Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the Company's income (loss) before income taxes are as follows:

	Year Ended December 31,
	2021		2020		2019
	(amounts in thousands)
United States	$	132,809	$	(12,998)	$	(24,783)
Foreign	399		668		572
Income (loss) before income taxes	$	133,208	$	(12,330)	$	(24,211)

 The components of the Company’s income tax expense (benefit) are as follows:

	Year Ended December 31,
	2021		2020		2019
	(amounts in thousands)
Current:
Federal	$	5,165	$	25	$	(35)
State	5,638		600		499
Foreign	330		119		109
Total	11,133		744		573
Deferred:
Federal	892		(138)		17,406
State	(10,648)		(818)		13,799
Foreign	(171)		24		(46)
Total	(9,927)		(932)		31,159
Income tax expense (benefit)	$	1,206	$	(188)	$	31,732

Deferred income taxes reflect the Company's net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2021		2020
	(amounts in thousands)
Deferred Tax Assets:
Accrued other and prepaid expenses	$	237	$	1,600
Allowance for doubtful accounts	1,644		909
Intangible assets	9,273		27,036
Net operating loss carryforwards	4,112		20,536
Accrued professional liability claims	1,335		1,525
Accrued workers’ compensation claims	3,097		3,015
Share-based compensation	840		721
Operating lease liabilities	3,790		4,871
Credit carryforwards	41		188
Other	505		—
Gross deferred tax assets	24,874		60,401
Valuation allowance	(20)		(37,472)
	24,854		22,929
Deferred Tax Liabilities:
Depreciation	(1,515)		(1,077)
Indefinite-lived intangibles	(9,993)		(25,546)
Operating lease right-of-use assets	(1,821)		(2,499)
Tax on unrepatriated earnings	(190)		(361)
Other	—		(38)
	(13,519)		(29,521)
Net deferred taxes	$	11,335	$	(6,592)

As of December 31, 2020, the Company determined that it could not sustain a conclusion that it was more likely than not that it would realize any of its deferred tax assets resulting from recent losses, the difficulty of forecasting future taxable income, and other factors. Due to the historical losses from the Company's operations, it had recorded a valuation allowance on its deferred tax assets not more likely than not to be realizable. As of December 31, 2021, and 2020, the Company had valuation allowances on its deferred tax assets of an immaterial amount and $37.5 million, respectively. For the year ended December 31, 2021, the Company recorded a net valuation allowance release of $37.5 million (comprised of $18.4 million related to federal NOLs, $7.5 million related to state NOLs, and $11.6 million related to other net deferred tax assets) on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. The valuation allowance on certain state NOLs was not released due to the respective expiration periods and specific state taxable income projections.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2021, in part because in the current year the Company achieved 12 quarters of cumulative pretax income including permanent items in the U.S. federal tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that its net deferred tax assets are realizable. The Company believes it has sustained cumulative profits and accordingly, released the valuation allowances on all deferred tax assets but for certain state NOLs due to the respective expiration periods and specific state taxable income projections.

In arriving at its conclusion to release the valuation allowance effective December 31, 2021, the Company considered several positive and negative factors. For the 12 quarters ended December 31, 2021, the Company has $110.3 million in cumulative pretax income including permanent items. The Company has a history of utilizing NOLs prior to expiration. Further, the

Company is forecasting positive pretax book income which is expected to exceed the reversal of its future tax deductions, further proving future estimates of taxable income. The growth estimates are tied to the growing demand for healthcare solutions for the Company's customers, including a growing aging U.S. population, and its customers’ pressure to keep costs down by using the Company's staffing solutions. With regard to negative evidence, the Company does not have any material taxable temporary differences to offset deductible temporary differences and does not have any taxable income available for carryback to offset NOLs. As such, the primary focus of its analysis emphasized the 12-quarter cumulative pretax income analysis and projections of future taxable income.

As of December 31, 2021, the Company utilized 100 percent of the federal net operating loss. The Company had approximately $72.4 million of state net operating loss carryforwards, and an immaterial amount of foreign net operating loss carryforwards. The NOLs expire as follows: state between 2022 and 2040 and foreign between 2022 and 2026. As a result of the 2017 Tax Act, certain state NOLs generated in 2020, 2019, and 2018 carry forward indefinitely.

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense (benefit) is as follows:

	Year Ended December 31,
	2021		2020		2019
	(amounts in thousands)
Tax at U.S. statutory rate	$	27,974	$	(2,589)	$	(5,084)
State taxes, net of federal benefit	8,573		135		(554)
Noncontrolling interest	(5)		(172)		(372)
Non-deductible items(a)	550		544		562
Foreign tax expense (benefit)	76		1		(58)
Valuation allowances	(37,450)		117		36,224
Uncertain tax positions	1,891		1,110		400
Officers' compensation	344		621		418
Return to provision	44		87		2
Other	(791)		(42)		194
Income tax expense (benefit)	$	1,206	$	(188)	$	31,732

________________

(a) Includes non-deductible meals and incidentals and other miscellaneous non-deductible items.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: 

	Year Ended December 31,
	2021		2020		2019
	(amounts in thousands)
Balance at January 1	$	6,891	$	5,792	$	5,412
Additions based on tax positions related to the current year	1,873		974		1,283
Additions (reductions) based on tax positions related to prior years	—		125		(498)
Reductions as a result of a lapse of applicable statute of limitations	(47)		—		(405)
Other	462		—		—
Balance at December 31	$	9,179	$	6,891	$	5,792

There were no short-term unrecognized tax benefits as of December 31, 2021, 2020, or 2019. Long-term unrecognized tax benefits are included in other long-term liabilities in the consolidated balance sheets and were $9.0 million, $1.0 million, and $0.7 million as of December 31, 2021, 2020, and 2019, respectively. See Note 7 - Balance Sheet Details. As of December 31,

2021, 2020, and 2019, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized, of $8.6 million, $7.1 million, and $6.0 million, respectively.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2021, 2020, and 2019, interest and penalties were immaterial. The Company has accrued $0.4 million for the payment of interest and penalties at December 31, 2021, and $0.3 million at December 31, 2020 and 2019. Tax years 2012 through 2021 remain open to examination by certain taxing jurisdictions to which the Company is subject to tax.

An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward if such carryforward would offset the disallowance of the tax position. As a result of the Company’s utilization of its federal net operating loss carryforward and a material amount of state net operating loss carryforwards, the Company reclassified $8.0 million of unrecognized tax benefits from deferred tax assets to long-term liabilities in the year ended December 31, 2021. Further, the Company reclassified $0.5 million, representing the federal benefit of state unrecognized tax benefits, in the tabular rollforward from unrecognized tax benefits to deferred tax assets.