred a $13.2 million capital loss for tax purposes on the elimination of a wholly-owned subsidiary, which generated a deferred tax asset of $3.1 million. In assessing whether the deferred tax asset on the capital loss was realizable, the Company considered the fact that capital losses can only be utilized to offset capital gains and there were no available capital gains in the current year. Furthermore, for federal tax purposes capital losses can generally only be carried back 3 years and carried forward 5 years. Since there is no opportunity to carry back the capital loss and no material capital gains are anticipated within the carry forward period, we determined a full valuation allowance was needed with respect to the capital loss. As of December 31, 2021, the total valuation allowance attributable to our non-ODL supported foreign tax credits, state net operating losses and capital loss carryforward is $32.2 million. The Company concluded it was not more likely than not for the deferred tax assets related to the non-ODL supported foreign tax credits to be realized and maintained the valuation allowance with respect to these assets. The separate state NOLs can generally only be used by the originating entity and relate to entities that no longer maintain active schools. Since these entities are not expected to generate future operating income, the more likely than not threshold was not reached with respect to this portion of the deferred tax assets. Similarly, the Company determined a valuation allowance was needed with respect to the portion of the combined state net operating losses which will likely go unused due to the teach-out of the schools located in the applicable combined filing jurisdictions. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or decreased, and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance in future years for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration