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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

(9) Income Taxes

 

Income taxes consist of the following:

               
   Year Ended December 31, 
   2024   2023   2022 
   (In thousands) 
Current federal tax expense  $4,376   $7,122   $16,946 
Current state tax expense   1,807    2,613    3,352 
Deferred federal tax expense   1,382    4,307    5,573 
Deferred state tax expense   663    1,712    4,339 
                
Income tax expense  $8,228   $15,754   $30,210 

 

 

Income tax expense for the years ended December 31, 2024, 2023 and 2022 differs from the amount determined by applying the statutory federal rate to income before income taxes as follows:

               
   Year Ended December 31, 
   2024   2023   2022 
   (In thousands) 
Expense at federal tax rate  $5,760   $12,830   $24,401 
State taxes, net of federal income tax effect   1,863    3,716    6,462 
Stock-based compensation   (958)   (1,184)   (2,611)
Non-deductible expenses   1,612    1,629    1,056 
Net operating loss carryback   –    –    – 
Effect of change in tax rate   –   –    – 
Accounting method change   –    –    – 
Other   (49)   (1,237)  902 
Income tax expense  $8,228   $15,754   $30,210 

 

The tax effected cumulative temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows:

          
   December 31, 
   2024   2023 
   (In thousands) 
Deferred Tax Assets:        
Finance receivables  $77   $895 
Accrued liabilities   703    1,423 
NOL carryforwards   256    400 
Built in losses   753    1,383 
Stock compensation   755    1,131 
Lease liability   5,846    883 
Other   185    – 
Total deferred tax assets  $8,575   $6,115 
           
Deferred Tax Liabilities:          
Pension accrual  $(2,015)  $(1,217)
Lease right-of-use assets   (5,301)   (803)
Furniture and equipment and other   (249)   (359)
Total deferred tax liabilities   (7,565)   (2,379)
Net deferred tax asset  $1,010   $3,736 

 

We acquired certain net operating losses and built-in loss assets as part of our acquisitions of MFN Financial Corp. (“MFN”) in 2002 and TFC Enterprises, Inc. (“TFC”) in 2003. Moreover, both MFN and TFC have undergone an ownership change for purposes of Internal Revenue Code (“IRC”) Section 382. In general, IRC Section 382 imposes an annual limitation on the ability of a loss corporation (that is, a corporation with a net operating loss (“NOL”) carryforward, credit carryforward, or certain built-in losses (“BILs”)) to utilize its pre-change NOL carryforwards or BILs to offset taxable income arising after an ownership change.

 

In determining the possible future realization of deferred tax assets, we have considered future taxable income from the following sources: (a) reversal of taxable temporary differences; and (b) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire.

 

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgements, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of $1.0 million as of December 31, 2024 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $1.0 million consists of approximately $479,000 of net U.S. federal deferred tax assets and $530,000 of net state deferred tax assets.

 

As of December 31, 2024, we had net operating loss carryforwards for state income tax purposes of $4.1 million. These state net operating losses begin to expire in 2025.

 

We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize potential interest and penalties related to unrecognized tax benefits as income tax expense. At December 31, 2024, we had no unrecognized tax benefits for uncertain tax positions.

 

We are subject to taxation in the US and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2020.