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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
10. | INCOME TAXES
Income tax expense for the years ended December 31, 2022 and 2021 is comprised of:
(in thousands) |  | 2022 |  |  | 2021 |
Federal, current |  | $ | 16,123 |  |  | $ | 9,875 |
Federal, deferred |  |  | 12,774 |  |  |  | 6,584 |
State, current |  |  | 5,136 |  |  |  | 2,777 |
State, deferred |  |  | 827 |  |  |  | 1,727 |
Income tax expense |  | $ | 34,860 |  |  | $ | 20,962 |
Income tax expense for the years ended December 31, 2022 and 2021 is summarized below:
(in thousands) |  | 2022 |  |  | 2021 |
Computed "expected" income tax expense |  | $ | 29,986 |  |  | $ | 16,643 |
State income taxes, net of federal income tax effect |  |  | 4,711 |  |  |  | 3,787 |
831(b) election |  |  | (1 | ) |  |  | (8 | )
Tax contingency accruals |  |  | (230 | ) |  |  | (295 | )
Valuation allowance, net |  |  | - |  |  |  | (242 | )
Tax credits |  |  | (379 | ) |  |  | (295 | )
Excess tax benefits on share-based compensation |  |  | (446 | ) |  |  | (259 | )
Change in prior year estimates |  |  | (145 | ) |  |  | (86 | )
Executive compensation disallowance |  |  | 1,778 |  |  |  | 1,705 |
Other, net |  |  | (414 | ) |  |  | 11 |
Income tax expense |  | $ | 34,860 |  |  | $ | 20,962 |
The amount of income tax expense (benefit) allocated to discontinued operations for TFS is $0.2 million expense and $0.8 million benefit for the years ended December 31, 2022 and 2021, respectively. Income tax expense varies from the amount computed by applying the applicable federal corporate income tax rate of 21% for 2022 and 2021, to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences. The IRS has issued guidance that allows meals and entertainment per diem to be 100% deductible for tax years 2021 and 2022. Accordingly, there is no adjustment in 2022 as our per diem plan qualifies for this treatment. The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at December 31, 2022 and 2021 are as follows:
(in thousands) |  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Insurance and claims |  | $ | 9,320 |  |  | $ | 9,453 |
Net operating loss carryovers |  |  | 3,583 |  |  |  | 4,448 |
Tax credits |  |  | 416 |  |  |  | 2,499 |
Leased liability |  |  | 16,292 |  |  |  | 9,599 |
Finance lease obligation |  |  | 1,360 |  |  |  | 2,800 |
State bonus |  |  | 2,945 |  |  |  | 2,165 |
Other |  |  | 5,206 |  |  |  | 2,361 |
Total deferred tax assets |  |  | 39,122 |  |  |  | 33,325 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  |  | (74,481 | ) |  |  | (68,090 | )
Investment in partnership |  |  | (42,151 | ) |  |  | (34,400 | )
ROU Asset- leases |  |  | (14,836 | ) |  |  | (9,178 | )
Other |  |  | (2,396 | ) |  |  | (783 | )
481(a) - finance leases |  |  | - |  |  |  | (2,177 | )
Prepaid expenses |  |  | (3,974 | ) |  |  | (3,358 | )
Total deferred tax liabilities |  |  | (137,838 | ) |  |  | (117,986 | )
Net deferred tax liability |  | $ | (98,716 | ) |  | $ | (84,661 | )
The net deferred tax liability of $98.8 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by net operating loss 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. The Company has determined that, 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 was not necessary at December 31, 2022 for our deferred tax assets since it is more likely than not they will be realized from future reversals of temporary differences. 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, 2022, we had a $0.4 million liability recorded for unrecognized tax benefits, which includes interest and penalties of less than $0.1 million. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. As of December 31, 2021, we had a $0.6 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 2022 and 2021. The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended December 31, 2022 and 2021:
|  | 2022 |  |  | 2021 |
Balance as of January 1, |  | $ | 596 |  |  | $ | 887 |
Decreases related to lapsing of statute of limitations |  |  | (204 | ) |  |  | (291 | )
Balance as of December 31, |  | $ | 392 |  |  | $ | 596 |
If recognized, approximately $0.4 million and $0.6 million of unrecognized tax benefits would impact our effective tax rate as of both December 31, 2022 and 2021, 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 2019 through 2021 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") was fully consumed in 2021. We have $1.0 million of federal tax credits available to offset future tax. Our state net operating loss carryforwards and state tax credits of $68.9 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. President Biden signed the Inflation Reduction Act (the "IRA") into law on August 16, 2022. We do not anticipate the IRA will have a significant impact on income tax expense or on other taxes. One of the most impactful provisions of the IRA includes the establishment of a Corporate Alternative Minimum Tax ("CAMT"). However, this tax only applies to corporations with three-year average earnings in excess of $1.0 billion. We will continue to monitor the CAMT each year to determine if we will become an applicable corporation. Additionally, the IRA enacted an excise tax on stock buybacks, which imposes a 1% tax on stock buybacks, subject to netting provisions regarding stock awarded to employees as part of their compensation. We do not believe this will have a material impact on our active buyback program, but will continue to monitor IRS guidance and regulations on how the buyback tax will be imposed and administered.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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