Income Taxes

12 Months Ended

Dec. 31, 2021

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 expense (benefit) of $15.0 million, $(16.9) million and $5.2 million during the years ended December 31, 2021, 2020 and 2019, respectively, which consists of the following (in thousands):

	2021		2020		2019
Current provision
Federal	$	1,489	$	—	$	(85)
State	7,418		—		43
Total current provision	8,907		—		(42)
Deferred provision
Federal	8,363		(12,286)		3,740
State	(2,253)		(4,632)		1,501
Total deferred provision	6,110		(16,918)		5,241
Total income tax expense (benefit)	$	15,017	$	(16,918)	$	5,199

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

	2021		2020		2019
Computed “expected” tax expense (benefit)	$	9,781	$	(3,639)	$	(6,629)
Increase (decrease) in income taxes resulting from:
State income taxes	3,659		(2,848)		1,634
Return-to-provision	(258)		(7,613)		(340)
Change in fair value of contingent earnout shares	2,050		(1,782)		2,066
Change in fair value of warrants	—		(2,640)		4,423
Permanently non-deductible transaction costs	215		485		2,079
Officer's compensation	23		—		1,991
Other permanent items	18		220		(16)
Enacted rate change	(28)		(6)		—
Other	(442)		905		(9)
Total income tax expense (benefit)	$	15,017	$	(16,918)	$	5,199

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):

	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	20,934	$	31,215
Location contracts and other intangibles	8,150		5,829
Stock-based compensation	2,513		1,428
Other	2,107		394
	33,704		38,866
Deferred tax liabilities:
Property and equipment	35,952		35,005
Unrealized gain on investments in convertible notes	—		37
	35,952		35,042
Total deferred tax (liability) asset, net	$	(2,248)	$	3,824

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, 2021, 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, 2021, and 2020, the Company did 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, 2021, the Company was subject to U.S federal income tax examinations for the years 2018 through 2020 and income tax examinations from state jurisdictions for the years 2018 through 2020. The Company's 2017 federal income tax return was under examination but the audit concluded in the fourth quarter of 2021 with no adjustments.

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

	2021			2020
	Amount		Expiration	Amount		Expiration
Federal net operating losses	$	61,514	Indefinite	$	108,830	2033
State net operating losses	106,810		2030	106,004		2030

Significant equity restructuring often results in an Internal Revenue Section 382 ownership change that limits the future use of net operating loss (“NOL”) carryforwards and other tax attributes. The Company has determined that it has undergone an ownership change in 2019 (as defined by Section 382 of the Internal Revenue Code). As a result, the Company's use of NOL carryforwards on an annual basis will be limited. Neither the amount of the Company's NOL carryforwards nor the amount of limitation of such carryforwards claimed by the Company have been audited or otherwise validated by the Internal Revenue Service, which could challenge the amount the Company has calculated. The recognition and measurement of the Company's tax benefit includes estimates and judgment by the Company's management, which includes subjectivity. Changes in estimates may create volatility in the Company's tax rate in future periods based on new information about particular tax positions that may cause management to change its estimates.

The Company also had a credit carryforward of approximately $0.4 million as of December 31, 2020, which was 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 operational 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 income (loss) for the year ended December 31, 2020. The Company will continue to monitor the situation and evaluate any additional future legislation.