INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax expense (benefit) consists of the following for the years ended December 31, 2024, 2023 and 2022 (in thousands):

	Year Ended December 31,
	2024		2023		2022
U.S. federal income tax expense (benefit):
Current	$	47,239	$	56,474	$	4,103
Deferred	16,396		18,739		38,810
	63,635		75,213		42,913
State income tax expense (benefit):
Current	10,597		20,253		9,182
Deferred	(2,456)		(3,814)		3,117
	8,141		16,439		12,299
Total income tax expense (benefit)	$	71,776	$	91,652	$	55,212

The difference between the statutory federal income tax rate and the effective tax rate is as follows for the years ended December 31, 2024, 2023 and 2022:

	Year Ended December 31,
	2024		2023		2022
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes net of federal tax benefit	3.5	%	4.8	%	5.0	%
Valuation allowance	(0.8)	%	(1.5)	%	0.0	%
Share based compensation impacts	1.2	%	0.7	%	0.4	%
Other, net	0.4	%	0.5	%	0.4	%
Effective income tax rate	25.3	%	25.5	%	26.8	%

The Company recorded income tax expense of $71.8 million, $91.7 million, and $55.2 million, which represents an effective tax rate of 25.3%, 25.5%, and 26.8% for the years ended December 31, 2024, 2023, and 2022, respectively. In March 2024, the Company released $2.2 million of state valuation allowance. The variance in the Company’s effective tax rate of 25.3% for the year ended December 31, 2024 compared to the federal statutory rate of 21% is primarily attributable to the difference in state taxes, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 25.3% and 25.5% for the years ended December 31, 2024 and 2023, respectively, is also primarily attributable to the difference in state taxes, various non-deductible expenses, and a change in state valuation allowance. The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. In September 2023, the Company released $5.8 million of state valuation allowance. The variance in the Company’s effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively, is primarily attributable to the difference in state taxes, various nondeductible expenses, and a change in state valuation allowance.

The components of deferred income tax assets and liabilities were as follows as of December 31, 2024 and 2023 (in thousands):

	December 31, 2024		December 31, 2023
Deferred tax assets:
Price concessions	$	8,053	$	5,365
Compensation and benefits	6,166		7,609
Interest limitation carryforward	5,768		13,802
Operating lease liability	23,880		26,378
Net operating losses	50,860		56,980
Other	12,676		7,556
Deferred tax assets before valuation allowance	107,403		117,690
Valuation allowance	(3,337)		(6,371)
Deferred tax assets net of valuation allowance	104,066		111,319
Deferred tax liabilities:
Accelerated depreciation	(12,630)		(8,882)
Operating lease right-of-use asset	(18,883)		(21,504)
Intangible assets	(48,412)		(52,502)
Goodwill	(59,303)		(52,188)
Other	(12,414)		(11,163)
Deferred tax liabilities	(151,642)		(146,239)
Net deferred tax liabilities	$	(47,576)	$	(34,920)

Deferred tax assets are generally required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. For the year ended December 31, 2024, the Company maintains a valuation allowance of $3.3 million against certain state net operating losses (“NOL”). In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income and tax-planning strategies, in making this assessment. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.

At December 31, 2024, the Company had $35.6 million of tax-effected federal NOL carryforwards all of which are currently available to offset future taxable income in the United States and reflected as a deferred tax asset of the company. Tax-effected federal NOL carryforwards of $24.6 million expire beginning in 2028 through 2036, and $11.0 million of tax-effected federal NOLs have an indefinite carryforward period. At December 31, 2024, the Company had $5.8 million tax-effected amounts of interest limitation carryforwards which have an indefinite carryforward period. At December 31, 2024, the Company also had $15.3 million tax-effected amounts of cumulative state NOL carryforwards available to offset future taxable income in various states. These state NOL carryforwards will begin to expire beginning in 2025 through 2043, with some having an indefinite carryforward period.

At December 31, 2024, 2023 and 2022, there were no unrecognized tax benefits for uncertain tax positions. Tax related interest and penalties are classified as a component of income tax expense.

The following table presents the valuation allowance for deferred tax assets for the years ended December 31, 2024, 2023 and 2022 (in thousands):

			Additions
Description	Balance at Beginning of Period		Charged (Benefit) to Costs and Expenses		Charged (Benefit) to Other Accounts		Balance at End of Period
2022: Valuation allowance for deferred tax assets	$	13,151	$	(95)	$	—	$	13,056
2023: Valuation allowance for deferred tax assets	$	13,056	$	(6,685)	$	—	$	6,371
2024: Valuation allowance for deferred tax assets	$	6,371	$	(3,034)	$	—	$	3,337

The company files income tax returns in the U.S. and various state and local jurisdictions. There are no ongoing Federal or state income tax audits as of December 31, 2024. The statute remains open for examination by the Internal Revenue Service beginning with year 2021 in state jurisdictions for periods beginning in 2020.