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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 11. Income Taxes Provision for income taxes consisted of the following (in thousands):
|  | Years ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 23,695 |  |  | $ | 35,434 |  |  | $ | 35,365 |
State |  |  | 11,441 |  |  |  | 8,999 |  |  |  | 19,788 |
|  |  | 35,136 |  |  |  | 44,433 |  |  |  | 55,153 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  |  | (2,424 | ) |  |  | (3,638 | ) |  |  | (11,552 | )
State |  |  | (1,826 | ) |  |  | (8,806 | ) |  |  | (2,726 | )
|  |  | (4,250 | ) |  |  | (12,444 | ) |  |  | (14,278 | )
Total provision for income taxes |  | $ | 30,886 |  |  | $ | 31,989 |  |  | $ | 40,875 |
The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate as follows:
|  | Years ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Tax provision at U.S. federal statutory rates |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State income taxes net of federal benefit |  |  | 9.5 |  |  |  | 11.6 |  |  |  | 12.1 |
Non-deductible permanent items |  |  | 3.8 |  |  |  | 2.5 |  |  |  | 0.9 |
Variable interest entities |  |  | 1.1 |  |  |  | (2.1 | ) |  |  | (1.1 | )
Stock-based compensation |  |  | 3.9 |  |  |  | 2.8 |  |  |  | (0.3 | )
Change in valuation allowance |  |  | (0.8 | ) |  |  | (2.6 | ) |  |  | 4.4 |
Gain on sale of investment |  |  | — |  |  |  | 8.5 |  |  |  | 1.2 |
Tax credits |  |  | (1.3 | ) |  |  | — |  |  |  | — |
NOL adjustment |  |  | (0.8 | ) |  |  | 0.2 |  |  |  | 0.5 |
Undistributed dividend |  |  | — |  |  |  | (11.5 | ) |  |  | 7.2 |
Spin-off transaction |  |  | — |  |  |  | 3.0 |  |  |  | — |
Uncertain tax position |  |  | 0.8 |  |  |  | — |  |  |  | — |
Tax rate change |  |  | (0.3 | ) |  |  | — |  |  |  | — |
Return-to-provision |  |  | (0.4 | ) |  |  | 2.4 |  |  |  | 0.6 |
Accrual to cash true-up |  |  | 1.3 |  |  |  | — |  |  |  | — |
Other |  |  | 0.4 |  |  |  | (0.3 | ) |  |  | 0.6 |
Effective income tax rate |  |  | 38.2 | % |  |  | 35.5 | % |  |  | 47.1 | %
The Company’s effective tax rate differs from the Federal statutory rate of 21% primarily due to state taxes, non-deductible permanent items, and stock-based compensation, offset by change in valuation allowance and R&D credits from increased R&D activities. Significant components of the Company’s deferred tax assets (liabilities) are shown below (in thousands).
|  | December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax assets |  |  |  |  |  |
State taxes |  | $ | 2,435 |  |  | $ | 2,831 |
Accrued expenses |  |  | 1,110 |  |  |  | 1,747 |
Allowance for bad debts |  |  | 3,741 |  |  |  | 1,718 |
Investment in other entities |  |  | — |  |  |  | 1,355 |
Net operating loss carryforward |  |  | 6,775 |  |  |  | 7,551 |
Lease liability |  |  | 8,644 |  |  |  | 10,897 |
Unrealized gain |  |  | 1,488 |  |  |  | 1,284 |
Stock options |  |  | 1,731 |  |  |  | 663 |
Deferred tax assets before valuation allowance |  |  | 25,924 |  |  |  | 28,046 |
Valuation allowance |  |  | (5,267 | ) |  |  | (5,904 | )
Net deferred tax assets |  |  | 20,657 |  |  |  | 22,142 |
Deferred tax liabilities |  |  |  |  |  |
Property and equipment |  |  | (1,031 | ) |  |  | (329 | )
Acquired intangible assets |  |  | (13,493 | ) |  |  | (15,301 | )
Right-of-use assets |  |  | (7,721 | ) |  |  | (9,936 | )
Debt issuance cost |  |  | (375 | ) |  |  | (648 | )
Investment in other entities |  |  | (1,701 | ) |  |  | — |
Other |  |  | (891 | ) |  |  | — |
Deferred tax liabilities |  |  | (25,212 | ) |  |  | (26,214 | )
Net deferred tax liabilities |  | $ | (4,555 | ) |  | $ | (4,072 | )
A valuation allowance of $5.3 million and $5.9 million as of December 31, 2024 and 2023, respectively, has been established against the Company’s deferred tax assets related to tax attributes with limitations on being utilized. Valuation allowance decreased by $0.6 million in 2024 and $2.4 million in 2023. As of December 31, 2024, the Company had federal and California tax net operating loss carryforwards of approximately $17.4 million and $44.8 million, respectively. The federal and California net operating loss carryforwards will expire at various dates from 2027 through 2044; however, $2.5 million of the federal net operating loss carryforwards do not expire and will be carried forward indefinitely. The Company has determined certain NOLs are limited pursuant to Internal Revenue Code Sections 382 and 383, but does not anticipate these NOLs will expire before utilization. The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be sustained upon examination by the relevant income tax authorities. The following table summarizes the activity related to the Company’s unrecognized tax benefits.
|  | 2024 |  |  | 2023 |
Gross unrecognized tax benefits at January 1, |  | $ | — |  |  | $ | — |
Increases for tax positions taken in the current year |  |  | 359 |  |  |  | — |
Increases for tax positions taken in the prior year |  |  | 359 |  |  |  | — |
Gross unrecognized tax benefits at December 31, |  | $ | 718 |  |  | $ | — |
If recognized, $0.7 million of the unrecognized tax benefits as of December 31, 2024 would reduce the annual effective tax rate. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. The Company is subject to U.S. federal income tax, as well as income tax in several states. The Company and its subsidiaries’ state and federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2020 through December 31, 2023 and for the years ended December 31, 2021 through December 31, 2023, respectively. The Company is currently under audit by the Internal Revenue Service and the California Franchise Tax Board for tax years ended December 31, 2019 through December 31, 2022.

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