Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 13 – Income Taxes

The provision for income taxes is comprised of the following components (in thousands):

	Year Ended December 31,
	2024		2023		2022
Current tax provision
Federal	$	12,900	$	14,520	$	717
State		3,490		3,137		251
Total current tax provision		16,390		17,657		968
Deferred tax provision
Federal		13,841		4,142		4,595
State		4,091		1,651		1,691
Total deferred tax provision		17,932		5,793		6,286
Income tax provision	$	34,322	$	23,450	$	7,254

The deferred tax assets and liabilities, consisting of temporary differences tax effected at the respective income tax rates, are as follows (in thousands):

	December 31,
	2024			2023
Deferred tax assets:
Accrued risk reserves	$	2,012		$	1,898
Accrued expenses		7,695			7,346
Tax basis in excess of book basis of fixed assets		–			5,653
Stock based compensation		1,181			931
Deferred revenue		3,154			4,987
Operating lease liabilities		19,896			23,658
Other		847			567
Total gross deferred tax assets		34,785			45,050
Less: valuation allowance		(517	)		(594	)
Deferred tax assets less valuation allowance	$	34,268		$	44,446
Deferred tax liabilities:
Unrealized gains on marketable securities	$	(28,581	)	$	(19,971	)
Deferred gain on sale of assets, net		(2,055	)		(2,055	)
Book basis in excess of tax basis of intangible assets		(5,655	)		(3,387	)
Book basis in excess of tax basis of securities		(4,042	)		(3,393	)
Book basis in excess of tax basis of fixed assets		(6,579	)		–
Long–term investments		(2,652	)		(8,753	)
Operating lease assets		(20,254	)		(24,087	)
Total deferred tax liabilities	$	(69,818	)	$	(61,646	)
Net deferred tax liability	$	(35,550	)	$	(17,200	)

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows (in thousands):

	Year Ended December 31,
	2024			2023			2022
Tax provision at federal statutory rate	$	28,646		$	18,635		$	5,719
Increase in income taxes resulting from:
State, net of federal benefit		6,349			4,600			1,034
Unrecognized tax benefits		690			1,227			730
Expiration of statute of limitations		(932	)		(1,491	)		(1,032	)
Tax (expense) benefit of noncontrolling interest		(34	)		317			518
Other		(397	)		162			285
Total increases		5,676			4,815			1,535
Effective income tax expense	$	34,322		$	23,450		$	7,254

Our deferred tax assets have been evaluated for realization based on historical taxable income, tax planning strategies, the expected timing of reversals of existing temporary differences and future taxable income anticipated. Our deferred tax assets, with the exception of certain state tax net operating losses and certain deferred tax assets associated with unrealized losses on marketable securities, are more likely than not to be realized in full due to the existence of sufficient taxable income of the appropriate character under the tax law.  As such, the only valuation allowance relates to state net operating losses and unrealized losses on marketable securities.

Uncertain tax positions may arise where tax laws may allow for alternative interpretations or where the timing of recognition of income is subject to judgment. Under ASC Topic 740, tax positions are evaluated for recognition using a more–likely–than–not threshold, and those tax positions requiring recognition are measured at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

In accordance with current guidance, the Company has established a liability for unrecognized tax benefits, which are differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured. Generally, a liability is created for an unrecognized tax benefit because it represents a company’s potential future obligation to a taxing authority for a tax position that was not recognized per above. We believe that our liabilities reflect the anticipated outcome of known uncertain tax positions in conformity with ASC Topic 740 Income Taxes. Our liabilities for unrecognized tax benefits are presented in the consolidated balance sheets within other noncurrent liabilities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Deferred Tax Asset			Liability For Unrecognized Tax Benefits			Liability For Interest and Penalties			Liability Total
Balance, January 1, 2022	$	5,455		$	8,902		$	2,290		$	11,192
Additions based on tax positions related to the current year		636			636			–			636
Additions (reductions) for tax positions of prior years		(1,097	)		(273	)		900			627
Reductions for statute of limitation expirations		(240	)		(760	)		(512	)		(1,272	)
Balance, December 31, 2022		4,754			8,505			2,678			11,183
Additions based on tax positions related to the current year		1,454			1,454			–			1,454
Additions (reductions) for tax positions of prior years		(198	)		324			1,583			1,907
Reductions for statute of limitation expirations		(361	)		(1,030	)		(823	)		(1,853	)
Balance, December 31, 2023		5,649			9,253			3,438			12,691
Additions based on tax positions related to the current year		835			835			–			835
Additions (reductions) for tax positions of prior years		(1,380	)		(1,097	)		859			(238	)
Reductions for statute of limitation expirations		(232	)		(592	)		(572	)		(1,164	)
Balance, December 31, 2024	$	4,872		$	8,399		$	3,725		$	12,124

Unrecognized tax benefits of $4,150,000, net of federal benefit at December 31, 2024, attributable to permanent differences, would favorably impact our effective tax rate if recognized. We do not expect significant increases or decreases in unrecognized tax benefits for the 2025 year, except for the effect of decreases related to the lapse of statute of limitations estimated at $1,113,000.

Interest and penalties expense related to U.S. federal and state income tax returns are included within income tax expense.  The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2021 (with few state exceptions).