INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income taxes attributable to continuing operations consist of the following (amounts in millions):

	For the Years Ended December 31,
	2020		2019		2018
Current income tax expense/(benefit):
Federal	$	41.6	$	24.2	$	16.4
State and local	10.6		4.8		2.1
	52.2		29.0		18.5
Deferred income tax expense/(benefit):
Federal	(22.5)		9.5		14.5
State and local	(4.1)		4.0		5.8
	(26.6)		13.5		20.3
Income tax expense	$	25.6	$	42.5	$	38.8

Total income tax expense for the years ended December 31, 2020, 2019 and 2018 was allocated as follows (amounts in millions):

	For the Years Ended December 31,
	2020		2019		2018
Income from continuing operations	$	25.6	$	42.5	$	38.8
Interest expense	0.2		0.3		0.1
Goodwill	—		0.9		—
Total	$	25.8	$	43.7	$	38.9

A reconciliation of significant differences between the reported amount of income tax expense and the expected amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of 21% to income before income taxes is as follows:

	For the Years Ended December 31,
	2020		2019		2018
Income tax expense at U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal income tax benefit (1)	2.4		4.8		4.8
Excess tax benefits from share-based compensation (1)	(12.7)		(2.2)		(1.8)
Non-deductible executive compensation	2.1		1.6		0.4
Other items, net (2)	(0.6)		(0.3)		—
Income tax expense	12.2	%	24.9	%	24.4	%

(1)On August 10, 2020, Paul B. Kusserow, President, Chief Executive Officer and Chairman of the Board of Amedisys, exercised 500,000 stock options previously awarded to him under our 2008 Omnibus Incentive Compensation Plan. We recognize compensation expense for stock option awards on a straight-line basis over the requisite service period for each separately vesting portion of the award in accordance with ASC 718, Compensation: Stock Compensation; however, the income tax deduction related to stock options is not recognized until the stock option exercise date. As a result, for awards that are expected to result in a tax deduction, a deferred tax asset is created as the entity recognizes compensation expense for U.S. GAAP purposes. If the tax deduction exceeds the cumulative U.S. GAAP compensation expense for the award, the tax benefit associated with any excess deduction is recognized as an income tax benefit in the statement of operations, resulting in a reduction of the effective tax rate. Mr. Kusserow's stock option exercise produced a $92.1 million tax deduction in excess of U.S. GAAP compensation expense, resulting in a $19.4 million federal income tax benefit and a $4.6 million state and local income tax benefit for the year ended December 31, 2020.

(2)Includes various items such as non-deductible expenses, non-taxable income, tax credits, valuation allowance, uncertain tax positions and return-to-accrual adjustments.

As of December 31, 2020 and 2019, the Company had income taxes receivable of $0.2 million and $2.0 million, respectively, included in other current assets within our consolidated balance sheets.

Deferred tax assets (liabilities) consist of the following components (amounts in millions):

	As of December 31,
	2020		2019
Deferred tax assets:
Accrued payroll & employee benefits	$	15.9	$	15.1
Workers’ compensation	9.6		9.0
Share-based compensation	5.1		7.9
Legal & compliance matters	7.0		4.8
Lease liability	25.2		23.1
Provider relief fund advance (1)	15.6		—
Deferred social security taxes (2)	14.3		—
Net operating loss carryforwards	2.4		3.7
Tax credit carryforwards	2.9		3.1
Other	0.6		0.5
Gross deferred tax assets	98.6		67.2
Less: valuation allowance	(0.1)		(0.4)
Net deferred tax assets	98.5		66.8
Deferred tax liabilities:
Property and equipment	(3.8)		(4.3)
Amortization of intangible assets	(11.8)		(0.3)
Deferred revenue	(9.0)		(13.5)
Investment in partnerships	—		(3.3)
Right-of-use asset	(24.9)		(22.8)
Other liabilities	(1.0)		(1.2)
Gross deferred tax liabilities	(50.5)		(45.4)
Deferred income taxes	$	48.0	$	21.4

(1)In April 2020, approximately $100 million was provided to the Company through the healthcare Provider Relief Fund established under the CARES Act. As of December 31, 2020, the Company recorded a liability related to the funds that we do not expect to utilize totaling $60 million, which is reflected in the Provider Relief Fund Advance account in current liabilities within our consolidated balance sheet. For income tax purposes, the Company recognized the $60 million as income upon receipt, resulting in a deferred tax asset as of December 31, 2020. The company will recognize an income tax deduction when the liability is paid during the year ended December 31, 2021.

(2)The CARES Act provides for the deferral of the employer share of social security tax (6.2%), effective for payments due after the enactment date through December 31, 2020. Fifty percent of the deferred payroll taxes are due on December 31, 2021 with the remaining amounts due on December 31, 2022. As of December 31, 2020, the Company has deferred $55.4 million of social security tax payments; $27.7 million of this amount is reflected in each payroll and employee benefits and other long-term obligations within our consolidated balance sheet. For income tax purposes, the deferred social security taxes will be deductible when paid on December 31, 2021 and December, 31, 2022, resulting in a deferred tax asset at December 31, 2020.

As of December 31, 2020, we have state net operating loss ("NOL") carryforwards of $47.5 million that are available to reduce future taxable income and $3.7 million of various state tax credits available to reduce future state income taxes. The state NOL and tax credit carryforwards expire at various times.

As of December 31, 2020 and 2019, the valuation allowance for deferred tax assets, which is primarily related to certain state NOLs and state tax credit carryforwards, was $0.1 million and $0.4 million, respectively. The net change in the total valuation allowance for the years ended December 31, 2020 and 2019 was a decrease of $0.3 million.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those jurisdictions during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income before the expiration of the

carryforwards governed by the tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of future taxable income needed to support the realization of the deferred tax assets. As a result, as of December 31, 2020, management believes that it is more likely than not that we will realize the benefits of these deferred tax assets, net of the existing valuation allowances. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

Uncertain Tax Positions

We account for uncertain tax positions in accordance with the authoritative guidance for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in millions):

	For the Years Ended December 31,
	2020		2019		2018
Balance at beginning of period	$	2.7	$	2.7	$	2.7
Additions for tax positions related to current year	—		—		—
Additions for tax positions related to prior year	—		—		—
Reductions for tax positions related to prior years	—		—		—
Lapse of statute of limitations	—		—		—
Settlements	—		—		—
Balance at end of period	$	2.7	$	2.7	$	2.7

As of December 31, 2020 and 2019, there is $2.7 million of unrecognized tax benefits recorded in other long-term obligations within the consolidated balance sheets that, if recognized in future periods, would impact our effective tax rate.

We recognized $0.2 million, $0.3 million and $0.1 million of interest as components of interest expense in connection with our reserve for uncertain tax positions during the years ended December 31, 2020, 2019 and 2018, respectively. Interest related to uncertain tax positions included in the consolidated balance sheets at December 31, 2020 and 2019 was $0.6 million and $0.4 million, respectively.

We are subject to income taxes in the U.S. and in many individual states, with significant operations in Louisiana, South Carolina, Alabama, Georgia, Massachusetts and Tennessee. We are open to examination in the U.S. and in various individual states for tax years ended December 31, 2014 through December 31, 2020. We are also open to examination in various states for the years ended 2007 through 2020 resulting from NOLs generated and available for carryforward from those years.