Income Taxes

12 Months Ended

Dec. 31, 2023

Income taxes

Income Taxes

6.    Income Taxes

An income tax expense of $3,375,000 was recorded for the year ended December 31, 2023 compared to income tax expense of $4,800,000 for the year ended December 31, 2022. The effective tax rate was approximately 26.2% for the year ended December 31, 2023 compared to 34.3% for the year ended December 31, 2022. 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,
	2023		2022
	(In thousands)
Deferred tax liabilities:
Property and equipment	$	3,976	$	4,218
Intangible assets		23,006		22,355
Prepaid expenses		490		477
Total deferred tax liabilities		27,472		27,050
Deferred tax assets:
Allowance for credit losses		81		56
Compensation		1,107		1,134
Other accrued liabilities		162		123
		1,350		1,313
Less: valuation allowance		—		—
Total net deferred tax assets		1,350		1,313
Net deferred tax liabilities	$	26,122	$	25,737
Current portion of deferred tax assets	$	296	$	341
Non-current portion of deferred tax liabilities		(26,418)		(26,078)
Net deferred tax liabilities	$	(26,122)	$	(25,737)

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, 2023 and December 31, 2022, we do not have a valuation allowance for net deferred tax assets.

At December 31, 2023 and 2022, net deferred tax liabilities include a deferred tax asset of $1,350,000 and $1,313,000, respectively, relating to deferred compensation, stock-based compensation expense, accrued compensation, the allowance for credit losses, and other accrued expenses.

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

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
Current:
Federal	$	2,240	$	2,800	$	3,080
State		750		1,065		985
Total current		2,990		3,865		4,065
Total deferred		385		935		195
Total Income Tax Provision	$	3,375	$	4,800	$	4,260

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,
	2023		2022		2021
	(In thousands)
Tax expense (benefit) at U.S. statutory rates	$	2,694	$	2,927	$	3,209
State tax expense, net of federal benefit		637		939		815
Other, net		44		934		236
	$	3,375	$	4,800	$	4,260

The 2023, 2022 and 2021 effective tax rates exceed the federal statutory rate primarily due to non-deductible compensation related expenses 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 2020. The Company is subject to examination for income and non-income tax filings in various states.

As of December 31, 2023, and 2022 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, 2023, 2022 and 2021, we had $-, $-, and $600, respectively, tax-related interest and penalties and had $0 accrued at December 31, 2023 and 2022.