Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provision for the years ended December 31, 2020, 2021 and 2022 is summarized below (in thousands):

	2020		2021		2022
Current:
Federal	$	31,398	$	20,754	$	13,825
State	9,786		5,736		5,650
Foreign	125		2,761		12,063
Total current	41,309		29,251		31,538
Deferred:
Federal	(8,537)		(10,128)		(1,978)
State	(538)		(612)		(1,668)
Foreign	(4,545)		3,001		(4,993)
Total deferred	(13,620)		(7,739)		(8,639)
Total provision for income taxes	$	27,689	$	21,512	$	22,899

The U.S. and foreign components of income (loss) before income taxes for the years ended December 31, 2020, 2021 and 2022 are summarized below (in thousands):

	2020		2021		2022
United States	$	128,822	$	57,804	$	46,646
Foreign	(14,865)		18,795		22,923
Total income before income taxes	$	113,957	$	76,599	$	69,569

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, 2021 and 2022 (in thousands):

	2021		2022
Lease liabilities	$	25,706	$	21,674
Allowance for credit losses	13,190		12,862
Contract liabilities	10,214		9,527
Stock-based compensation	7,758		8,138
Other	6,195		4,363
Other facility-related costs	1,916		1,313
Loss carryforward	1,444		2,013
Intangible assets	(74,016)		(69,920)
Property and equipment	(21,320)		(9,968)
Right-of-use lease assets	(15,052)		(12,786)
Valuation allowance	(630)		(1,821)
Net deferred tax liability	$	(44,595)	$	(34,605)

As of December 31, 2022, Loss carryforward consists of net operating losses related to the states where the Company does not file a consolidated return. The company has state net operating loss carryforwards of $20.2 million which will expire from

2027 through 2043 and $14.3 million which have an indefinite carryover period. The change in the valuation allowance for deferred tax assets as of December 31, 2021 and 2022 was $0.6 million and $1.2 million, respectively, 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.

As of December 31, 2021 and 2022, 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 approximately $33,000 and $55,000 of expense related to interest and penalties in 2021 and 2022, respectively. The total amount of interest and penalties included in the consolidated balance sheets was approximately $30,000 and $59,000 as of December 31, 2021 and 2022, respectively. 

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

	Year Ended December 31,
	2021		2022
Beginning unrecognized tax benefits	$	314	$	1,043
Additions for tax positions taken in the prior year	948		—
Reductions for tax positions taken in prior years	(219)		(95)
Ending unrecognized tax benefits	$	1,043	$	948

The Company does not anticipate significant changes to unrecognized tax benefits within the next 12 months. As of December 31, 2022, $0.9 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, 2020, 2021, and 2022 is as follows:

	2020		2021		2022
Statutory federal rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefits	5.6		3.4		3.2
Impact of foreign operations	(1.2)		2.2		3.0
Nondeductible compensation	2.2		1.9		2.4
Change in valuation allowance	—		0.8		1.7
Excess tax benefit on share-based compensation	(2.0)		—		1.7
Transaction costs	0.6		—		—
Other	(1.9)		(1.2)		(0.1)
Effective tax rate	24.3	%	28.1	%	32.9	%

Cash payments for income taxes were $45.4 million, $27.3 million, and $26.8 million in 2020, 2021, and 2022, respectively.