Income Taxes

12 Months Ended

Dec. 31, 2023

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:

	2023			2022			2021
Pre-tax loss:
Federal	$	(35,111	)	$	(27,991	)	$	(24,574	)
Foreign		3,272			(1,578	)		958
Total		(31,839	)		(29,569	)		(23,616	)

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

	2023			2022			2021
Current:
Federal	$	—		$	—		$	(49	)
State		1,840			664			271
Foreign		(1,131	)		58			295
Total		709			722			517
Deferred:
Federal		(438	)		517			448
State		(960	)		1,726			744
Foreign		(291	)		(715	)		—
Total		(1,689	)		1,528			1,192
Income tax (benefit) expense	$	(980	)	$	2,250		$	1,709

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:

	2023			2022
Deferred tax assets:
Net operating losses	$	14,200		$	15,641
Allowance for bad debts		696			552
Employee related		12,626			5,655
Contingent consideration		10,294			9,755
ROU assets		11,529			10,526
Transaction costs		2,347			—
Other		6,883			6,526
Total deferred tax asset		58,575			48,655
Deferred tax liabilities:
Intangible assets		(15,005	)		(6,070	)
Property and equipment		(11,086	)		(5,785	)
Lease liabilities		(11,140	)		(10,033	)
Interest rate swap		(900	)		(1,739	)
Section 481A adjustment		(1,538	)		—
Other		(941	)		(218	)
Total deferred tax liability		(40,610	)		(23,845	)
Valuation allowance		(24,029	)		(30,552	)
Net deferred tax liability	$	(6,064	)	$	(5,742	)

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:

	2023				2022				2021
Tax completed at federal statutory rate		21.00		%		21.00		%		21.00		%
State tax net of federal benefit		(9.12	)			2.42				15.41
Non-deductible expenses		(2.24	)			(0.34	)			(0.47	)
Equity compensation		(1.71	)			(16.95	)			31.95
Embedded derivatives		4.47				(1.90	)			(1.97	)
Transaction costs		4.47				—				—
Foreign taxes		0.97				0.05				(0.06	)
Federal deferred tax adjustment		(30.42	)			—				6.41
Change in valuation allowance		19.23				(12.13	)			(80.26	)
GILTI		(3.39	)			—				—
Other		0.07				0.18				0.67
Effective income tax rate		3.33		%		(7.67	)	%		(7.32	)	%

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 (decrease) increase in the Company’s valuation allowance was $(6.5) million and $3.6 million during the year ended December 31, 2023 and 2022, 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, 2023, 2022, and 2021, the Company does not have any unrecognized tax benefits.

The Company makes IRC Section 338 elections, to treat certain stock transactions as asset acquisitions. The Company makes such determination after a transaction has occurred and records preliminary anticipated ASC 740 impacts. Once finalized, any changes in anticipated treatment are accounted for upon filing of income tax returns and prior to relevant statutory deadlines (Note 8).

As of December 31, 2023, federal and state net operating loss carryforwards of approximately $54.5 million and $69.8 million are available to offset future federal and state taxable income, respectively.

Federal net operating loss carryforwards will begin to expire during 2036 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, $51.5 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 2023 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, Sweden, and Denmark for which returns are subject to examination for various years, dependent on the jurisdiction.

The Organization for Economic Co-operation and Development (“OECD”) has introduced a framework to implement a global minimum corporate tax of 15%, referred to as Pillar Two. Many aspects of Pillar Two will be effective beginning in calendar year 2024 and other aspects will be effective beginning in calendar year 2025. While it is uncertain whether the U.S. will adopt Pillar Two, certain countries in which the Company operates have adopted legislation and other countries are in the process of introducing legislation to implement Pillar Two. While the Company does not expect Pillar Two to have a material impact on its effective tax rate, the Company's analysis is ongoing as the OECD releases additional guidance and countries implement additional legislation.

The Inflation Reduction Act (“IRA”) was signed into law on August 16, 2022. Among other provisions, the IRA includes a 15% corporate minimum tax applied to large corporations, known as the “CAMT”. The CAMT does not impact the Consolidated Financial Statements for 2023. The Company will continue to evaluate the impact of CAMT on future years.

The Tax Cuts and Jobs Act of 2017, enacted tax provisions, that became 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, the Company 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.