INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax expense (benefit) consists of the following for the years ended December 31, 2023, 2022 and 2021 (in thousands):

	Year Ended December 31,
	2023		2022		2021
U.S. federal income tax expense (benefit):
Current	$	56,474	$	4,103	$	—
Deferred	18,739		38,810		(30,411)
	75,213		42,913		(30,411)
State income tax expense:
Current	20,253		9,182		6,817
Deferred	(3,814)		3,117		190
	16,439		12,299		7,007
Total income tax expense (benefit)	$	91,652	$	55,212	$	(23,404)

The difference between the statutory federal income tax rate and the effective tax rate is as follows for the years ended December 31, 2023, 2022 and 2021:

	Year Ended December 31,
	2023		2022		2021
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes net of federal tax benefit	4.8	%	5.0	%	4.9	%
Non-deductible expenses	0.1	%	0.2	%	0.3	%
Valuation allowance	(1.5)	%	0.0	%	(46.2)	%
Non-deductible and stock-based compensation	0.7	%	0.4	%	0.0	%
Other, net	0.4	%	0.2	%	(0.1)	%
Effective income tax rate	25.5	%	26.8	%	(20.1)	%

The Company recorded income tax expense of $91.7 million and $55.2 million, which represents an effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively. The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. In September 2023, the Company released $5.8 million of state valuation allowance. The variance in the Company’s effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively, is primarily attributable to the difference in state taxes, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 25.5% for the year ended December 31, 2023 compared to the federal statutory rate of 21% is also primarily attributable to state taxes, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 26.8% and negative 20.1% for the years ended December 31, 2022 and 2021, respectively, is primarily attributable to the release of the Company’s federal valuation allowance for the year ended December 31, 2021.

The components of deferred income tax assets and liabilities were as follows as of December 31, 2023 and 2022 (in thousands):

	December 31, 2023		December 31, 2022
Deferred tax assets:
Price concessions	$	5,365	$	6,169
Compensation and benefits	7,609		5,517
Interest limitation carryforward	13,802		29,453
Operating lease liability	26,378		22,765
Net operating losses	56,980		62,027
Other	7,556		6,576
Deferred tax assets before valuation allowance	117,690		132,507
Valuation allowance	(6,371)		(13,056)
Deferred tax assets net of valuation allowance	111,319		119,451
Deferred tax liabilities:
Accelerated depreciation	(8,882)		(7,026)
Operating lease right-of-use asset	(21,504)		(18,076)
Intangible assets	(52,502)		(57,673)
Goodwill	(52,188)		(44,949)
Other	(11,163)		(13,881)
Deferred tax liabilities	(146,239)		(141,605)
Net deferred tax liabilities	$	(34,920)	$	(22,154)

Deferred tax assets are generally required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. For the year ended December 31, 2023, the Company maintains a valuation allowance of $6.4 million against certain state net operating losses (“NOL”). In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income and tax-planning strategies, in making this assessment. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.

The Company is subject to taxation in the United States and various states. At December 31, 2023, the Company had $39.3 million of tax-effected federal NOL carryforwards all of which are currently available to offset future taxable income in the United States and reflected as a deferred tax asset of the company. Tax-effected federal NOL carryforwards of $28.4 million expire beginning in 2028 through 2036, and $10.9 million of tax-effected federal NOLs have an indefinite carryforward period. At December 31, 2022, the Company had $42.3 million of tax-effected federal NOLs. At December 31, 2023 and 2022, the Company had $13.8 million and $29.4 million tax-effected amounts of interest limitation carryforwards which have an indefinite carryforward period. At December 31, 2023 and 2022, the Company also had $17.7 million and $19.5 million tax-effected amounts of cumulative state NOL carryforwards available to offset future taxable income in various states. These state NOL carryforwards will begin to expire beginning in 2024 through 2042, with some having an indefinite carryforward period.

At December 31, 2023 and 2022, there were no unrecognized tax benefits for uncertain tax positions.

The following table presents the valuation allowance for deferred tax assets for the years ended December 31, 2023, 2022 and 2021 (in thousands):

			Additions
Description	Balance at Beginning of Period		Charged (Benefit) to Costs and Expenses		Charged (Benefit) to Other Accounts		Balance at End of Period
2021: Valuation allowance for deferred tax assets	$	112,085	$	(96,136)	$	(2,798)	$	13,151
2022: Valuation allowance for deferred tax assets	$	13,151	$	(95)	$	—	$	13,056
2023: Valuation allowance for deferred tax assets	$	13,056	$	(6,685)	$	—	$	6,371

Currently, the Company is not subject to any U.S. Federal income tax audits. The Company is subject to various state tax audits and believes that the outcome of these audits will not have a material impact on the Company.