Note 19 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

19. Income Taxes

The following is a summary of the income (loss) from continuing operations before provision for (benefit from) income taxes (in thousands):

Years Ended December 31,	2021			2020			2019
Domestic	$	(17,914	)	$	(292	)	$	(47,867	)
Foreign	8,418			8,437			7,643
Total income (loss) from continuing operations before provision for (benefit from) income taxes	$	(9,496	)	$	8,145		$	(40,224	)

The following is a summary of the provision for (benefit from) income taxes on continuing operations (in thousands):

Years Ended December 31,	2021			2020			2019
Federal:
Current	$	434		$	(9,151	)	$	116
Deferred		(1,637	)		15,644			(12,085	)
Total federal		(1,203	)		6,493			(11,969	)
State:
Current		(947	)		(1,109	)		719
Deferred		(569	)		3,938			(2,250	)
Total state		(1,516	)		2,829			(1,531	)
Foreign:
Current		1,322			229			361
Deferred		160			376			851
Total foreign		1,482			605			1,212
Total provision for (benefit from) income taxes on continuing operations	$	(1,237	)	$	9,927		$	(12,288	)

The following is a reconciliation of our provision for (benefit from) income taxes on continuing operations based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

Years Ended December 31,	2021					2020					2019
Federal statutory tax	$	(1,994	)	21.0	%	$	1,681		21.0	%	$	(8,366	)	21.0	%
State taxes, net of federal tax benefit		(1,412	)	14.9			3,056		38.2			(1,328	)	3.3
Foreign taxes		966		(10.2	)		915		11.4			1,395		(3.5	)
Percentage depletion deduction		(1,015	)	10.7			(1,096	)	(13.7	)		(932	)	2.3
Non-controlling interests		1,613		(17.0	)		4,423		55.3			(733	)	1.8
Nondeductible expenses		1,300		(13.7	)		584		7.3			1,462		(3.7	)
Company-owned life insurance		(731	)	7.7			(591	)	(7.4	)		(870	)	2.2
Stock-based compensation		(660	)	6.9			502		6.3			—		—
Changes in uncertain tax positions		—		—			(1,662	)	(20.8	)		(923	)	2.3
Valuation allowance		—		—			3,550		44.4			—		—
Purchase price accounting		—		—			—		—			(1,308	)	3.3
Provision to return adjustments		702		(7.4	)		(1,456	)	(18.2	)		(640	)	1.6
Other		(6	)	0.1			21		(1.9	)		(45	)	(0.1	)
Total	$	(1,237	)	13.0	%	$	9,927		121.9	%	$	(12,288	)	30.5	%

Provision for (benefit from) income taxes of $21.0 million, ($10.2) million and ($8.1) million were allocated to discontinued operations for the years ended December 31, 2021, 2020 and 2019, respectively. The effective tax rates for discontinued operations were 66.2%, 5.8% and 21.9% for the years ended December 31, 2021, 2020 and 2019, respectively. The majority of the variance from the statutory tax rate in 2021 is due to the net deferred tax liability on basis differences on held for sale entities recorded in 2021 and the majority of the variance from the statutory tax rate in 2020 is due to the goodwill impairment and the investment in affiliates impairment recorded in 2020.

The following is a summary of the deferred tax assets and liabilities (in thousands):

December 31,	2021			2020
Long-term deferred tax assets:
Receivables	$	3,173		$	3,044
Insurance		14,334			12,654
Deferred compensation		11,133			11,187
Accrued compensation		3,792			9,721
Other accrued liabilities		1,088			1,283
Contract income recognition		11,453			15,638
Lease liabilities		16,351			16,342
Net operating loss carryforwards		59,760			52,181
Valuation allowance		(26,533	)		(29,547	)
Other		8,440			10,531
Total long-term deferred tax assets		102,991			103,034
Long-term deferred tax liabilities:
Property and equipment		64,915			46,153
Right of use assets		15,791			15,792
Total long-term deferred tax liabilities		80,706			61,945
Net long-term deferred tax assets	$	22,285		$	41,089

The following is a summary of the net operating loss carryforwards at December 31, 2021 (in thousands):

	Expiration		Gross Carryforward		Tax Effected Carryforward
Federal net operating loss carryforwards		2032-2035	$	65,395	$	13,733
Federal net operating loss carryforwards		N/A		110,139		23,129
State net operating loss carryforwards		2022-2041		230,164		11,708
Foreign tax loss carryforwards		2022-2041		41,992		11,190
Total net operating loss carryforwards at December 31, 2021					$	59,760

The federal, state and foreign net operating loss carryforwards above included unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. The federal and state net operating loss acquired during the Layne acquisition are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use the federal net operating loss carryforwards prior to expiration we believe that is more likely than not that these deferred tax assets will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is more likely than not that they will be realized.

The following is a summary of the change in valuation allowance (in thousands):

December 31,	2021			2020
Beginning balance	$	29,547		$	25,271
Additions (deductions), net		(3,014	)		4,276
Ending balance	$	26,533		$	29,547

The deduction to the valuation allowance is mainly due to the revaluation of our net deferred tax assets related to various state and local jurisdictions which is partially offset by additions to the valuation allowance that are insignificant for the year ended December 31, 2021.

Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2013. With few exceptions, as of December 31, 2021, we are no longer subject to state examinations by taxing authorities for years before 2012.

We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2014.

We had approximately $22.7 million of total gross unrecognized tax benefits as of both December 31, 2021 and 2020. There were approximately $5.4 million of unrecognized tax benefits that would affect the effective tax rate in any future period at both December 31, 2021 and 2020. It is reasonably possible that our unrecognized tax benefit could decrease by approximately $1.8 million in 2022, of which $1.6 million would impact our effective tax rate in 2022. The decrease relates to anticipated statute expirations and anticipated resolution of outstanding unrecognized tax benefits.

The following is a tabular reconciliation of unrecognized tax benefits (in thousands) the balance of which is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:

December 31,	2021			2020			2019
Beginning balance	$	22,728		$	24,406		$	19,348
Gross increases - acquisitions		—			—			5,812
Gross increases – current period tax positions		—			—			—
Gross decreases – current period tax positions		—			—			—
Gross increases – prior period tax positions		—			22			169
Gross decreases – prior period tax positions		—			—			(7	)
Settlements with taxing authorities/lapse of statute of limitations		(4	)		(1,700	)		(916	)
Ending balance	$	22,724		$	22,728		$	24,406

We record interest on uncertain tax positions in interest expense and penalties in other income, net in our consolidated statements of operations. During the years ended December 31, 2021, 2020 and 2019, we recognized approximately $0.4 million interest and penalty expense, $0.5 million interest and penalty income and $0.3 million interest and penalty expense, respectively.

Approximately $6.1 million and $5.8 million of accrued interest and penalties related to our uncertain tax position liability was included in other long-term liabilities and accrued expenses and other current liabilities in our consolidated balance sheets at December 31, 2021 and 2020, respectively.