Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company files a consolidated U.S. federal income tax return and various state income tax returns. The provision for the federal and state income taxes attributable to income (loss) consists of the following components:

	Years Ended December 31,
(in thousands)	2021			2020			2019
Current (benefit) expense
Federal taxes	$	(21,392)		$	(13,748)		$	(16,393)
State taxes	(2,565)			(2,148)			(282)
Total current provision	(23,957)			(15,896)			(16,675)
Deferred expense (benefit)
Federal taxes	25,518			13,325			16,286
State taxes	(3,255)			1,581			395
Total deferred provision	22,263			14,906			16,681
Income tax (benefit) expense	$	(1,694)		$	(990)		$	6
Effective tax rate	(27.2)		%	(168.9)		%	0.3		%

A reconciliation of income tax expense (benefit) determined by applying the federal and state tax rates to income before income taxes is as follows:

	Years Ended December 31,
(in thousands)	2021		2020		2019
Expected tax expense at federal statutory	$	1,310	$	24	$	371
State income taxes, net of federal tax effect	438		54		15
Revaluation of deferred tax liabilities	(5,206)		—		—
Stranded tax effects reclassified from other comprehensive income	1,620		—		—
Excess tax benefit from share based compensation and other expense, net	144		(1,068)		(380)
Income tax (benefit) expense	$	(1,694)	$	(990)	$	6

The effective tax rate in 2021 decreased from 2020, primarily as a result of recognition of non-cash deferred tax benefits triggered by the disposition of Wireless assets and operations, (see Note 3 – Discontinued Operations), which drove a reduction in the Company’s future estimated tax rate, as apportionable income and expenses for higher tax rate jurisdictions was reduced, resulting in a revaluation of deferred tax liabilities during the year ended December 31, 2021.

The Company's net cash payments for income taxes were $459.1 million in the year ended December 31, 2021, which included $434.3 million of payments related to the taxable gain from the sale of the Wireless business. The Company's cash payments for income taxes were $11.2 million in the year ended December 31, 2020.

Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply in the year of reversal or settlement and arise from temporary differences between the US GAAP and tax bases of the following assets and liabilities:

(in thousands)	December 31, 2021		December 31, 2020
Deferred tax assets:
Leases	$	15,483	$	123,129
Asset retirement obligations	2,581		10,403
Net operating loss carry-forwards	5,878		7,723
Pension liabilities	2,148		3,868
Accruals and stock based compensation	2,572		3,093
Other	6,300		5,002
Total gross deferred tax assets	34,962		153,218
Less valuation allowance	—		—
Net deferred tax assets	34,962		153,218
Deferred tax liabilities:
Property, plant and equipment	92,449		127,602
Leases	15,410		126,458
Intangible assets	10,710		25,722
Prepaid assets and other	2,407		22,120
Total gross deferred tax liabilities	120,976		301,902
Net deferred tax liabilities	$	86,014	$	148,684

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generating future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in prior carryback years if available and tax planning strategies in making this assessment. Based upon the level of historical taxable income, projections for future taxable income over the periods for which the deferred tax assets are deductible, and the option to elect out of bonus depreciation on in-serviced fixed assets, the Company believes it more likely than not that the net deferred tax assets will be realized.

The Company has a deferred tax asset of $5.9 million related to federal and various state net operating losses. As of December 31, 2021, the Company had approximately $27.8 million of federal net operating losses expiring through 2027. The Company also had approximately $0.3 million of state net operating losses expiring through 2036.

As of December 31, 2021 and 2020, the Company had no unrecognized tax benefits. 

The Company is not currently subject to state or federal income tax audits as of December 31, 2021. The Company's returns are generally open to examination from 2018 forward and the net operating losses acquired from nTelos are open to examination from 2002 forward.