(7) Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

(7) Income Taxes

(7) Income Taxes

We file numerous consolidated and separate income tax returns with the United States and with many states. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2015.

As of March 31,2022, and December 31, 2021, we had no unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

The Company and its subsidiaries file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of $18.9 million as of March 31, 2022 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $18.9 million consists of approximately $11.6 million of net U.S. federal deferred tax assets and $7.3 million of net state deferred tax assets.

Income tax expense was $8.2 million for the three months ended March 31, 2022, representing effective income tax rates of 28%. For the prior year period, income tax expense was $2.8 million for the three months ended March 31, 2021 representing an effective tax rate of 35%.