INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

20. INCOME TAXES

For financial reporting purposes, income (loss) from continuing operations before income taxes includes the following components (in thousands):

	Years ended December 31,
	2021		2020		2019
United States income (loss)	$	121,180	$	95,115	$	(62,917)
Foreign income	1,836		1,375		1,069
Total income (loss) from continuing operations before income taxes	$	123,016	$	96,490	$	(61,848)

The provision (benefit) for income taxes for 2021, 2020 and 2019 consists of the following (in thousands):

	Years ended December 31,
	2021		2020		2019
Current:
Federal	$	532	$	—	$	(49)
State	4,344		1,316		191
Foreign	183		68		136
Total current	5,059		1,384		278
Deferred:
Federal	(49,045)		—		612
State	(4,763)		—		172
Foreign	(26)		(21)		(2)
Total deferred	(53,834)		(21)		782
Total provision (benefit) for income taxes	$	(48,775)	$	1,363	$	1,060

The provision (benefit) for income taxes for 2021, 2020 and 2019 differ from the amounts computed by applying the U.S. federal income tax rate of 21% to income (loss) before income taxes for the following reasons (in thousands):

	Year ended December 31,
	2021		2020		2019
U.S. federal income tax provision (benefit) at statutory rate	$	25,833	$	20,263	$	(12,988)
State income tax expense, net of federal benefit	5,734		3,224		(2,373)
Non-deductible executive compensation	1,908		147		—
Other, net	110		(165)		399
Gain on subsidiary stock	—		360		(855)
Delaware gift card litigation reversal	—		(1,022)		—
Research and development credit	(1,419)		(1,266)		(1,677)
Stock based compensation expense	(3,851)		1,839		976
Change in valuation allowance	(77,090)		(22,017)		17,578
Total provision (benefit) for income taxes	$	(48,775)	$	1,363	$	1,060

The components of our deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	35,247	$	88,990
Research and development tax credits	19,551		20,067
Basis difference in equity securities	6,092		8,079
Accrued expenses	5,750		7,168
Unearned revenue	5,431		4,747
Operating lease liabilities	3,128		6,604
Reserves and other	2,835		3,877
Other tax credits and carryforwards	207		253
Intangible assets	135		2,897
Interest expense carryforward	—		1,799
Gross deferred tax assets	78,376		144,481
Valuation allowance	(11,384)		(134,305)
Total deferred tax assets	66,992		10,176
Deferred tax liabilities:
Basis difference in equity securities	(20,831)		(218)
Operating lease right-of-use assets	(3,077)		(6,152)
Fixed assets	(2,264)		(2,236)
Prepaid expenses	(785)		(777)
Goodwill	—		(934)
Total deferred tax liabilities	(26,957)		(10,317)
Total deferred tax assets (liabilities), net	$	40,035	$	(141)

The components of our deferred tax assets and liabilities as of December 31, 2020 include amounts related to continuing and discontinued operations. Of the total deferred tax liabilities, net, approximately $178,000 relates to discontinued operations, and has been reclassified in the consolidated financial statements as a component of Long-term liabilities of discontinued operations as of December 31, 2020. The remaining deferred tax assets, net, of approximately $37,000 related to continuing operations is reflected as Deferred tax assets, net, on the Consolidated Balance Sheet as of December 31, 2020.

At December 31, 2021, we have federal net operating loss carryforwards with no expiration date of approximately $135.2 million; the utilization of these net operating loss carryforwards is limited to 80% of taxable income in any given year. We have state net operating loss carryforwards with no expiration date of approximately $37.4 million primarily in the state of Utah; the utilization of these net operating loss carryforwards is limited to 80% of taxable income in the state in any given year. We also have state net operating loss carryforwards of approximately $16.2 million which expire in 2022 and $89.2 million that expire between 2026 and 2039.

At December 31, 2021, we have federal research credit carryforwards of approximately $21.4 million that expire between 2029 and 2041. We also have state research credit carryforwards of approximately $9.0 million that expire between 2022 and 2035. Ownership changes under Internal Revenue Code Section 382 could limit the amount of net operating losses or credit carryforwards that can be used in the future.

Each quarter we assess the recoverability of our deferred tax assets under ASC Topic 740. We assess available positive and negative evidence to estimate whether we will generate sufficient future taxable income to use our existing deferred tax assets. We have no carryback ability, and therefore we must rely on future taxable income, including tax planning strategies and future reversals of taxable temporary differences, to support their realizability. In our assessment for the period ended June 30, 2021, we concluded it was more likely than not that our deferred tax assets related to United States federal ordinary income and all states with the exception of Utah will be realizable. In reaching the conclusion that deferred tax assets related to United

States federal income and all states, except for Utah, will be realizable, we considered, among other things, three significant pieces of positive evidence that occurred during the quarter ended June 30, 2021: 1) achieving three-year cumulative earnings, 2) recent use of deferred tax assets, and 3) changes in our tax filing groups in conjunction with the Pelion Transaction. Therefore, in the year ended December 31, 2021, we released approximately $53.8 million of valuation allowance. We still maintain a valuation allowance against our deferred tax assets for capital losses and the state of Utah where not supported by future reversals of taxable temporary differences, because of the uncertainty regarding the realizability of these deferred tax assets. We will continue to monitor the need for a valuation allowance against our remaining deferred tax assets on a quarterly basis.

A reconciliation of the beginning and ending unrecognized tax benefits, excluding interest and penalties, as of December 31, 2021, 2020 and 2019 is as follows (in thousands):

	Year ended December 31,
	2021		2020		2019
Beginning balance	$	9,638	$	9,058	$	7,974
Additions for tax positions related to the current year	1,992		971		1,064
Additions (reductions) for tax positions taken in prior years	331		(35)		20
Reduction due to settlements	—		(301)		—
Reduction due to cash payments	—		(55)		—
Ending balance	$	11,961	$	9,638	$	9,058

Included in the balance of unrecognized tax benefits as of December 31, 2021, 2020 and 2019, are approximately $12.0 million, $9.6 million, and $9.1 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. We believe it is reasonably possible that these unrecognized tax benefits will continue to increase in the future.

Accrued interest and penalties on unrecognized tax benefits as of December 31, 2021 and 2020 were $753,000 and $340,000, respectively.

We are subject to taxation in the United States and various state and foreign jurisdictions. Tax years beginning in 2017 are subject to examination by taxing authorities, although net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used.

We have indefinitely reinvested foreign earnings of $5.7 million at December 31, 2021. We would need to accrue and pay various taxes on this amount if repatriated. We do not intend to repatriate these earnings.