Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax (benefit) expense for the Company years ended December 31, 2020 and 2019, consisted of the following (dollars in thousands):

	Year Ended December 31, 2020		Year Ended December 31, 2019
Current income tax expense
Federal	$	7,441	$	10,952
State and local	2,126		2,656
Total current income tax expense	$	9,567	$	13,608
Deferred income tax (benefit) expense
Federal	$	(21,799)	$	6,999
State and local	(7,017)		1,656
Total deferred tax (benefit) expense	(28,816)		8,655
Total income tax (benefit) expense	$	(19,249)	$	22,263

Total income tax (benefit) expense differed from the amount computed by applying the federal statutory tax rate of 21.0% for the years ended December 31, 2020 and 2019, as a result of the following (dollars in thousands):

	Year Ended December 31, 2020		Year Ended December 31, 2019
Computed income tax expense at federal statutory rate on pre-tax (loss) income	$	(16,583)	$	17,539
State income tax expense, net of federal tax benefit	(3,753)		4,415
Bankruptcy costs	150		446
Section 162 disallowance	375		936
Provision to return	(152)		(1,564)
Other adjustments	714		491
Net income tax (benefit) expense	$	(19,249)	$	22,263

    

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (dollars in thousands):

	December 31, 2020		December 31, 2019
Deferred income tax assets:
Accounts receivable	$	1,753	$	1,332
Leases	45,977		42,374
Other liabilities	4,777		4,980
Debt costs	1,132		841
Interest limitation	451		3,966
Financing liabilities	54,708		—
Net operating loss	39		—
Total deferred income tax assets before valuation allowance	108,837		53,493
Less: valuation allowance	—		—
Total deferred tax assets	$	108,837	$	53,493
Deferred income tax liabilities:
Intangible assets	$	27,586	$	12,992
Property and equipment	30,417		22,465
Leases	40,962		36,666
Other	2,093		2,408
Total deferred income tax liabilities	$	101,058	$	74,531
Total net deferred income tax assets (liabilities)	$	7,779	$	(21,038)

Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences between the tax and financial reporting bases of our assets and liabilities and other tax attributes. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

As of December 31, 2020 and 2019, the Company did not record a valuation allowance because of the reversal of deferred tax liabilities of the Company and expected future taxable income.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (the "CARES Act") was signed into law. Among other provisions, the law provides relief to U.S. federal corporate taxpayers through temporary adjustments to net operating loss rules, changes to limitations on interest expense deductibility, and technical corrections to qualified improvement property. The Company recognized the effect of the changes in tax law on existing deferred tax assets and liabilities in income from continuing operations in the period ended December 31, 2020. The new legislation is retroactive. As a result, the effective tax rate for the current period and income taxes payable or receivable for the prior annual period was adjusted for the period ended December 31, 2020 resulting in a federal cash tax benefit of approximately $3.5 million and an immaterial state cash tax benefit.

As of December 31, 2020, the Company did not have federal interest expense disallowance carryforwards as a result of the change in the adjusted taxable income limitation pursuant to the CARES Act. The Company had state interest expense disallowance carryforwards in certain jurisdictions of $550.8 million, which are available to offset future taxable income and have an indefinite carryforward period.

The Company records interest and penalties related to uncertain tax positions in income tax expense. For interest and penalties, the Company recorded income tax expense of $0.2 million in each of the years ended December 31, 2020 and 2019. As of December 31, 2020 and 2019, the total interest and penalties accrued was $0.5 million and $0.3 million, respectively.

The total uncertain tax positions and accrued interest and penalties as of December 31, 2020 and 2019 were $6.1 million and $5.9 million, respectively. The uncertain tax positions and accrued interest and penalties are presented as non-current liabilities, as payments are not anticipated within one year of the balance sheet date. These non-current income tax liabilities are recorded in other long-term liabilities in the Consolidated Balance Sheets. The $6.1 million as of December 31, 2020 represents the uncertain tax positions and accrued interest and penalties that, if recognized, would favorably affect the effective income tax rate in future periods. As of December 31, 2020, the Company does not believe that the uncertain tax positions will significantly change within the next 12 months as a result of the settlement of tax audits. Interest and penalties accrued on uncertain tax positions are released upon the expiration of statutes of limitations.

All federal income tax returns are closed for tax years through 2016. For the majority of state and local tax jurisdictions in which the Company is subject to income tax audits, tax years through 2016 have been closed.

The following table reconciles uncertain tax positions (dollars in thousands):

	Year Ended December 31, 2020		Year Ended December 31, 2019
Balance at beginning of period	$	5,651	$	5,787
Decreases for prior year tax positions	—		(120)
Decreases relating to settlements with taxing authorities and other	(81)		(16)
Balance at end of period	$	5,570	$	5,651