Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Components of provision for income taxes are as follows:

	Years Ended December 31,
(in thousands)	2021		2020		2019
Current:
Federal	$	(4,937)	$	(16,986)	$	5,461
State	483		192		719
Total current	(4,454)		(16,794)		6,180
Deferred:
Federal	4,065		15,169		1,803
State	1,547		2,263		(5,029)
Total deferred	5,612		17,432		(3,226)
Total provision for income taxes	$	1,158	$	638	$	2,954

A reconciliation of the federal statutory tax rate to our effective tax rate applicable to continuing operations is as follows:

	Years Ended December 31,
	2021		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes	5.3	%	4.5	%	6.0	%
Research and development credits	(17.2)	%	(28.0)	%	—	%
Change in uncertain tax positions	(6.3)	%	6.9	%	0.2	%
Tax benefit from net operating loss carryback	—	%	(10.2)	%	—	%
Permanent items	1.4	%	5.4	%	2.3	%
State tax rate change effect on deferred balance	(0.8)	%	1.7	%	—	%
Other tax credits	(0.2)	%	(0.1)	%	(0.1)	%
Tax audit adjustments	(0.1)	%	—	%	0.9	%
Change in valuation allowance	—	%	—	%	(22.5)	%
Other	(0.4)	%	0.4	%	1.9	%
Tax provision	2.7	%	1.6	%	9.7	%

The significant components of our deferred tax assets and liabilities are presented in the following table:

	As of December 31,
(in thousands)	2021		2020
Deferred tax assets:
Lease liabilities	$	40,389	$	35,801
Research and development credits	13,332		9,637
Accrued expenses	13,260		15,611
Provision for doubtful accounts and implicit price concessions	12,154		13,291
Deferred benefit plan compensation	8,316		11,199
Net operating loss carryforwards	7,714		8,907
Inventory reserves	3,425		2,945
Share-based compensation	2,998		3,437
Refund liabilities	2,169		2,518
Other	2,857		3,378
Deferred tax assets	106,614		106,724
Less: Valuation allowance	(2,075)		(2,112)
Total deferred tax assets	104,539		104,612
Deferred tax liabilities:
Lease assets	37,095		32,069
Goodwill	12,116		9,368
Property, plant, and equipment	6,731		7,198
Prepaid expenses	3,103		1,100
Total deferred tax liabilities	59,045		49,735
Net deferred tax assets	$	45,494	$	54,877

We provide a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have $1.6 million and $4.6 million of U.S. federal net operating loss carryforwards available as of December 31, 2021 and 2020, respectively. We have $139.1 million and $153.0 million of state net operating loss carryforwards available as of December 31, 2021 and 2020, respectively. These carryforwards will be used to offset future income but may be limited by the change in ownership rules in Section 382 of the Internal Revenue Code. These net operating loss carryforwards will expire in varying amounts through 2041.

We establish valuation allowances when necessary to reduce deferred tax assets to amounts expected to be realized. As of December 31, 2021 and 2020, we have recorded a valuation allowance of approximately $2.1 million related to various state jurisdictions. In our assessment of the valuation allowance, we consider a number of types of evidence on a taxing jurisdiction and legal entity basis in each reporting period, including the nature, frequency, and severity of current and cumulative financial reporting income and losses, sources of future taxable income, future reversals of existing taxable temporary differences, and prudent and feasible tax planning strategies, weighted by objectivity. The Company’s valuation allowance position in 2021 has not changed based on assessment of all available positive and negative evidence.

The following schedule presents the activity in the valuation allowance:

(in thousands) Year	Balance at Beginning of Year		Acquisitions		Provision		Released		Balance at End of Year
2021	$	2,112	$	—	$	(37)	$	—	$	2,075
2020	$	2,065	$	—	$	47	$	—	$	2,112
2019	$	8,930	$	—	$	238	$	7,103	$	2,065

A reconciliation of our liability for unrecognized tax benefits is as follows:

(in thousands)	2021		2020		2019
Unrecognized tax benefits, at beginning of the year	$	6,896	$	4,331	$	4,765
Additions for tax positions related to the current year	1,489		1,026		247
Increase related to prior year positions	546		1,891		—
Decrease related to prior year positions	(400)		(352)		(337)
Decrease for lapse of applicable statute of limitations	(3,979)		—		(344)
Unrecognized tax benefits, at end of the year	$	4,552	$	6,896	$	4,331

As of December 31, 2021, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $4.6 million. During the year ended December 31, 2021, we released $4.0 million of unrecognized tax benefits and $1.3 million of interest expense due to lapse of statute of limitations for the applicable tax years. We do not anticipate further significant release of unrecognized tax benefits within the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2021, 2020, and 2019, the amount of accrued interest and penalties was approximately $0.0 million, $1.2 million, and $1.0 million, respectively.

We are subject to income tax in the U.S. federal, state, and local jurisdictions. We are no longer subject to U.S. federal income tax examinations for years prior to 2017. However, due to net operating loss carryforwards, tax authorities have the ability to adjust those net operating losses related to closed years. We believe the ultimate resolution of income tax examinations will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

For the year ended December 31, 2020, we completed a formal study to identify qualifying research and development expenses resulting in the recognition of tax benefits of $3.3 million, net of tax reserves, related to 2020 and $6.1 million, net of tax reserves, relating to the prior years. For the year ended December 31, 2021, we recorded a federal tax benefit of $4.3 million, net of tax reserves, as a deferred tax asset.