Income Taxes

12 Months Ended

Dec. 31, 2019

Income Taxes

Income Taxes

15. Income Taxes

The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities is principally dependent upon achievement of projected future taxable income. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more-likely-than-not that the Company will realize the benefits of these deductible differences. The Company has no valuation allowance at December 31, 2019 and 2018.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. For businesses, the Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. The Company concluded that the Act caused the Company’s deferred tax assets and liabilities to be revalued. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted though income tax expense. The Company’s net deferred tax liability was revalued as of December 22, 2017. The Company recorded a $10.7 million income tax benefit related to the revaluation of its net deferred tax liabilities. Excluding this income tax benefit in 2017, our effective tax rate would have been 32.1%.

The components of income tax expense (benefit) are as follows:

	Year Ended December 31,
	2019		2018		2017
Current:
Federal	$	57,354	$	60,764	$	76,966
State		(1,344)		8,732		8,589
		56,010		69,496		85,555
Deferred:
Federal		2,804		(10,708)		(6,189)
State		(487)		(799)		843
		2,317		(11,507)		(5,346)
Tax expense recorded as an increase of paid-in capital		—		—		—
	$	58,327	$	57,989	$	80,209

A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows:

	Year Ended December 31,
	2019		2018		2017
Statutory U.S. federal income tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal tax benefit	2.4		4.0		3.2
State tax credits, net of federal effect	(1.0)		(1.0)		(0.7)
Excess tax benefits	(2.3)		(3.7)		(5.8)
Deferred tax revaluation (Federal Rate change)	—		—		(3.7)
Nondeductible expenses	0.1		0.4		—
Other	(1.8)		(0.5)		0.3
Effective income tax rate	18.4	%	20.2	%	28.3	%

Significant components of the Company’s deferred income tax assets and liabilities, included in Deferred income taxes, non-current on the consolidated balance sheets are as follows:

	As of December 31,		As of December 31,
	2019		2018
Deferred tax assets:
Share-based compensation	$	2,499	$	3,030
Employee compensation		614		780
Intangibles		23,693		—
State taxes		1,764		879
Other		432		386
Deferred tax assets		29,002		5,075
Deferred tax liability:
Property and equipment		(10,865)		(10,778)
Goodwill		(36,295)		(762)
Other		(162)		—
Deferred tax liability		(47,322)		(11,540)
Net deferred tax liability	$	(18,320)	$	(6,465)

The net deferred tax liability on the accompanying consolidated balance sheet is comprised of the following:

	As of December 31,		As of December 31,
	2019		2018
Deferred income taxes, current	$	2,215	$	1,871
Deferred income taxes, non-current		(20,535)		(8,336)
Net deferred tax liability	$	(18,320)	$	(6,465)

The Company recognizes the impact of a tax position in its financial statements if that position is more-likely-than-not to be sustained on audit, based on the technical merits of the position. The Company discloses all unrecognized tax benefits, which includes the reserves recorded for uncertain tax positions on filed tax returns and the unrecognized portion of affirmative claims. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Unrecognized tax benefits as of December 31, 2019 and 2018 were $6,773 and $1,960, respectively.

The reconciliation of the beginning and ending balance of unrecognized tax benefits at December 31, is as follows:

	2019		2018
Unrecognized tax benefits, beginning of year	$	1,960	$	2,008
Tax positions taken during the current year
Increases		5,671		—
Decreases		—		—
Tax positions taken during a prior year
Increases		96		75
Decreases		—		—
Decreases for settlements during the period		—		(123)
Reductions for lapses of applicable statute of limitations		(954)		—
Unrecognized tax benefits, end of year	$	6,773	$	1,960

As of December 31, 2019 and 2018, the unrecognized tax benefit recorded of $6,773 and $1,960, respectively, if reversed, would impact the effective tax rate. At December 31, 2019 and 2018, the Company had accrued $153 and $217, respectively, in interest and $0, in penalties. It is reasonably possible that the amount of the unrecognized tax benefit will change during the next 12 months, however management does not expect the potential change to have a material effect on the results of operations or financial position.

The Company’s uncertain tax positions were related to tax years that remained subject to examination by tax authorities. As of December 31, 2019, the earliest tax year still subject to examination for federal and state purposes is 2016 and 2015, respectively.