5. Income Taxes

The income tax provision consists of the following (the 2018 amounts have been recast in accordance with Note 1 above):


Year ended December 31,	2019			2018
Current Benefit
Federal	$	(247	)	$	(753	)
State		(174	)		(10	)

Total Current Benefit		(421	)		(763	)

Deferred Expense (Benefit)
Federal		789			(2,095	)
State		(46	)		(2,266	)

Total Deferred Expense (Benefit)		743			(4,361	)

Income Tax Expense (Benefit)	$	322		$	(5,124	)

The following is a reconciliation between a federal income tax rate of 21% in for the years ended December 31, 2019 and 2018 of income before income taxes and the effective tax rate which is derived by dividing the provision (benefit) for income taxes by the income before the provision for income taxes (in thousands):


Year ended December 31,	2019			2018
Computed provision for income taxes at the statutory rate	$	(3,964	)	$	37,000
Increase (decrease) in income taxes resulting from:
State income tax provision, net of federal income tax benefit		(830	)		(2,880	)
Non-deductible expenses		241			198
Gain on troubled debt restructuring		—			(44,981	)
Loss of tax attributes		—			14,322
Valuation allowance changes affecting the provision for income taxes		5,873			(9,562	)
Return to provision adjustments		(954	)		(125	)
Other, net		(46	)		904

Provision (benefit) for income taxes	$	322		$	(5,124	)

As of December 31, 2019, the Company recorded $6,330 of valuation allowance against certain deferred tax assets primarily associated with federal and state net operating losses. As of December 31, 2018, the company recorded $457 of valuation allowance against certain deferred tax assets primarily associated with state net operating losses. The increase in the valuation allowance for 2019 was primarily based on federal and state net operating losses generated in 2019.

Deferred tax assets and liabilities reflect temporary differences between financial and tax reporting. Significant components of deferred tax assets and liabilities are as follows:


December 31,	2019			2018
Deferred Tax Assets
Accruals and reserves not currently deductible	$	6,631		$	7,084
Federal NOL and interest expense limitation carryovers		13,796			286
State NOL and interest expense limitation carryovers		1,106			39
Accrued and deferred compensation		2,888			2,809
Prepaid items		1,198			2,432
Lease liability		4,052			—

Contract liability		2,543			3,242

Residual value guarantee settlement		—			2,568

Other		1,010			849

Subtotal before valuation allowance		33,224			19,309
Less: valuation allowance		(6,330	)		(457	)

Total Deferred Tax Assets		26,894			18,852

Deferred Tax Liabilities
Property and equipment		(24,696	)		(20,701	)
Right-of-use asset		(4,791	)		—
Other		(6	)		(6	)

Total Deferred Tax Liabilities		(29,493	)		(20,707	)

Net Deferred Income Tax Liabilities	$	(2,599	)	$	(1,855	)

At December 31, 2019 and 2018, the Company had federal net operating losses of approximately $60,940 and $0, and state net operating losses of approximately $17,897 and $509, respectively. The estimated effective tax rate applicable to the federal and state net operating losses are 21.0% and 3.1%, respectively. The federal net operating loss is not subject to an expiration date but is subject to an 80% of taxable income limitation, while the Company expects the state net operating losses to begin to expire in 2024. State net operating losses differ with respect to expiration dates and limitations dependent on state specific regulations. For the year ended December 31, 2019 and 2018, the Company had a federal business interest carryforward of $4,724 and $1,360, respectively. These amounts, as well as future interest deductions, are subject to a limitation of 30% of adjusted taxable income. For the years ended December 31, 2019 and 2018, the Company recorded a valuation allowance of $6,330 and $457, respectively, against federal and state deferred tax assets consisting of net operating loss carryovers and interest expense limitation carryovers. As the Company was in a cumulative loss position as of December 31, 2019 and 2018, the reversal of existing temporary differences was used to determine the extent to which valuation allowances were recorded. The Company has no ongoing federal or state examinations. Federal tax years 2016, 2017, and 2018 are open to examination. As a result of the troubled debt restructuring in 2018, any remaining federal and state net operating loss and tax credit carryovers were eliminated, and therefore any related deferred tax assets and valuation allowances have also been reduced as of December 31, 2018.

Under ASC Topic 740, the accounting guidance related to uncertain tax positions requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2019 and 2018 is as follows (in thousands):


December 31,	2019			2018
Unrecognized tax benefits at the beginning of the year	$	388		$	278
Gross increases – current year tax positions		—			128
Gross decreases – lapse of statute		(140	)		(18	)

Unrecognized tax benefits at the end of the year	$	248		$	388

Interest and penalties in year-end balance	$	121		$	252