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

14. Income Taxes:

 

The components of the income tax provision (benefit) are as follows (in thousands):

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Federal:

 

 

 

 

 

 

 

 

 

Current

 

$

41,592

 

 

$

(16,610

)

 

$

63,697

 

Deferred

 

 

(20,373

)

 

 

28,719

 

 

 

(45,660

)

 

 

 

21,219

 

 

 

12,109

 

 

 

18,037

 

State:

 

 

 

 

 

 

 

 

 

Current

 

 

16,888

 

 

 

(2,954

)

 

 

8,561

 

Deferred

 

 

(10,866

)

 

 

7,573

 

 

 

(10,022

)

 

 

 

6,022

 

 

 

4,619

 

 

 

(1,461

)

Total

 

$

27,241

 

 

$

16,728

 

 

$

16,576

 

 

The Company files its tax return on a consolidated basis with its subsidiaries, and its affiliated professional contractors file tax returns on an individual basis.

 

The effective tax rate for continuing operations was 20.1%, 234.0% and 28.2% for the years ended December 31, 2021, 2020 and 2019, respectively. The effective tax rate for the year ended December 31, 2021 includes a $10.8 million benefit related to a change in estimate of an income tax receivable based on loss carryback provisions under the CARES Act which allow 2020 net operating loss to be carried back for refund at prior 35% federal tax rate. The income tax receivable arose during the three months ended March 31, 2021 and resulted from a mutual agreement reached with the buyer of our former anesthesiology services medical group to treat a portion of the divestiture as an asset sale for tax purposes. The increase in the effective tax rate for the year ended December 31, 2020 as compared to the year ended December 31, 2019 was due to a significant reduction in pre-tax income as a result of the impacts from the transformational and restructuring related expenses and COVID-19.

 

The differences between the effective rate and the United States federal income tax statutory rate are as follows:

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Tax at statutory rate

 

 

21.00

%

 

 

21.00

%

 

 

21.00

%

State income tax, net of federal benefit

 

 

4.72

 

 

 

24.34

 

 

 

6.45

 

Non-deductible expenses

 

 

3.42

 

 

 

60.44

 

 

 

3.98

 

Equity compensation adjustments

 

 

0.77

 

 

 

98.61

 

 

 

6.45

 

Change in accrual estimates relating to
   uncertain tax positions

 

 

(1.08

)

 

 

4.22

 

 

 

(9.63

)

Change in valuation allowance

 

 

(0.26

)

 

 

23.67

 

 

 

0.39

 

Other, net

 

 

(0.46

)

 

 

1.71

 

 

 

(0.45

)

Change in tax law

 

 

(7.97

)

 

─

 

 

─

 

Income tax provision

 

 

20.14

%

 

 

233.99

%

 

 

28.19

%

 

All of the Company’s deferred tax assets and liabilities are classified as long-term. The significant components of deferred income tax assets and liabilities are as follows (in thousands):

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

Allowance for uncollectible accounts

 

$

135,280

 

 

$

79,755

 

Reserves and accruals

 

 

55,549

 

 

 

64,445

 

Stock-based compensation

 

 

3,303

 

 

 

7,517

 

Operating loss and other carryforwards

 

 

29,045

 

 

 

16,767

 

Capital loss carryforwards

 

 

428,805

 

 

 

447,854

 

Operating lease assets

 

 

18,960

 

 

 

15,042

 

Property and equipment

 

 

1,967

 

 

 

3,044

 

Other

 

 

686

 

 

 

571

 

Deferred tax assets before valuation
   allowance

 

 

673,595

 

 

 

634,995

 

Less: Valuation allowance

 

 

(441,529

)

 

 

(458,708

)

Deferred tax assets, net of valuation
   allowance

 

 

232,066

 

 

 

176,287

 

Gross deferred tax liabilities:

 

 

 

 

 

 

Amortization

 

 

(168,505

)

 

 

(152,969

)

Accounting method changes

 

 

—

 

 

 

(16,352

)

Operating lease liabilities

 

 

(16,439

)

 

 

(14,057

)

Other

 

 

(187

)

 

 

(183

)

Total deferred tax liabilities

 

 

(185,131

)

 

 

(183,561

)

Net deferred tax (liabilities) assets

 

$

46,935

 

 

$

(7,274

)

 

The Company’s net deferred tax assets were $46.9 million as of December 31, 2021, as compared to net deferred tax liabilities of $7.3 million at December 31, 2020. The increase in net deferred tax assets of $54.2 million during the year ended December 31, 2021 was primarily related to an increase in deferred tax assets related to allowance for uncollectible accounts.

 

For the years ended December 31, 2021, 2020 and 2019, income tax expense of $1.0 million, $7.1 million and $3.8 million, respectively, was recognized for excess tax deficiencies associated with equity compensation.

 

The Company generated $1.61 billion capital losses during the 2020 taxable year, with $1.57 billion from the sale of its former anesthesiology services medical group and $45.1 million from the sale of its former radiology services medical group, all of which will expire in 2025. Total capital loss carryforwards as of December 31, 2021 was $1.68 billion. As of December 31, 2021, management has determined that it is more likely than not that the tax benefits related to these carryforwards will not be realized and has recorded a full valuation allowance against the related deferred tax assets. Additionally, the Company has net operating loss carryforwards for federal and state tax purposes totaling $61.7 million, $35.4 million and $31.5 million at December 31, 2021, 2020 and 2019, respectively.

With respect to the December 31, 2021 balance, $25.1 million expires at various times from 2022 through 2041, and $36.6 million does not expire.

 

As of December 31, 2021, 2020 and 2019, the Company’s liability for uncertain tax positions, excluding accrued interest and penalties, was $4.9 million, $6.2 million and $7.4 million, respectively. As of December 31, 2021, the Company had $4.9 million of uncertain tax positions that, if recognized, would favorably impact its effective tax rate.

 

The following table summarizes the activity related to the Company’s liability for uncertain tax positions for the years ended December 31, 2021, 2020 and 2019 (in thousands):

 

 

 

Years Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Balance at beginning of year

 

$

6,168

 

 

$

7,409

 

 

$

11,185

 

Increases related to prior year tax
   positions

 

 

—

 

 

 

—

 

 

 

369

 

Decreases related to prior year tax
   positions

 

 

—

 

 

 

(1,041

)

 

 

—

 

Increases related to current year tax
   positions

 

 

900

 

 

 

100

 

 

 

1,700

 

Decreases related to divestitures

 

 

—

 

 

 

(300

)

 

 

—

 

Decreases related to lapse of statutes
   of limitation

 

 

(2,140

)

 

 

—

 

 

 

(5,845

)

Balance at end of year

 

$

4,928

 

 

$

6,168

 

 

$

7,409

 

 

During the year ended December 31, 2021, the Company decreased its liability for uncertain tax positions by $1.2 million, primarily related to expiration of statutes of limitation, partially offset by additional taxes on current year positions. During the year ended December 31, 2020, the Company decreased its liability for uncertain tax positions by $1.2 million, primarily related to a reduction in tax liability for prior year positions. In addition, the Company anticipates that its liability for uncertain tax positions will decrease by $2.0 million over the next 12 months.

 

The Company includes interest and penalties related to income tax liabilities in income tax expense. During the year ended December 31, 2021 and 2020, the Company included $0.4 million and $0.5 million, respectively, of interest and penalties in income tax expense. The impact to income tax expense related to penalties and interest was not material during the years ended December 31, 2019. At December 31, 2021 and 2020, the Company's accrued liability for interest and penalties related to income tax liabilities totaled $0.8 million and $1.0 million, respectively.

 

The Company is currently subject to U.S. Federal and various state income tax examinations for the tax years 2015 through 2020.