Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

10. Income Taxes

The components of the provision for income taxes are comprised of the following for the years ended December 31:

	2022		2021		2020
Domestic
Current	$	2,488	$	1,365	$	296
Deferred		29,882		469		(8,751)
Foreign
Current		—		70		—
Deferred		—		—		—
Total income tax expense (benefit)	$	32,370	$	1,904	$	(8,455)

Income tax results differed from the amount computed by applying the U.S. statutory income tax rate to income (loss) before income taxes for the following reasons for the years ended December 31:

	2022		2021		2020
Statutory income tax expense (benefit)	$	22,325	$	(561)	$	(7,053)
State tax expense		2,797		1,120		(450)
Effect of tax rates in foreign jurisdictions		(28)		30		(17)
Change in fair value of warrant liabilities		6,664		224		(494)
Transaction costs		—		—		(899)
Valuation allowances		310		452		(279)
Compensation		383		500		201
Other		(81)		139		536
Reported income tax expense (benefit)	$	32,370	$	1,904	$	(8,455)

Income tax expense (benefit) was $32.4 million, $1.9 million and $ (8.5) million for the years ended December 31, 2022, 2021 and 2020, respectively. The effective tax rate for the years ended December 31, 2022, 2021, and 2020 was 30.4%, (71.3)% and 25.2%, respectively.  The fluctuation in the rate for the years ended December 31, 2022, 2021 and 2020, respectively, results primarily from the relationship of year-to-date income (loss) before income tax, the fluctuation in the permanent add-back related to the change in fair value of warrant liabilities on the Company’s warrants, the impact of state tax expense based off of gross receipts, and a compensation deduction limitation during each of the years ended December 31, 2022, 2021, and 2020.  

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and carryforwards.

Significant components of the deferred tax assets and liabilities for the Company are as follows:

	2022		2021
Deferred tax assets (liabilities)
Stock-based compensation	$	4,793	$	1,182
Deferred revenue		1,621		7,779
Intangible assets		9,157		9,640
Tax loss carryforwards		30,649		34,303
Operating lease obligations		5,152		—
Interest carryforwards		4,997		—
Other - net		23		402
Deferred tax assets gross		56,392		53,306
Valuation allowance		(4,486)		(4,176)
Net deferred income tax asset		51,906		49,130
Deferred tax liabilities
Rental equipment and other plant, property and equipment		(60,771)		(33,709)
Operating lease right-of-use assets		(5,955)		—
Software		(352)		(711)
Deferred tax liability		(67,078)		(34,420)
Net deferred income tax asset (liability)	$	(15,172)	$	14,710

Tax loss carryovers for federal and foreign income tax purposes totaled $136.9 million at December 31, 2022 as shown in the below table.  Approximately $6.7 million of these foreign income tax loss carryovers expire between 2023 and 2043. The remaining $130.2 million of federal income tax loss carryovers do not expire. The availability of these tax losses to offset future income varies by jurisdiction. Furthermore, the ability to utilize the tax losses may be subject to additional limitations upon the occurrence of certain events, such as changes in ownership of the Company. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, the Company believes it is more likely than not that all of the United States related deferred tax assets will be realized.

The amount of the deferred tax assets considered realizable, however, could be reduced if estimates of future taxable income during the carryforward period are reduced. A valuation allowance has been established against the deferred tax assets to the extent it is not more likely than not they will be realized.

				Valuation
	2022		Expiration	Allowance
United States	$	130,212	Unlimited	—	%
Canada		6,123	2023-2043	100	%
Mexico		527	2024-2033	100	%
Total	$	136,862

Unrecognized Tax Positions

No amounts have been accrued for uncertain tax positions as of December 31, 2022 and 2021. However, management's conclusion regarding uncertain tax positions may be subject to review and adjustment at a later date based on ongoing analyses of tax laws, regulations, and interpretations thereof and other factors. The Company does not have any unrecognized tax benefits as of December 31, 2022 and 2021 and does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Additionally, no interest or penalty related to uncertain taxes has been recognized in the accompanying consolidated financial statements.

The Company is subject to taxation in US, Canada, Mexico and state jurisdictions. The Company’s tax returns are subject to examination by the applicable tax authorities prior to the expiration of the statute of limitations for assessing additional taxes, which generally ranges from two to five years. Therefore, as of December 31, 2022, tax years for 2016 through 2022 generally remain subject to examination by the tax authorities. In addition, in the case of certain tax jurisdictions in which the Company has loss carryforwards, the tax authority in some of these jurisdictions may examine the amount of the tax loss carryforward based on when the loss is utilized rather than when it arises.