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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
10. | INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 2021 and 2020 is comprised of:
(in thousands) |  | 2021 |  |  | 2020 |
Federal, current |  | $ | 9,875 |  |  | $ | 63 |
Federal, deferred |  |  | 6,584 |  |  |  | (2,391 | )
State, current |  |  | 2,777 |  |  |  | 2,349 |
State, deferred |  |  | 1,727 |  |  |  | (2,825 | )
Income tax (benefit) expense |  | $ | 20,962 |  |  | $ | (2,804 | )
Income tax expense (benefit) for the years ended December 31, 2021 and 2020 is summarized below:
(in thousands) |  | 2021 |  |  | 2020 |
Computed "expected" income tax expense |  | $ | 16,643 |  |  | $ | (3,554 | )
State income taxes, net of federal income tax effect |  |  | 3,787 |  |  |  | (227 | )
831(b) election |  |  | (8 | ) |  |  | (123 | )
Per diem allowances |  |  | - |  |  |  | 1,028 |
Tax contingency accruals |  |  | (295 | ) |  |  | 65 |
Valuation allowance, net |  |  | (242 | ) |  |  | (139 | )
Tax credits |  |  | (295 | ) |  |  | (403 | )
Excess tax benefits on share-based compensation |  |  | (259 | ) |  |  | 129 |
Change in prior year estimates |  |  | (86 | ) |  |  | 288 |
Executive compensation disallowance |  |  | 1,705 |  |  |  | - |
Other, net |  |  | 11 |  |  |  | 132 |
Income tax (benefit) expense |  | $ | 20,962 |  |  | $ | (2,804 | )
The amount of income tax expense (benefit) allocated to discontinued operations for TFS is $0.8 million expense and $9.5 million benefit for the years ended December 31, 2021 and 2020, respectively. Income tax expense varies from the amount computed by applying the applicable federal corporate income tax rate of 21% for 2021 and 2020, 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 in 2020. 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. The nondeductible effect of per diem is temporarily suspended for 2021 and 2022 in accordance with IRS guidance issued during the quarter ended December 31, 2021. The rate impact of these items will fluctuate in future periods as income fluctuates. The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at December 31, 2021 and 2020 are as follows:
(in thousands) |  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Insurance and claims |  | $ | 9,453 |  |  | $ | 10,970 |
Net operating loss carryovers |  |  | 4,448 |  |  |  | 7,759 |
Tax credits |  |  | 2,499 |  |  |  | 11,395 |
Leased liability |  |  | 9,599 |  |  |  | 9,969 |
Finance lease obligation |  |  | 2,800 |  |  |  | 3,848 |
State bonus |  |  | 2,165 |  |  |  | 4,860 |
Other |  |  | 2,361 |  |  |  | 4,917 |
Valuation allowance |  |  | - |  |  |  | (242 | )
Total deferred tax assets |  |  | 33,325 |  |  |  | 53,476 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  |  | (68,090 | ) |  |  | (78,682 | )
Investment in partnership |  |  | (34,400 | ) |  |  | (31,585 | )
ROU Asset- leases |  |  | (9,178 | ) |  |  | (9,697 | )
Other |  |  | (783 | ) |  |  | (4,353 | )
481(a) - finance leases |  |  | (2,177 | ) |  |  | (588 | )
Prepaid expenses |  |  | (3,358 | ) |  |  | (3,124 | )
Total deferred tax liabilities |  |  | (117,986 | ) |  |  | (128,029 | )
Net deferred tax liability |  | $ | (84,661 | ) |  | $ | (74,553 | )
The net deferred tax liability of $84.7 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by net operating 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, no valuation allowance has been established at December 31, 2021. 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, 2021, we had a $0.6 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, 2020, we had a $0.9 million liability recorded for unrecognized tax benefits, which included interest and penalties of $0.1 million. Interest and penalties recognized for uncertain tax positions provided for de minimus expense in 2021 and 2020. The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended December 31, 2021 and 2020:
|  | 2021 |  |  | 2020 |
Balance as of January 1, |  | $ | 887 |  |  | $ | 823 |
Increases related to prior year tax positions |  |  | - |  |  |  | - |
Decreases related to prior year positions |  |  | - |  |  |  | - |
Increases related to current year tax positions |  |  | - |  |  |  | 98 |
Decreases related to settlements with taxing authorities |  |  | - |  |  |  | - |
Decreases related to lapsing of statute of limitations |  |  | (291 | ) |  |  | (34 | )
Balance as of December 31, |  | $ | 596 |  |  | $ | 887 |
If recognized, approximately $0.6 million and $0.9 million of unrecognized tax benefits would impact our effective tax rate as of both December 31, 2021 and 2020, respectively. 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 2016 through 2020 tax years remain subject to examination by the IRS for U.S. federal tax purposes, our major taxing jurisdiction. In the normal course of business, we are also subject to audits by state and local tax authorities. We do not anticipate total unrecognized tax benefits to materially change in the next twelve months. Our federal net operating loss ("NOL") will be fully consumed in the current year. We have $2.1 million of federal tax credits available to offset future tax. Our state net operating loss carryforwards and state tax credits of $86.8 million and $0.4 million, respectively, expire beginning in 2023 and 2029 based on jurisdiction. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act, among other things, includes provisions for refundable payroll tax credits, deferral for employer-side social-security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The Company considered the impacts of the legislation in the 2021 and 2020 financial statements. On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the "ARPA") into law. The new law includes several provisions meant to stimulate the U.S. economy. Of relevance to the Company, ARPA extended the reach of IRC Section 162(m) to include compensation paid to the eight highest-paid individuals other than the chief executive officer and chief financial officer (rather than the three highest), however, this change is not effective until 2027. There is no material impact to the financial statements at this time.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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