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

NOTE 7. Income Taxes

The following is a reconciliation of our effective tax rate to the federal statutory tax rate:

 

 

Years Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

 

U.S. federal statutory rate

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

State taxes, net of federal benefit

 

3.5

 

 

 

3.6

 

 

 

3.5

 

 

Federal and state incentives

 

(0.5

)

 

 

(1.1

)

 

 

(0.9

)

 

State law changes

 

1.1

 

 

 

(0.2

)

 

 

0.7

 

 

Permanent differences

 

0.6

 

 

 

0.2

 

 

 

1.2

 

 

Net effective rate

 

25.7

 

%

 

23.5

 

%

 

25.5

 

%

 

The following is a summary of our provision for income taxes (in thousands):

 

 

Years Ended December 31,

 

 

2021

 

 

2020

 

 

2019

 

Current

 

 

 

 

 

 

 

 

Federal

$

51,918

 

 

$

11,913

 

 

$

31,209

 

State and local

 

13,876

 

 

 

3,597

 

 

 

3,979

 

Foreign

 

38

 

 

 

11

 

 

 

84

 

 

 

65,832

 

 

 

15,521

 

 

 

35,272

 

 

 

 

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

 

Federal

 

(5,125

)

 

 

6,548

 

 

 

(344

)

State and local

 

(1,254

)

 

 

465

 

 

 

1,788

 

Foreign

 

(17

)

 

 

7

 

 

 

(17

)

 

 

(6,396

)

 

 

7,020

 

 

 

1,427

 

 

 

 

 

 

 

 

 

 

Total provision

$

59,436

 

 

$

22,541

 

 

$

36,699

 

 

 

The following is a summary of our deferred tax assets and liabilities (in thousands):

 

 

December 31,

 

 

2021

 

 

2020

 

Accrued compensation

 

19,226

 

 

 

12,467

 

Other reserves

 

17,896

 

 

 

14,154

 

Tax credit carryforwards

 

8,286

 

 

 

8,715

 

Operating loss carryforwards

 

881

 

 

 

2,845

 

Lease accounting liability

 

11,956

 

 

 

11,669

 

Total gross deferred income taxes

 

58,245

 

 

 

49,850

 

Valuation allowances

 

(5,023

)

 

 

(6,518

)

Total deferred tax assets

 

53,222

 

 

 

43,332

 

 

 

 

 

 

 

Prepaids

 

(6,607

)

 

 

(6,404

)

Property and equipment

 

(135,768

)

 

 

(132,669

)

Intangibles

 

(55,466

)

 

 

(55,166

)

Lease right-of-use asset

 

(11,325

)

 

 

(11,418

)

Total deferred tax liabilities

 

(209,166

)

 

 

(205,657

)

 

 

 

 

 

 

Total deferred taxes

$

(155,944

)

 

$

(162,325

)

 

We are subject to income taxation in the United States, numerous state jurisdictions, Mexico and Canada. Because income tax return formats vary among the states, we file both unitary and separate company state income tax returns. We do not permanently reinvest our foreign earnings, all amounts are accrued and accounted for, though not material.

We acquired a federal net operating loss carryforward of $4.1 million through the acquisition by way of merger with CaseStack, LLC in December 2018. The Internal Revenue Service ("IRS") loss limitation rules allowed us to utilize $1.3 million in each of the 2021, 2020 and 2019 tax years. The remaining net operating loss of $0.2 million is expected to be fully utilized in 2022. Our state tax net operating losses total $0.6 million. Some of those state losses have no expiration date while others will expire between December 31, 2022, and December 31, 2040. Management believes it is more likely than not that the loss carryforward deferred tax assets will be realized.

Our federal incentive tax credit carryforward of $0.1 million expires between December 31, 2025, and December 31, 2028. Our state incentive tax credit carryforwards of $8.2 million expire between December 31, 2022, and December 31, 2026. Management believes it is more likely than not that approximately $3.4 million of the incentive carryforward deferred tax assets will be realized and a valuation allowance of $5.0 million has been established for the remainder which are not expected to be realized.

As of December 31, 2021 and December 31, 2020, the amount of unrecognized tax benefits was $6.6 million and $4.3 million, respectively. If recognized, these benefits would decrease our income tax provision by $5.4 million and $3.7 million, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

 

2021

 

 

2020

 

Gross unrecognized tax benefits - beginning of the year

$

4,292

 

 

$

4,069

 

Gross increases (decreases) related to prior year tax positions

 

997

 

 

 

(52

)

Gross increases related to current year tax positions

 

1,794

 

 

 

1,484

 

Lapse of applicable statute of limitations

 

(436

)

 

 

(1,209

)

Gross unrecognized tax benefits - end of year

$

6,647

 

 

$

4,292

 

 

We recognize interest and penalties related to income tax liabilities in our provision for income taxes. In 2021, we included $0.1 million in our provision for income taxes.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. Though some provisions of the CARES Act do impact the Company, there was no material effect on the Company’s consolidated financial condition or results of operations for the year ended December 31, 2020. On December 27, 2020, the Consolidated Appropriations Act (“CAA”) was enacted in further response to the COVID-19 pandemic, in combination with omnibus spending for the 2021 federal fiscal year. The CAA extended many of the provisions enacted by the CARES Act, the extension of which likewise did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2021.