Income taxes

12 Months Ended

Dec. 31, 2022

Income taxes

Income taxes

6.    Income Taxes

On March 18, 2020, the Families First Coronavirus Response Act ("FFCR Act"), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous tax provisions, such as deferring payroll payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and updating the definition of qualified improvement property. This legislation currently has no material impact to the Company’s financial statements.

An income tax expense of $4,800,000 was recorded for the year ended December 31, 2022 compared to income tax expense of $4,260,000 for the year ended December 31, 2021. The effective tax rate was approximately 34.3% for the year ended December 31, 2022 compared to 27.6% for the year ended December 31, 2021. The 2022 year to date tax rate was impacted by $3.8 million in expenses in the third quarter related to the compensation of our CEO upon his death, in accordance with his employment agreement that are permanent differences between our book and taxable income.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows:

	December 31,
	2022		2021
	(In thousands)
Deferred tax liabilities:
Property and equipment	$	4,218	$	4,242
Intangible assets		22,355		21,425
Prepaid expenses		477		405
Total deferred tax liabilities		27,050		26,072
Deferred tax assets:
Allowance for doubtful accounts		56		43
Compensation		1,134		1,093
Other accrued liabilities		123		134
		1,313		1,270
Less: valuation allowance		—		—
Total net deferred tax assets		1,313		1,270
Net deferred tax liabilities	$	25,737	$	24,802
Current portion of deferred tax assets	$	341	$	361
Non-current portion of deferred tax liabilities		(26,078)		(25,163)
Net deferred tax liabilities	$	(25,737)	$	(24,802)

Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. At December 31, 2022 and December 31, 2021, we do not have a valuation allowance for net deferred tax assets.

At December 31, 2022 and 2021, net deferred tax liabilities include a deferred tax asset of $1,313,000 and $1,270,000, respectively, relating to deferred compensation, stock-based compensation expense, accrued compensation, the allowance for doubtful accounts, and other accrued expenses.

The significant components of the provision for income taxes are as follows:

	Years Ended December 31,
	2022		2021		2020
	(In thousands)
Current:
Federal	$	2,800	$	3,080	$	850
State		1,065		985		400
Total current		3,865		4,065		1,250
Total deferred		935		195		(545)
Total Income Tax Provision	$	4,800	$	4,260	$	705

The reconciliation of income tax at the U.S. federal statutory tax rates to income tax expense (benefit) is as follows:

	Years Ended December 31,
	2022		2021		2020
	(In thousands)
Tax expense (benefit) at U.S. statutory rates	$	2,927	$	3,209	$	(290)
State tax expense, net of federal benefit		939		815		235
Other, net		934		236		760
	$	4,800	$	4,260	$	705

The 2022 and 2021 effective tax rates exceed the federal statutory rate primarily due to non-deductible compensation related expenses and state income taxes. The 2020 effective tax rate exceeded the federal statutory rate primarily due to non-deductible compensation related expenses, book tax differences in impairment charges and state income taxes.

The Company files income taxes in the U.S. federal jurisdiction, and in various state and local jurisdictions. The Company is no longer subject to U.S. federal examinations by the Internal Revenue Service (IRS) for years prior to 2019. The Company is subject to examination for income and non-income tax filings in various states.

As of December 31, 2022, and 2021 there were no accrued balances recorded related to uncertain tax positions.

We classify income tax-related interest and penalties that are related to income tax liabilities as a component of income tax expense. For the years ended December 31, 2022, 2021 and 2020, we had $-, $-, and $600, respectively, tax-related interest and penalties and had $0 accrued at December 31, 2022 and 2021.