XML 41 R27.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company recognized income tax expense (benefit) of $20.7 million, $15.0 million and $(16.9) million during the years ended December 31, 2022, 2021 and 2020, respectively, which consists of the following (in thousands):
202220212020
Current provision
Federal
$1,558 $1,489 $— 
State
5,669 7,418 — 
Total current provision
7,227 8,907 — 
Deferred provision
Federal
13,743 8,363 (12,286)
State
(310)(2,253)(4,632)
Total deferred provision
13,433 6,110 (16,918)
Total income tax expense (benefit)$20,660 $15,017 $(16,918)
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):
202220212020
Computed “expected” tax expense (benefit)$19,900 $9,781 $(3,639)
Increase (decrease) in income taxes resulting from:
State income taxes4,289 3,659 (2,848)
Return-to-provision(132)(258)(7,613)
Change in fair value of contingent earnout shares(4,104)2,050 (1,782)
Change in fair value of warrants— — (2,640)
Permanently non-deductible transaction costs137 215 485 
Officer's compensation177 23 — 
Other permanent items467 18 220 
Enacted rate change(121)(28)(6)
Other47 (442)905 
Total income tax expense (benefit)$20,660 $15,017 $(16,918)
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):
20222021
Deferred tax assets:
Net operating loss carryforwards$15,089 $20,934 
Location contracts and other intangibles— 8,150 
Interest expense limitation carryforward4,513 — 
  Stock-based compensation3,019 2,513 
Lease liabilities1,469 — 
Other3,016 2,107 
27,106 33,704 
Deferred tax liabilities:
Property and equipment49,299 35,952 
Location contracts and other intangibles8,287 — 
Lease assets1,453 — 
Interest rate caplets4,693 — 
Other395 — 
64,127 35,952 
  Total deferred tax liability, net$(37,021)$(2,248)
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, 2022, 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, 2022, and 2021, the Company did not record a liability for unrecognized tax benefits.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. As of December 31, 2022, the Company is subject to U.S federal income tax examinations for the years 2019 through 2021 and income tax examinations from state jurisdictions for the years 2019 through 2021.
The following table summarizes carryforwards of net operating losses as of December 31 (in thousands):
20222021
AmountExpirationAmountExpiration
Federal net operating losses$33,057 Indefinite$61,514 Indefinite
State net operating losses106,939 2030106,810 2030
Federal general business tax credit132 2039— — 
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. With regard to Century, an ownership change occurred on the date the outstanding equity interests were purchased in 2022. As a result, the Company's use of the acquired NOLs, interest expense limitation carryforward and R&D credit carryforward on an annual basis will be limited. 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 had a credit carryforward of approximately $0.4 million as of December 31, 2020, which was fully utilized in 2021. The Company currently has a credit carryforward of $0.1 million as of December 31, 2022, which is being carried forward to 2023.
On March 27, 2020, the CARES Act was signed into law and authorized more than $2 trillion to battle COVID-19 and its economic effects. The Company was eligible for certain operational credits of the relief programs under the CARES Act and 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.