Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense included in our consolidated statements of operations were as follows:

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Current:
Federal	$	15,846	$	11,914	$	4,011
State	3,650		1,790		894
Foreign	471		604		443
Current income tax expense	19,967		14,308		5,348
Deferred:
Federal	(11,212)		8,102		1,136
State	(3,722)		(1,226)		(1,370)
Foreign	(69)		—		—
Deferred income tax (benefit) expense	(15,003)		6,876		(234)
Income tax expense	$	4,964	$	21,184	$	5,114

Note 14—Income Taxes (continued)

Income tax expense differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:

	Year Ended December 31,
	2020		2019		2018
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	(2.0)		0.1		(0.5)
General business credits	(10.9)		(2.1)		(2.2)
Employee stock-based compensation	(7.7)		(2.2)		(17.1)
Tax Cuts and Jobs Act remeasurement	—		—		0.2
Non-deductible executive compensation	17.2		0.1		2.2
Capital loss valuation allowance release	(1.1)		—		—
Non-deductible penalties	1.1		—		—
Other	0.1		0.6		0.5
Effective tax rate	17.7	%	17.5	%	4.1	%

The increase in the effective tax rate for the year ended December 31, 2020 as compared to the prior year ended December 31, 2019 is primarily due to an increase of the IRC 162(m) limitation on the deductibility of certain executive compensation. This increase was partially offset by the impact of general business credits and an increase in excess tax benefits from stock-based compensation.

We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the year ended December 31, 2020, the provision for GILTI tax expense was not material to our financial statements.

The tax effects of temporary difference that give rise to significant portions of our deferred tax assets and liabilities were as follows:

	December 31,
	2020		2019
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	7,882	$	8,002
Stock-based compensation	7,651		5,820
Reserve for overdrawn accounts	7,661		4,456
Accrued liabilities	15,080		7,965
Lease liabilities	4,763		8,195
Tax credit carryforwards	10,035		8,723
Capital loss carryforwards	—		341
Other	543		—
Gross deferred tax assets	53,615		43,502
Valuation allowance	—		(341)
Total deferred tax assets	$	53,615	$	43,161
Deferred tax liabilities:
Internal-use software costs	$	29,149	$	29,382
Property and equipment, net	1,003		2,240
Deferred expenses	4,544		4,114
Intangible assets	10,009		7,826
Gift card revenue	1,389		1,422
Lease right-of-use assets	1,974		6,524
Other	—		388
Total deferred tax liabilities	48,068		51,896
Net deferred tax assets (liabilities)	$	5,547	$	(8,735)

Note 14—Income Taxes (continued)

We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. During the second quarter ended June 30, 2020, we released our valuation allowance against our capital loss carryforwards as we recognized capital gains on the sale of certain investment securities during that period sufficient to offset our entire capital loss carryforward amount. As of December 31, 2020, we did not have a valuation allowance on any of our deferred tax assets as we believe it is more-likely-than-not that we will realize the benefits of our deferred tax assets.

We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities. We remain subject to examination of our federal income tax returns for the years ended December 31, 2017 through 2019. We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates the returns were filed. The IRS initiated an examination of our 2017 U.S. federal tax return during the second quarter ended June 30, 2020 and the examination remains ongoing as of December 31, 2020. We do not expect that this examination will have a material impact on our consolidated financial statements.

As of December 31, 2020, we have federal net operating loss carryforwards of approximately $19.2 million and state net operating loss carryforwards of approximately $68.8 million which will be available to offset future income. If not used, the federal net operating losses will expire between 2026 and 2034. In regards to the state net operating loss carryforwards, approximately $46.6 million will expire between 2021 and 2040, while the remaining balance of approximately $22.2 million, does not expire and carries forward indefinitely. The net operating losses are subject to an annual IRC Section 382 limitation which restricts their utilization against taxable income in future periods. In addition, we have state business tax credits of approximately $17.3 million that can be carried forward indefinitely and other state business tax credits of approximately $1.1 million that will expire between 2023 and 2027.

As of December 31, 2020 and 2019, we had a liability of $9.5 million and $8.4 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows:

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Beginning balance	$	8,398	$	6,965	$	5,560
Increases related to positions taken during prior years	482		313		462
Increases related to positions taken during the current year	1,500		1,576		1,607
Decreases due to a lapse of applicable statute of limitations	(862)		(456)		(664)
Ending balance	$	9,518	$	8,398	$	6,965
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate	$	9,424	$	8,341	$	6,918

We recognized accrued interest and penalties related to unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018, of approximately $0.5 million, $0.5 million and $0.3 million, respectively.