Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12. INCOME TAXES

The following is a geographical breakdown of income before the provision for (loss) income taxes as of December 31:

	2022			2021			2020
Pre-tax loss:
Federal	$	(27,991	)	$	(24,574	)	$	(58,140	)
Foreign		(1,578	)		958			1,042
Total		(29,569	)		(23,616	)		(57,098	)

Income tax expense for the years ended December 31, is comprised of the following:

	2022			2021			2020
Current:
Federal	$	—		$	(49	)	$	(38	)
State		664			271			1,152
Foreign		58			295			490
Total		722			517			1,604
Deferred:
Federal		517			448			(1,184	)
State		1,726			744			553
Foreign		(715	)		—			(122	)
Total		1,528			1,192			(753	)
Income tax expense	$	2,250		$	1,709		$	851

The Company’s deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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

	2022			2021
Deferred tax assets:
Net operating losses	$	15,641		$	16,180
Allowance for bad debts		552			1,250
Employee related		5,655			1,291
Contingent consideration		9,755			9,770
ROU assets		10,526			8,285
Other		6,526			1,711
Total deferred tax asset		48,655			38,487
Deferred tax liabilities:
Intangible assets		(6,070	)		(2,467	)
Property and equipment		(5,785	)		(4,860	)
Lease liabilities		(10,033	)		(8,144	)
Interest rate swap		(1,739	)		—
Other		(218	)		(64	)
Total deferred tax liability		(23,845	)		(15,535	)
Valuation allowance		(30,552	)		(26,958	)
Net deferred tax liability	$	(5,742	)	$	(4,006	)

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, is as follows:

	2022				2021				2020
Tax completed at federal statutory rate		21.00		%		21.00		%		21.00		%
State tax net of federal benefit		2.42				15.41				1.32
Non- deductible expenses		(0.34	)			(0.47	)			(1.05	)
Equity compensation		(16.95	)			31.95				(0.59	)
Embedded derivatives and warrant options		(1.90	)			(1.97	)			(7.43	)
Foreign taxes		0.05				(0.06	)			(0.77	)
Federal deferred tax adjustment		—				6.41				—
Change in valuation allowance		(12.13	)			(80.26	)			(14.30	)
Other		0.18				0.67				0.34
Effective income tax rate		(7.67	)	%		(7.32	)	%		(1.48	)	%

The Company elected to account for the global intangible low-taxed income inclusion as a period cost.

The Company recorded a valuation allowance against its US, Australia and Sweden net deferred tax assets as realization of such assets is not more likely than not. The impact of indefinite lived deferred items was considered in recording such valuation allowance. The increase in the Company’s valuation allowance was $3.6 million and $18.7 million during the year ended December 31, 2022 and 2021, respectively.

The Company’s policy is to record any penalties or interest related to any unrecognized tax benefits as a component of the income tax provision. As of December 31, 2022, 2021, and 2020, the Company does not have any unrecognized tax benefits.

As of December 31, 2022, federal and state net operating loss carryforwards of approximately $60.7 million and $37.3 million are available to offset future federal and state taxable income, respectively.

Federal net operating loss carryforwards will begin to expire during 2035 while the Company’s state net operating loss carryforwards will begin to expire during various years, dependent on the jurisdiction. Federal net operating losses generated beginning in 2018 are carried forward indefinitely. Therefore, $51.9 million of Federal net operating loss carryforwards will not expire.

The Company is subject to audit by federal and state tax authorities in the ordinary course of business. The Company’s federal income tax returns remain subject to examination for the 2015 through 2022 tax years. The Company files in multiple state jurisdictions which remain subject to examination for various years depending on such state jurisdiction. The Company is also subject to audit by tax authorities in Canada, Australia, Germany, and Sweden for which returns are subject to examination for various years, dependent on the jurisdiction.

The Tax Cuts and Jobs Act of 2017, enacted tax provisions, that become effective during the taxable year ended December 31, 2022, requiring companies compute adjusted taxable income for IRC §163(j) purposes with the inclusion of depreciation and amortization deductions, making such limitation less taxpayer favorable. The Company adopted such provisions and recorded a corresponding deferred tax asset during the year ended December 31, 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. The CARES Act includes several significant provisions for corporations, including those pertaining to net operating losses, interest deductions and payroll tax benefits. Under ASC 740, the effects of new legislation are recognized upon enactment. Accordingly, the effects of the CARES Act have been incorporated into the income tax provision computation for the year ended December 31, 2020. These provisions did not have a material impact on the income tax provision. The Company deferred the employer side social security payments for payroll paid for the portion of 2020 following enactment as permitted by the CARES Act. In total, we deferred approximately $5.0 million of 2020 payments to 2021 and 2022, of which $2.5 million was repaid in 2021 and the remaining amount was paid in 2022.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (CAA 2021) which included a number of provisions including, but not limited to the extension of numerous employment tax credits, the extension of the Section 179D deduction, enhanced business meals deductions, and the deductibility of expenses paid with Paycheck Protection Program (PPP) loan funds that are forgiven. Accordingly, the effects of the CAA 2021 have been incorporated into the income tax provision for the year ended December 31, 2020. These provisions did not have a material impact on the income tax provision.