Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Prior to the consummation of the reverse recapitalization, TPG Pace Holding Corp. was registered in the Cayman Islands. On November 20, 2019 TPG Pace Holding Corp. effected a deregistration as an exempted company in the Cayman Islands under the Cayman Islands Companies Law (2018 Revision), and a domestication as a corporation incorporated under the laws of the State of Delaware under Section 388 of the DGCL, pursuant to which the Company's jurisdiction of incorporation was changed from the Cayman Islands to the State of Delaware. This domestication was analyzed under the applicable tax laws and it was determined that there were no significant tax implications associated with the domestication. 

The Company recognized income tax (benefit) expense of $(16.9) million, $5.2 million and $4.4 million during the years ended December 31, 2020, 2019 and 2018, respectively, which consists of the following (in thousands):

	2020		2019		2018
Current provision
Federal	$	—	$	(85)	$	(100)
State	—		43		222
Total current provision	—		(42)		122
Deferred provision
Federal	(12,286)		3,740		3,256
State	(4,632)		1,501		1,044
Total deferred provision	(16,918)		5,241		4,300
Total income tax (benefit) expense	$	(16,918)	$	5,199	$	4,422

A reconciliation of the “expected” income taxes computed by applying the federal statutory income tax rate to the total (benefit) expense is as follows (in thousands):

	2020		2019		2018
Computed “expected” tax (benefit) expense	$	(6,279)	$	(2,205)	$	3,197
(Decrease) increase in income taxes resulting from:
State income taxes	(2,848)		1,634		1,219
Return-to-provision	(7,613)		(341)		—
Change in fair value of contingent earnout shares	(1,782)		2,066		—
Permanently non-deductible transaction costs	485		2,079		—
Officer's compensation	—		1,991		—
Other permanent items	220		(16)		(264)
Enacted rate change	(6)		—		—
Other	905		(9)		270
Total income tax (benefit) expense	$	(16,918)	$	5,199	$	4,422

In the third quarter of 2020, the Company filed its federal and state income tax returns and identified certain favorable return-to-provision adjustments, primarily the deductibility of employee and officer compensations costs and transaction costs, following the engagement of specialized tax technical expertise resulting in a change in estimate relative to the Company's best estimate used in the preparation of the 2019 income tax provision. The Company recorded this change in estimate and related income tax benefit of $7.6 million for the year ended December 31, 2020.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows at December 31 (in thousands):

	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	31,215	$	6,633
Location contracts and other intangibles	5,829		4,699
Stock-based compensation	1,428		—
Other	394		260
	38,866		11,592
Deferred tax liabilities:
Property and equipment	35,005		24,568
Unrealized gain on investments in convertible notes	37		—
	35,042		24,568
Total deferred tax assets and liabilities, net	$	3,824	$	(12,976)

A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The guidance on accounting for income taxes provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient taxable income can reasonably be expected in future years in order to utilize the deferred tax asset.

The Company evaluated the need to record a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. As a result of this evaluation, the Company concluded as of December 31, 2020, that the positive evidence outweighed the negative evidence and that it is more likely than not that its deferred tax assets will be realized

As of December 31, 2020, and 2019, the Company has not recorded a liability for unrecognized tax benefits.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. As of December 31, 2020, the Company was subject to U.S federal income tax examinations for the years 2017 through 2019 and income tax examinations from state jurisdictions for the years 2017 through 2019. The Company is currently under federal income tax audit for the tax year 2017.

The following table summarizes carryforwards of net operating losses as of December 31 (in thousands):

	2020			2019
	Amount		Expiration	Amount		Expiration
Federal net operating losses	$	108,830	2033	$	27,873	2033
State net operating losses	106,004		2024	14,454		2024

The Company also has credit carryforwards of approximately $0.4 million and $0.5 million as of December 31, 2020 and 2019, respectively, which are expected to be fully utilized in 2021.

On March 27, 2020, the CARES Act was signed into law and authorizes more than $2 trillion to battle COVID-19 and its economic effects, including immediate cash relief for individual citizens, loan programs for small business, support for hospitals and other medical providers, and various types of economic relief for impacted businesses and industries. The Company was eligible for certain credits of the relief programs under the CARES Act and has recorded a benefit of $1.3 million to other expenses, net on its consolidated statements of operations and comprehensive (loss) income. The Company will continue to monitor the situation and evaluate any additional future legislation.