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Note 8 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
8. | INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 2019, 2018, and 2017 is comprised of:
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Federal, current |  | $ | (1,174 | ) |  | $ | - |  |  | $ | (7,780 | )
Federal, deferred |  |  | 3,976 |  |  |  | 14,117 |  |  |  | (28,055 | )
State, current |  |  | 1,077 |  |  |  | 1,410 |  |  |  | (1,737 | )
State, deferred |  |  | (415 | ) |  |  | (20 | ) |  |  | 5,430 |
Income tax expense (benefit) |  | $ | 3,464 |  |  | $ | 15,507 |  |  | $ | (32,142 | )
Income tax expense (benefit) for the years ended December 31, 2019, 2018, and 2017 is summarized below:
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Computed "expected" income tax expense |  | $ | 2,508 |  |  | $ | 12,182 |  |  | $ | 8,154 |
State income taxes, net of federal income tax effect |  |  | (351 | ) |  |  | 2,610 |  |  |  | 862 |
831(b) election |  |  | (393 | ) |  |  | (200 | ) |  |  | (290 | )
Per diem allowances |  |  | 1,450 |  |  |  | 1,446 |  |  |  | 2,145 |
Tax contingency accruals |  |  | 601 |  |  |  | (57 | ) |  |  | (43 | )
Valuation allowance, net |  |  | 321 |  |  |  | - |  |  |  | (1,167 | )
Tax credits |  |  | (377 | ) |  |  | (968 | ) |  |  | (1,352 | )
Impact of Tax Act remeasurement |  |  | - |  |  |  | - |  |  |  | (40,123 | )
Excess tax benefits on share-based compensation |  |  | 105 |  |  |  | 50 |  |  |  | (457 | )
Change in prior year estimates |  |  | (420 | ) |  |  | - |  |  |  | - |
Other, net |  |  | 20 |  |  |  | 444 |  |  |  | 129 |
Income tax expense (benefit) |  | $ | 3,464 |  |  | $ | 15,507 |  |  | $ | (32,142 | )
Income tax expense varies from the amount computed by applying the applicable federal corporate income tax rate of 21 % for 2019 and 2018 and of 35% for 2017 , to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences, the most significant of which is the effect of the per diem pay structure for drivers and the impacts of tax reform discussed below. Drivers who meet the requirements to receive per diem receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and employee benefits are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven, the impact of the per diem program on our effective tax rate is significant. Due to the partially nondeductible effect of per diem pay, our tax rate will fluctuate in future periods based on fluctuations in earnings. The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at December 31, 2019 and 2018 are as follows:
(in thousands) |  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Insurance and claims |  | $ | 10,269 |  |  | $ | 9,593 |
Net operating loss carryovers |  |  | 25,849 |  |  |  | 10,260 |
Tax credits |  |  | 10,942 |  |  |  | 11,985 |
Leased liability |  |  | 15,668 |  |  |  | - |
Capital lease obligation |  |  | 8,483 |  |  |  | - |
State bonus |  |  | 6,576 |  |  |  | 5,938 |
Other |  |  | 2,160 |  |  |  | 2,412 |
Valuation allowance |  |  | (385 | ) |  |  | (63 | )
Total deferred tax assets |  |  | 79,562 |  |  |  | 40,125 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  |  | (97,066 | ) |  |  | (87,939 | )
Investment in partnership |  |  | (36,669 | ) |  |  | (26,066 | )
Deferred fuel hedge |  |  | - |  |  |  | (73 | )
ROU Asset- leases |  |  | (15,280 | ) |  |  | - |
Other |  |  | (449 | ) |  |  | (569 | )
Sec. 481(a) - capital leases |  |  | (7,462 | ) |  |  | - |
Prepaid expenses |  |  | (2,966 | ) |  |  | (2,945 | )
Total deferred tax liabilities |  |  | (159,892 | ) |  |  | (117,592 | )
Net deferred tax liability |  | $ | (80,330 | ) |  | $ | (77,467 | )
The net deferred tax liability of $80.3 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by tax credit carryovers and insurance claims that have been reserved but not paid. The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. Based on forecasted taxable income resulting from the reversal of deferred tax liabilities, primarily generated by accelerated depreciation for tax purposes in prior periods, and tax planning strategies available to us, a valuation allowance has been established at December 31, 2019 of approximately $0.4 million related to certain state net operating loss carry forwards. If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets. As of December 31, 2019 , we had a $0.9 million liability recorded for unrecognized tax benefits, which includes interest and penalties of $0.1 million. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. As of December 31, 2018 , we had a $2.7 million liability recorded for unrecognized tax benefits, which included interest and penalties of $0.9 million. Interest and penalties recognized for uncertain tax positions provided for a $0.1 million expense in 2018 and a $0.8 million and $0.1 million benefit in 2019 and 2017 , respectively. The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended December 31, 2019, 2018, and 2017 :
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance as of January 1, |  | $ | 1,796 |  |  | $ | 1,924 |  |  | $ | 2,051 |
Increases related to prior year tax positions |  |  | 2,969 |  |  |  | 4 |  |  |  | 19 |
Decreases related to prior year positions |  |  | - |  |  |  | (9 | ) |  |  | (10 | )
Increases related to current year tax positions |  |  | 287 |  |  |  | - |  |  |  | - |
Decreases related to settlements with taxing authorities |  |  | (4,200 | ) |  |  | - |  |  |  | - |
Decreases related to lapsing of statute of limitations |  |  | (29 | ) |  |  | (123 | ) |  |  | (136 | )
Balance as of December 31, |  | $ | 823 |  |  | $ | 1,796 |  |  | $ | 1,924 |
If recognized, approximately $0.9 million and $2.5 million of unrecognized tax benefits would impact our effective tax rate as of both December 31, 2019 and 2018 . Any prospective adjustments to our reserves for income taxes will be recorded as an increase or decrease to our provision for income taxes and would impact our effective tax rate. Our 2015 through 2018 tax years remain subject to examination by the IRS for U.S. federal tax purposes, our major taxing jurisdiction. As of December 31, 2019, the 2013 audit was settled and the resulting adjustments have been recorded in the 2019 financial statements. In the normal course of business, we are also subject to audits by state and local tax authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect the more likely than not outcome of known tax contingencies. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution. We do not expect any significant increases or decreases for uncertain income tax positions during the next year. The charitable contributions will begin expiring in 2022. Our federal net operating loss of $103.9 million is available to offset future federal taxable income, if any, of which $1.4 million will expire in 2037, with the remaining loss of $102.5 million with indefinite life. In addition to the federal net operating losses, we also have $10.4 million of federal tax credits plus $2.1 million of charitable contributions which will begin to expire in 2028 and 2022, respectively. Our federal tax credits of $10.4 million are available to offset future federal taxable income, which will begin to expire in 2028. We have a federal alternative minimum tax credit carryforward of $1.2 million that, under the Tax Act, will be fully refunded by 2021. Our state net operating loss carryforwards and state tax credits of $115.7 million and $0.6 million, respectively expire beginning in 2021 and 2029 based on jurisdiction.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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