Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense were as follows (in thousands):

	Year Ended December 31,
	2019		2020		2021
Current income tax expense:
Federal	$	5,803	$	5,685	$	513
State	1,425		2,146		1,535
	7,228		7,831		2,048
Deferred tax expense:
Federal	(1,766)		(608)		4,948
State	(275)		(203)		515
	(2,041)		(811)		5,463
Income Tax Expense	$	5,187	$	7,020	$	7,511

    The tax effects of principal temporary differences are as follows (in thousands):

	As of December 31,
	2020		2021
Deferred tax assets
Operating lease liability	$	2,187	$	20,717
Allowance for doubtful accounts	1,487		2,061
Restricted stock	1,573		1,329
Accrued vacation and severance	695		768
Investment	564		774
Other	596		716
Stock option compensation expense	63		159
Net operating loss	—		3,338
Total gross deferred tax assets	7,165		29,862
Valuation allowance	(536)		(743)
Total net deferred tax assets	6,629		29,119
Deferred tax liabilities
Income tax deductible capitalized software development costs	(2,468)		(2,121)
Operating lease asset	(2,161)		(19,442)
Property and equipment	(1,867)		(10,110)
Prepaid expenses	(1,294)		(1,136)
Goodwill and intangibles	(1,419)		(1,302)
Other comprehensive income- unrealized gain on interest rate cap	—		(67)
Total deferred tax liabilities	(9,209)		(34,178)
Deferred tax liabilities, net	$	(2,580)	$	(5,059)

At December 31, 2021, the Company had net operating loss carryforwards and capital loss carryforwards of $15.9 million and $1.8 million, respectively, which are available to offset future taxable income. The capital loss carryforwards will expire in 2026 while the net operating loss can be carried forward indefinitely. The Company’s utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change provisions of Section 382 of Internal Revenue Code of 1986, as amended.

Income tax expense differs from the amount of tax determined by applying the United States Federal income tax rates to pretax income and loss due to the application of state apportionment laws, permanent tax differences, and other temporary differences (in thousands):

	Year Ended December 31,
	2019				2020				2021
	Amount		%		Amount		%		Amount		%
Tax expense at statutory rate	$	3,192	21.00	%	$	5,427	21.00	%	$	5,305	21.00	%
State taxes, net	852		5.60	%	1,156		4.48	%	1,576		6.24	%
Permanent differences	244		1.61	%	491		1.90	%	678		2.68	%
Equity-based compensation benefits	371		2.44	%	(305)		(1.18)	%	(219)		(0.87)	%
Post-employment benefits	345		2.27	%	(67)		(0.26)	%	—		—	%
Uncertain tax position	93		0.61	%	49		0.19	%	—		—	%
Valuation allowance	213		1.40	%	287		1.11	%	206		0.82	%
Other	(123)		(0.80)	%	(18)		(0.07)	%	(35)		(0.14)	%
	$	5,187	34.13	%	$	7,020	27.17	%	$	7,511	29.73	%

    Permanent differences in the table above are mainly attributable to executive and stock compensation, minority investment losses, nondeductible meals and entertainment expenses, and non-deductible employer contributions to the American Public Education, Inc. Employee Stock Purchase Plan.

    There were no material uncertain tax positions as of December 31, 2019, 2020, or 2021. Interest and penalties associated with uncertain income tax positions would be classified as income tax expense. The Company has not recorded any material interest or penalties during any of the years presented.

The Company is subject to U.S. federal income taxes as well as income tax of multiple state jurisdictions. For U.S. federal and state tax purposes, tax years 2018-2020 remain open to examination.