Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provision for the years ended December 31, 2019, 2020 and 2021 is summarized below (in thousands):

	2019		2020		2021
Current:
Federal	$	37,878	$	31,398	$	20,754
State	11,584		9,786		5,736
Foreign	—		125		2,761
Total current	49,462		41,309		29,251
Deferred:
Federal	(7,009)		(8,537)		(10,128)
State	133		(538)		(612)
Foreign	—		(4,545)		3,001
Total deferred	(6,876)		(13,620)		(7,739)
Total provision for income taxes	$	42,586	$	27,689	$	21,512

The U.S. and foreign components of income (loss) before income taxes for the years ended December 31, 2019, 2020 and 2021 are summarized below (in thousands):

	2019		2020		2021
United States	$	123,724	$	128,822	$	57,804
Foreign	—		(14,865)		18,795
Total income before income taxes	$	123,724	$	113,957	$	76,599

The Company is making an assertion that all earnings generated by its foreign subsidiaries are permanently reinvested in non-U.S. business or are distributable to the United States without material tax implications. As such, income taxes have not been accrued in the United States with respect to foreign subsidiary earnings. The Company intends to continue to reinvest the earnings outside of the United States for which there would be a material tax implication to distributing, such as withholding tax, for the foreseeable future and, as a result, have not recognized additional tax expense on these earnings.

The tax effects of the principal temporary differences that give rise to the Company’s net deferred tax liability are as follows as of December 31, 2020 and 2021 (in thousands):

	2020		2021
Lease liabilities	$	28,017	$	25,706
Allowance for credit losses	14,083		13,190
Contract liabilities	8,500		10,214
Stock-based compensation	6,318		7,758
Other	6,713		7,020
Other facility-related costs	582		1,916
Loss carryforward	7,307		619
Intangible assets	(84,515)		(74,016)
Property and equipment	(20,421)		(21,320)
Right-of-use lease assets	(19,991)		(15,052)
Valuation allowance	—		(630)
Net deferred tax liability	$	(53,407)	$	(44,595)

The valuation allowance for deferred tax assets as of December 31, 2021 was $0.6 million and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return. The Company concluded that it was more likely than not that the deferred tax asset for the net operating loss carryforwards would not be realized due to negative evidence outweighing the positive evidence regarding the realization of the deferred tax assets. The Company will continue to evaluate its ability to realize its net deferred tax assets on a quarterly basis. The Company had no valuation allowance for deferred tax assets as of December 31, 2020. As of December 31, 2021, Loss carryforward consists of net operating losses related to the states where the Company does not file a consolidated return.

As of December 31, 2020 and 2021, the Company’s liabilities for unrecognized tax benefits are included in other long-term liabilities in the consolidated balance sheets. Interest and penalties, including those related to uncertain tax positions, are included in the provision for income taxes in the consolidated statements of income . The Company recognized $64,000 and $33,000 of expense related to interest and penalties in 2020 and 2021, respectively. The total amount of interest and penalties included in the consolidated balance sheets was $45,000 and $30,000 as of December 31, 2020 and 2021, respectively. 

The following table summarizes changes in unrecognized tax benefits, excluding interest and penalties, for the respective periods (in thousands):

	Year Ended December 31,
	2020		2021
Beginning unrecognized tax benefits	$	1,165	$	314
Additions for tax positions taken in the prior year	30		948
Reductions for tax positions taken in prior years	(881)		(219)
Ending unrecognized tax benefits	$	314	$	1,043

The Company does not anticipate significant changes to unrecognized tax benefits within the next 12 months. As of December 31, 2021, $1.0 million of the Company’s total unrecognized tax benefits would favorably affect the Company’s effective tax rate, if recognized.

A reconciliation between the Company’s statutory tax rate and the effective tax rate for the years ended December 31, 2019, 2020, and 2021 is as follows:

	2019		2020		2021
Statutory federal rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefits	4.6		5.6		3.4
Impact of foreign operations	—		(1.2)		2.2
Termination of deferred compensation arrangements	9.2		—		—
Transaction costs	—		0.6		—
Excess tax benefit on share-based compensation	(2.6)		(2.0)		—
Other	2.2		0.3		1.5
Effective tax rate	34.4	%	24.3	%	28.1	%

In February 2019, to align compensation and benefit plans after completion of the merger with CEC, the Compensation Committee of the Company’s Board of Directors took action to terminate all deferred compensation arrangements, including for employees already participating in such arrangements. These changes affect the tax deductibility of certain arrangements, which resulted in a discrete item recorded during the three months ended March 31, 2019, reducing the Company’s deferred tax assets by $11.5 million, and increasing the Company’s 2019 effective tax rate and future cash tax payments.

Cash payments for income taxes were $48.8 million, $45.4 million, and $27.3 million in 2019, 2020, and 2021, respectively.