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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of the provision for income taxes are as follows:
| Years Ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Current taxes |  |  |  |  |
Federal | $ | (72,517) |  |  | $ | 9,022 |  |  | $ | 15,262 |
State | 2,002 |  |  | 2,033 |  |  | 5,217 |
| (70,515) |  |  | 11,055 |  |  | 20,479 |
Deferred taxes |  |  |  |  |
Federal | 9,871 |  |  | 7,363 |  |  | 5,760 |
State | (8,680) |  |  | 1,632 |  |  | 120 |
| 1,191 |  |  | 8,995 |  |  | 5,880 |
(Benefit) Provision for income taxes | $ | (69,324) |  |  | $ | 20,050 |  |  | $ | 26,359 |
The effective rate varies from the statutory U.S. federal tax rate as follows:
| Years Ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Income tax expense at statutory federal rate | $ | (15,710) |  |  | $ | 15,789 |  |  | $ | 20,537 |
State income taxes, net of federal effect | (5,276) |  |  | 2,883 |  |  | 4,308 |
Nondeductible professional fees | (665) |  |  | 1,255 |  |  | 1,776 |
Other permanent differences including lobbying expense | 279 |  |  | 424 |  |  | 236 |
Share-based compensation | (922) |  |  | (261) |  |  | (718) |
Gain on bargain purchases | (13,413) |  |  | — |  |  | — |
CARES Act | (33,347) |  |  | — |  |  | — |
Deferred tax impact of TCJA | — |  |  | — |  |  | 117 |
Return to provision adjustments | (270) |  |  | (245) |  |  | 89 |
Change in uncertain tax positions | — |  |  | 205 |  |  | 14 |
Total (benefit) provision for income taxes | $ | (69,324) |  |  | $ | 20,050 |  |  | $ | 26,359 |
Effective income tax rate on continuing operations | 92.7 | % |  | 26.7 | % |  | 27.0 | %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income taxes at December 31, 2020 and 2019 are as follows:
| Years Ended December 31,
(in thousands) | 2020 |  | 2019
Deferred tax assets: |  |  |
Accrued liabilities and other | $ | 2,128 |  |  | $ | 3,233 |
Tax basis difference in property and equipment | — |  |  | 9,148 |
Tax basis difference in share-based compensation | 914 |  |  | 1,800 |
Tax basis difference in naming rights liabilities | 60,159 |  |  | — |
Tax basis difference in self constructed assets | 3,953 |  |  | — |
Federal tax net operating loss carryforwards | 648 |  |  | 121 |
State tax net operating loss carryforwards | 7,816 |  |  | 310 |
Total deferred tax assets, net | $ | 75,618 |  |  | $ | 14,612 |
Deferred tax liabilities: |  |  |
Tax basis difference in land | $ | (5,053) |  |  | $ | (2,865) |
Tax basis difference in property and equipment | (4,998) |  |  | — |
Change in accounting method | (16,234) |  |  | — |
Tax basis difference in non-shareholder contribution | (6,766) |  |  | — |
Tax basis difference in goodwill | (4,433) |  |  | (4,296) |
Tax basis difference in amortizable assets | (75,117) |  |  | (21,241) |
Total deferred tax liabilities | $ | (112,601) |  |  | $ | (28,402) |
Net deferred tax liabilities | $ | (36,983) |  |  | $ | (13,790) |
The Company will only recognize a deferred tax asset when, based on available evidence, realization is more likely than not. Accordingly, no valuation has been established as of December 31, 2020 and 2019, respectively. During 2019, the Company acquired Dover Downs Entertainment, Inc. in a stock acquisition. Pursuant to ASC 805, the Company recognized an acquisition of $11.9 million of deferred tax assets. During 2020, the Company acquired the assets of Bally’s Park Place LLC and Bally’s Atlantic City LLC in an asset acquisition. Pursuant to ASC 805, the Company recognized an acquisition of $11.1 million of deferred tax liabilities. During 2020, the Company acquired 100% membership interests of Eldorado Shreveport, #1 LLC and Eldorado Shreveport, #2 LLC in an equity acquisition treated as an asset acquisition for tax purposes. Pursuant to ASC Topic 805, Business Combinations, the Company recognized an acquisition of $11.5 million of deferred tax liabilities. For the years ended December 31, 2020 and 2019 the net deferred tax liabilities increased by $23.2 million and decreased by $3.7 million, respectively. For the year ended December 31, 2020, an increase of $1.2 million was included in income from operations, an increase of $22.6 million was acquired from business combinations in 2020, and a decrease $0.6 million was included in other comprehensive loss. For the year ended December 31, 2019, an increase of $9.0 million was included in income from operations, a decrease of $11.9 million was acquired from the Dover Downs Entertainment, Inc., and a decrease of $0.9 million was included in other comprehensive loss. As of December 31, 2020, the Company has $3.1 million of federal net operating carryforwards subject to a section 382 limitation and $3.8 million of Delaware net operating loss carryforwards, both with an unlimited carryforward period. There was $0.6 million of federal net operating carryforwards subject to a section 382 limitation and $2.6 million of Delaware net operating loss carryforwards, both with an unlimited carryforward period, as of December 31, 2019. As of December 31, 2020 and December 31, 2019, the Company has $12.1 million and $3.6 million, respectively, of Colorado net operating loss carryforwards which expire at various dates through 2037. In addition, at December 31, 2020, the Company has $22.7 million of Louisiana loss carryforwards, $15.5 million of Missouri loss carryforwards, $17.2 million of New Jersey loss carryforwards, and $65.3 million of Rhode Island loss carryforwards, which expire at various dates through 2040. There were no Louisiana, Missouri, New Jersey, or Rhode Island loss carryforwards at December 31, 2019. As of December 31, 2020, the Company anticipates sufficient taxable income to make utilization of these net operating losses more likely than not during the carryforward periods, and accordingly, no valuation allowance has been established. CARES Act On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees, including those that operate in the gaming area. Based on the Company’s analysis of the CARES Act, the benefits the Company believes will be available to it include: a.refund of federal income taxes due to five-year carryback of net operating loss incurred in 2020 when our 2020 tax return is filed; b.relaxation of interest expense deduction limitation for income tax purposes; c.the employee retention credit, providing a refundable federal tax credit equal to 50% of the first $10,000 of qualified wages and benefits, including qualified medical plan contributions, paid to employees while they are not performing services after March 12, 2020 and before January 1, 2021; and d.deferral of all employer Federal Insurance Contributions Act (“FICA”) taxes for the remainder of 2020, 50% payable by December 2021 and the remainder payable by December 2022. The Company realized a tax benefit of $33.3 million in the 2020 provision. The Company intends to continue to review and consider any available potential benefits under the CARES Act for which it qualifies, including those described above. The Company cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and the Company cannot provide assurances that it will be able to access such benefits in a timely manner or at all. If the U.S. government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance, it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the “TCJA”). SAB 118 provides a measurement period that begins in the reporting period that includes the TCJA’s enactment date and ends when an entity has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC 740, however in no circumstance should the measurement period extend beyond one year from the enactment date. In accordance with SAB 118, a company must reflect in its financial statements the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. SAB 118 provides that to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. In accordance with SAB 118, the Company has recorded a provisional estimated income tax benefit of $(0.1) million for the year ended December 31, 2019 related to the remeasurement of the Company’s net deferred tax liability and other effects of the TCJA. As a result of the adoption of the TCJA, the Company remeasured the net deferred tax liability at the reduced federal corporate income tax rate. During the fourth quarter of 2018, the Company completed its analysis to determine the deferred tax effect of the TCJA and recorded immaterial adjustments as of December 22, 2018. From time to time, the Company may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where the Company conducts business. While the Company believes that the tax returns filed, and tax positions taken are supportable and accurate, some tax authorities may not agree with the positions taken. This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor. As of December 31, 2020, there were no tax contingency accruals for uncertain tax positions, which would impact the effective tax rate, if recognized. There were no tax contingency accruals for uncertain tax positions recorded as of December 31, 2020. There was no unrecognized tax benefit recorded as of December 31, 2020. A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows:
| Years Ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Uncertain tax position liability at the beginning of the year | $ | — |  |  | $ | 400 |  |  | $ | 445 |
Increases related to tax positions taken during prior period | — |  |  | — |  |  | 21 |
Decreases related to tax positions taken during prior periods | — |  |  | (400) |  |  | — |
Decreases related to settlements with taxing authorities | — |  |  | — |  |  | (66) |
Uncertain tax position liability at the end of the year | $ | — |  |  | $ | — |  |  | $ | 400 |
The Company and its subsidiaries file tax returns in several jurisdictions including the United States and the States of Colorado, Delaware, Louisiana, Mississippi, Missouri, New Jersey and Rhode Island. The Company remains subject to examination for U.S. federal income tax purposes for the years ended December 31, 2017 through 2020. The Company remains subject to examination for state tax purposes for the years ended December 31, 2012 through 2020. The Company is currently under audit by the State of Colorado for tax years ended December 31, 2012 through 2015. Based on the current status of the Colorado audit, the Company believes no additional reserves are necessary. In addition, the disallowance of a loss carryforward generated in a period outside of the normal statute of limitations is generally open until the statute of limitations expires in the year of the utilization of the loss. The Company has a tax sharing agreement with its subsidiaries. Under the agreement, subsidiaries are required to satisfy their separate return liability and pay for benefits realized by virtue of filing a consolidated return. The Company and its subsidiaries made total cash tax payments during 2020 and 2019 of $3.8 million and $16.5 million, respectively, to federal and state taxing authorities. Effective July 10, 2014, the tax sharing agreement was amended to comply with the credit agreement in place related to the Company’s indebtedness. The amendment limits payments to any Unrestricted Subsidiaries, as defined in the credit agreement, to the actual payments of tax made by the unrestricted subsidiary directly or indirectly to the consolidated group. As of December 31, 2020, Mile High USA, Inc. and its subsidiaries are unrestricted subsidiaries.

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