Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before income taxes are as follows:

	Years ended December 31,
	2022		2021
	(in thousands)
United States	$	11,864	$	4,659
Foreign	(2,071)		4,481
Income before income taxes	$	9,793	$	9,140

The components of income tax expense for the years ended December 31, 2022 and 2021 were as follows:

	Federal		State		Foreign		Total
	(in thousands)
2022
Current	$	—	$	128	$	2,161	$	2,289
Deferred	3,758		(1,693)		—		2,065
Total	$	3,758	$	(1,565)	$	2,161	$	4,354
2021
Current	$	—	$	(2)	$	1,597	$	1,595
Deferred	4,072		121		—		4,193
Total	$	4,072	$	119	$	1,597	$	5,788

The following is a reconciliation of the federal income tax expense at the statutory rate of 21% for the years ended December 31, 2022 and 2021 to the effective income tax expense:

	Years Ended December 31,
	2022		2021
	(in thousands)
Statutory federal income tax expense	$	2,057	$	1,844
State taxes, net of federal benefit	(1,593)		119
Foreign tax paid	1,509		—
Foreign jurisdiction rate differential	666		705
Permanent differences-nondeductible executive compensation	2,180		2,042
Permanent differences and other	(465)		1,078
Effective income tax expense	$	4,354	$	5,788

Permanent differences and other includes Subpart F income of $0.5 million from foreign operations for the year ended December 31, 2022. The Company records tax expense or benefit for unusual or infrequent items discretely in the period in which they occur.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	(in thousands)
Balance as of December 31, 2020	$	330
Decreases related to current year tax positions	—
Decreases due to tax positions expired	(317)
Balance as of December 31, 2021	13
Decreases related to current year tax positions	11
Decreases due to tax positions expired	(5)
Balance as of December 31, 2022	$	19

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	As of December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Unearned lease revenue	$	3,867	$	2,217
State taxes	2		—
Inventory	2,123		1,486
Reserves and allowances	4,425		6,781
Other accruals	15,973		2,577
Lease liability	1,366		146
Net operating loss carry forward	67,595		68,168
California alternative minimum tax credit	33		33
Charitable contributions	2		2
Total deferred tax assets	95,386		81,410
Less: valuation allowance	(536)		(518)
Net deferred tax assets	94,850		80,892
Deferred tax liabilities:
Depreciation and impairment on aircraft engines and equipment	(208,389)		(183,131)
Notes receivable	(5,479)		(15,911)
Right of use liability	(1,360)		(139)
Other deferred tax liabilities	(4,590)		(4,595)
Net deferred tax liabilities	(219,818)		(203,776)
Other comprehensive income deferred tax liability	(7,548)		(1,448)
Net deferred tax liabilities	$	(132,516)	$	(124,332)

As of December 31, 2022, the Company had net operating loss carry forwards of approximately $315.9 million for federal tax purposes and $1.3 million (tax effected) for state tax purposes. The majority of the federal net operating loss carry forwards were generated in 2020 and can be carried forward indefinitely. The remainder will expire at various times from 2033 to 2037, and the state net operating loss carry forwards will expire at various times from 2026 to 2043. There is a $0.4 million valuation allowance for net operating losses in California that expire between 2034 and 2042 and a $0.1 million valuation allowance for net operating losses in Georgia that expire between 2032 and 2040. The Company’s ability to utilize the net operating loss and tax credit carry forwards in the future may be subject to restriction in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax law. Management believes that no valuation allowance is required on deferred tax assets related to federal net operating loss carry forwards, as it is more likely than not that all amounts are recoverable through future taxable income. The open tax years for federal and state tax purposes are from 2005 to 2022.

Other than $6.2 million held at a subsidiary in China, for which the tax impact of the planned repatriation has been accrued, it is the Company's intention to reinvest undistributed earnings of their wholly-owned foreign operations and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes.