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Note 12 - Federal and State Income Taxes

12 Months Ended

Dec. 31, 2020

12.

FEDERAL AND STATE INCOME TAXES

Under GAAP, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax reporting purposes.

Significant components of the Company’s deferred tax liabilities and assets at December 31 are as follows:

	2020		2019
	(in thousands)

Deferred tax liabilities:
Property and equipment	$	100,736	$	83,453
Unrealized gains on securities		2,580		2,580
Prepaid expenses and other		2,599		2,193

Total deferred tax liabilities		105,915		88,226

Deferred tax assets:
Current expected credit losses		896		760
Tax credit carryforwards		988		988
Compensated absences		189		512
Self-insurance allowances		674		5,630
Marketable equity securities		2,129		1,253
Net operating loss carryover		32,031		15,364
Other		125		197

Total deferred tax assets		37,032		24,704

Net deferred tax liability	$	68,883	$	63,522

The reconciliation between the effective income tax rate and the statutory Federal income tax rate for the years ended December 31, 2020, 2019 and 2018 is presented in the following table:

	2020				2019						2018
	(in thousands)
	Amount		Percent		Amount			Percent			Amount		Percent

Federal income tax at statutory rate	$	4,916		21.0	$	2,124			21.0		$	6,582		21.0
Nondeductible per diem and meals		321		1.4		-			-			-		-
Other nondeductible expenses, net		-		-		342			3.4			80		0.2
State income taxes/other, net		345		1.5		(251	)		(2.5	)		685		2.2

Total income tax expense	$	5,582		23.9	$	2,215			21.9		$	7,347		23.4

The provision (benefit) for income taxes consisted of the following:

	2020			2019			2018
	(in thousands)
Current:
Federal	$	(62	)	$	(56	)	$	(48	)
State		282			646			189
Total current income tax provision		220			590			141
Deferred:
Federal		4,860			2,177			6,185
State		502			(552	)		1,021
Total deferred income tax provision		5,362			1,625			7,206

Total income tax provision expense	$	5,582		$	2,215		$	7,347

In March 2020, the President of the United States signed the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), to stabilize the economy during the coronavirus pandemic. The CARES Act temporarily suspends and modifies certain tax laws established by the TCJA, including, but not limited to, modifications to net operating loss limitations, business interest limitations and alternative minimum tax. The CARES Act did not have a material impact on the Company’s current year provision or the Company’s consolidated financial statements.

The Company has general business credits of approximately $988,000 at December 31, 2018, which begin to expire after the year 2030. The Company also has net operating loss carryovers for federal income purposes of approximately $59,715,000 of which $30,835,000 will begin to expire after the year 2030 while the remaining balance does not expire and can be carried forward indefinitely.

In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether, based on the weight of that evidence, a valuation allowance is necessary. If negative conditions exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable income to determine the amount, if any, of the required valuation allowance. As of December 31, 2020 and 2019, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position. As of December 31, 2020, an adjustment to the Company’s consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During 2020 and 2019, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which the Company operates generally provide for a deficiency assessment statute of limitation period of three years, and as a result, the Company’s tax years 2017 and forward remain open to examination in those jurisdictions.

- 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.

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