INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

14.INCOME TAXES

Income tax expense (benefit) consists of the following components:

	For the Year Ended
(In thousands)	2021		2020		2019
Current:
Federal	$	305	$	314	$	143
State		470		2,236		1,392
Total current expense		775		2,550		1,535
Deferred:
Federal		4,867		8,802		(4,339)
State		637		(416)		(910)
Total deferred expense (benefit)		5,504		8,386		(5,249)
Total income tax expense (benefit)	$	6,279	$	10,936	$	(3,714)

The following is a reconciliation of the federal statutory tax rate to the effective tax rate for the years ended December 31, 2021, 2020 and 2019:

	For the Year Ended
(In percentages)	2021		2020		2019
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	6.4		1.6		10.6
Searchlight investment	(33.0)		(3.3)		—
Other permanent differences	(0.5)		2.2		(4.5)
Change in deferred tax rate	—		—		(2.9)
Valuation allowance	(1.7)		2.8		(4.7)
Provision to return	2.6		(1.1)		(0.5)
Nondeductible goodwill	(1.5)		—		—
State audit settlement	—		—		(3.2)
Other	0.4		(0.5)		(0.1)
	(6.3)	%	22.7	%	15.7	%

Deferred Taxes

The components of the net deferred tax liability are as follows:

	Year Ended December 31,
(In thousands)	2021		2020
Non-current deferred tax assets:
Reserve for uncollectible accounts	$	2,632	$	2,420
Accrued vacation pay deducted when paid		4,388		4,354
Accrued expenses and deferred revenue		15,019		16,419
Net operating loss carryforwards		100,402		76,198
Excess interest carryforward		2,402		—
Pension and postretirement obligations		57,507		79,688
Share-based compensation		1,706		974
Derivative instruments		2,633		6,582
Financing costs		—		1,177
Tax credit carryforwards		4,854		4,990
		191,543		192,802
Valuation allowance		(8,580)		(7,139)
Net non-current deferred tax assets		182,963		185,663
Non-current deferred tax liabilities:
Goodwill and other intangibles		(44,044)		(53,797)
Basis in investment		(4)		(12)
Partnership investments		(16,902)		(15,988)
Property, plant and equipment		(310,579)		(286,888)
Financing costs		(5,892)		—
Other		—		1
		(377,421)		(356,684)
Net non-current deferred taxes	$	(194,458)	$	(171,021)

The investment made by Searchlight in 2020 is treated as a contribution of equity for federal tax purposes; therefore, the impact of the non-cash PIK interest expense, discount and issuance costs, and fair value adjustments on the CPR resulted in an increase of $33.1 million and a decrease of $1.6 million to our current tax expense for 2021 and 2020, respectively.

As of December 31, 2021, the American Rescue Plan Act did not have a material impact on the Company’s income tax positions. We will continue to evaluate the impact of enacted and future legislation.

Deferred income taxes are provided for the temporary differences between assets and liabilities recognized for financial reporting purposes and assets and liabilities recognized for tax purposes.  The ultimate realization of deferred tax assets depends upon taxable income during the future periods in which those temporary differences become deductible.  To determine whether deferred tax assets can be realized, management assesses whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, taking into consideration the scheduled reversal of deferred tax liabilities, projected future taxable income and tax-planning strategies.

Consolidated and its wholly owned subsidiaries, which file a consolidated federal income tax return, estimates it has available federal NOL carryforwards as of December 31, 2021 of $423.1 million and related deferred tax assets of $88.9 million.  The federal NOL carryforwards for tax years beginning after December 31, 2017 of $157.2 million and related deferred tax assets of $33.0 million can be carried forward indefinitely.  The federal NOL carryforwards for the tax years prior to December 31, 2017 of $265.9 million and related deferred tax assets of $55.8 million expire in 2027 to 2035.

ETFL, a nonconsolidated subsidiary for federal income tax return purposes, estimates it has available NOL carryforwards as of December 31, 2021 of $0.6 million and related deferred tax assets of $0.1 million. ETFL’s federal NOL carryforwards are for the tax years prior to December 31, 2017 and expire in 2022 to 2024.

We estimate that we have available state NOL carryforwards as of December 31, 2021 of $812.8 million and related deferred tax assets of $16.1 million.  The state NOL carryforwards expire from 2022 to 2041. Management believes that it is more likely than not that we will not be able to realize state NOL carryforwards of $89.0 million and related deferred

tax asset of $5.9 million and has placed a valuation allowance on this amount.  The related NOL carryforwards expire from 2022 to 2041.  If or when recognized, the tax benefits related to any reversal of the valuation allowance will be accounted for as a reduction of income tax expense.

We estimate that we have available state tax credit carryforwards as of December 31, 2021 of $6.1 million and related deferred tax assets of $4.9 million. The state tax credit carryforwards are limited annually and expire from 2022 to 2031. Management believes that it is more likely than not that we will not be able to realize state tax credit carryforwards of $3.4 million and related deferred tax asset of $2.7 million and has placed a valuation allowance on this amount.  The related state tax credit carryforwards expire from 2022 to 2031.  If or when recognized, the tax benefits related to any reversal of the valuation allowance will be accounted for as a reduction of income tax expense.

Unrecognized Tax Benefits

Under the accounting guidance applicable to uncertainty in income taxes, we have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns as well as all open tax years in these jurisdictions. Our unrecognized tax benefits as of December 31, 2021 and 2020 were $4.9 million. There were no material effects on the Company’s effective tax rate. The net amount of unrecognized benefits that, if recognized, would result in an impact to the effective rate is $4.7 million for each of the years ended December 31, 2021 and 2020.

Our practice is to recognize interest and penalties related to income tax matters in interest expense and selling, general and administrative expenses, respectively.  As of December 31, 2021 and 2020, we did not have a material liability for interest or penalties and had no material interest or penalty expense.

The periods subject to examination for our federal return are years 2018 through 2020.  The periods subject to examination for our state returns are years 2017 through 2020.  In addition, prior tax years may be subject to examination by federal or state taxing authorities if the Company’s NOL carryovers from those prior years are utilized in the future.  We are currently under examination by state taxing authorities.  We do not expect any settlement or payment that may result from the examination to have a material effect on our results or cash flows.

We do not expect that the total unrecognized tax benefits and related accrued interest will significantly change due to the settlement of audits or the expiration of statute of limitations in the next twelve months.  There were no material effects on the Company’s effective tax rate.