Income Taxes

12 Months Ended

Dec. 31, 2019

Note 10 – Income Taxes

Income tax provision (benefits) are summarized as follows:

	Year Ended December 31,
(In thousands)	2019			2018			2017
Current:
Federal	$	(371	)	$	(741	)	$	(91	)
State		—			—			(5	)
Total current tax benefit		(371	)		(741	)		(96	)
Deferred:
Federal	$	(1,475	)	$	9,872		$	(7,456	)
State		(30	)		508			(369	)
Total deferred tax benefit		(1,505	)		10,380			(7,825	)
Income tax (benefit) provision	$	(1,876	)	$	9,639		$	(7,921	)

Reconciliation of the statutory federal income tax rate to the Company’s actual rate based on income (loss) before income tax benefit is summarized as follows:

	Year Ended December 31,
	2019			2018			2017
Statutory federal tax rate		21.0	%		21.0	%		35.0	%
State income taxes, net of federal income taxes		1.2			4.5			2.0
Permanent tax differences – stock compensation		(0.7	)		22.0			—
Permanent tax differences – business meals		(0.9	)		(5.0	)		—
Permanent tax differences – executive compensation		(0.1	)		(0.2	)		(12.5	)
Permanent tax differences – other		0.1			—			(17.0	)
Purchase price allocation adjustment – merger		5.9			—			—
Change in valuation allowance		(32.3	)		(144.5	)		193.5
FICA credit generated		2.8			8.5			11.8
Impact of Tax Cuts and Jobs Act		—			(4.8	)		(74.6	)
Impact of ASC 842		7.7			—			—
Change in tax rate and apportionment		(0.3	)		(4.3	)		—
Deferred only adjustment to beginning deferred balances		0.1			17.3			—
Other, net		—			—			(0.4	)
Effective tax rate		4.5	%	(85.5%)				137.8	%

The Company’s current and non-current deferred tax assets (liabilities) are comprised of the following:

	December 31,
(In thousands)	2019			2018
Deferred tax assets:
Accruals and reserves	$	5,346		$	3,854
Share-based compensation expense		4,958			3,758
Alternative minimum tax credit carryforward		371			741
General business credit carryforward		3,936			2,447
State tax credits		5,500			5,500
Net operating loss carryforwards		27,269			19,156
Operating lease obligation		46,525
Other		583			944
		94,488			36,400
Valuation allowances		(36,652	)		(23,276	)
	$	57,836		$	13,124
Deferred tax liabilities:
Prepaid services		(288	)		(876	)
Amortization of intangible assets		(7,760	)		(9,519	)
Depreciation of fixed assets		(7,534	)		(5,322	)
Right-of-use assets		(43,342	)
		(58,924	)		(15,717	)
Net deferred tax assets (liabilities)	$	(1,088	)	$	(2,593	)

Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income and the impact of tax planning strategies. The Company's financial results for the year ended December 31, 2019, include a net increase in valuation allowance of $13.4 million. The Company has performed a continuing evaluation of its deferred tax asset valuation allowance on a quarterly basis. The Company concluded that, as of December 31, 2019, negative evidence outweighs positive evidence for the realization of deferred tax assets and as a result has provided a full valuation allowance against its net deferred tax assets.

As of December 31, 2019, the Company had approximately $123.5 million of federal net operating loss carryforwards, which will begin to expire in 2033. These net operating losses have the potential to be used to offset future ordinary taxable income and reduce future cash tax liabilities. However, in connection with the American Acquisition, the Company issued 4,046,494 shares of its common stock to a former American equity holder, which resulted in an “ownership change” under Section 382 that will generally limit the amount of net operating losses the Company can utilize annually. As of December 31, 2019, the Company has concluded that the American Acquisition will not result in a loss of net operating loss nor credit carryforwards.

Additionally, the Company had deferred tax assets of approximately $3.9 million related to general business credits. The general business credit carryforward begins to expire in 2037.

As of December 31, 2019, the Company’s 2017 tax year is under audit by the IRS.

As of December 31, 2019, the Company has no uncertain tax positions.