INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company accounts for income taxes under ASC 740 - Income Taxes, which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry-forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

Income tax expense (benefit) attributable to income from continuing operations was $16.4 million, $(24.2) million, and $25.0 million for the years ended December 31, 2023, 2022, and 2021, respectively, and differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations as a result of the following:

(in thousands, except percentage data)	2023				2022				2021
Federal income tax expense (benefit) at the statutory rate	21.0	%	$	58,296	(21.0)	%	$	(150,785)	(21.0)	%	$	(1,097)
State income taxes, net of federal tax expense	0.9	%	2,559		(1.6)	%	(11,495)		150.7	%	7,876
Executive compensation deduction limitation	0.9	%	2,587		1.0	%	7,358		578.1	%	30,213
Excess tax benefit related to share-based compensation	0.2	%	470		—	%	285		(36.5)	%	(1,909)
Nondeductible other expenses	0.6	%	1,798		—	%	14		4.3	%	225
Change in valuation allowance	(18.9)	%	(52,502)		18.2	%	130,462		(277.0)	%	(14,477)
Prior year true-ups	1.2	%	3,346		—	%	127		81.9	%	4,281
Other, net	—	%	(128)		—	%	(198)		(2.8)	%	(144)
Income tax expense (benefit) from continuing operations	5.9	%	$	16,426	(3.4)	%	$	(24,232)	477.7	%	$	24,968

The components of the provision for income taxes are as follows:

(in thousands)	December 31, 2023		December 31, 2022		December 31, 2021
Current income tax expense (benefit)
Federal	$	—	$	—	$	—
State	1,140		733		2
Total current income tax expense	1,140		733		2
Deferred expense
Federal	66,129		(143,598)		31,569
State	1,659		(11,829)		7,874
Total deferred tax expense (benefit)	67,788		(155,427)		39,443
Change in valuation allowance	(52,502)		130,462		(14,477)
Net deferred tax expense after valuation allowance (benefit)	15,286		(24,965)		24,966
Income tax provision (benefit)	$	16,426	$	(24,232)	$	24,968

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are presented below:

(in thousands)	December 31, 2023		December 31, 2022
Deferred tax assets:
Tax credit carryforwards	$	517	$	386
Net operating loss carryforwards	144,081		48,703
Intangible assets	1,602		1,727
Stock compensation	3,898		2,133
Digital assets	—		52,535
Disallowed Interest	3,093		2,215
Bad debt reserve	9,957		10,039
Research and development costs	1,619		541
Accruals, reserves and other	286		239
Impairment loss	36,100		36,397
Capital losses	11,950		—
Gain on hedge instruments	3,798		—
Total gross deferred tax assets	216,901		154,915
Less valuation allowance	(77,960)		(130,462)
Net deferred tax assets	138,941		24,453
Deferred tax liabilities:
Unrealized gains	—		(2,494)
Property and equipment, net	(117,094)		(21,959)
Digital assets	(37,133)		—
Total gross deferred liabilities	(154,227)		(24,453)
Net deferred tax liability	$	(15,286)	$	—

The valuation allowance for deferred tax assets as of December 31, 2023 and 2022 was $78.0 million and $130.5 million, respectively. The net change in the total valuation allowance was a decrease of $52.5 million in the year ended December 31, 2023.

At year ended December 31, 2023, the Company concluded, based upon all available evidence, it was more likely than not that it would not have sufficient future taxable income to realize the Company’s federal and state deferred tax assets. As a result, the Company established a valuation allowance against deferred tax assets that are not supported by reversing deferred tax liabilities.

At December 31, 2023, the Company has federal and state net operating loss carryforwards of $772.1 million, which are available to offset future taxable income. In addition, the Company has interest expense carryforwards of $14.2 million.

The Company has the following attributes and credit carryforwards:

(in thousands)	Gross Amount		Expiring
Federal net operating loss carryforwards	$	3,314	2034-2035
Federal net operating loss carryforwards	651,476		Indefinite
State net operating loss carryforwards	117,286		Various
Interest expense carryforwards	14,189		Indefinite
Federal tax credit carryforwards	477		2040-2043
State tax credit carryforwards	40		Indefinite

Section 382 and Section 383 of the Internal Revenue Code limit the utilization of U.S. tax attribute carryforwards following a change of control. Based on the Company’s analysis under Section 382, approximately $85.5 million of tax attributes are limited by Section 382/383 as of December 31, 2023. The Section 382/383 limitation in conjunction with the twenty-year carryforward limitation caused $33.5 million of attributes to be deemed worthless, which resulted in a write-off of the related deferred tax assets in 2021.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the tax years ended December 31, 2023 and 2022 is as follows:

(in thousands)	December 31, 2023		December 31, 2022		December 31, 2021
Balance, beginning of year	$	5,252	$	44	$	—
Increase (decrease) related to prior year tax positions	(31)		21		25
Increase related to current year tax positions	75		5,187		19
Balance, end of year	$	5,296	$	5,252	$	44

The Company has established a reserve against its federal research and development (“R&D”) tax credits generated in 2023 and previous years. The Company has also established a reserve related to its executive compensation deduction limitation in 2022.

As of December 31, 2023, the total amount of unrecognized tax benefits was $5.3 million, all of which was offset against deferred tax assets. If the unrecognized tax benefits were recognized as of December 31, 2023, there would be a $5.3 million favorable impact that would affect the effective rate on income from continuing operations. The Company also accrues for interest and penalties on its uncertain tax positions and includes such charges in its income tax provision in the Consolidated Statements of Comprehensive Income (Loss). The Company had no interest and penalty expenses in the years ended December 31, 2023 and 2022.

The Company did not accrue either interest or penalties for the years ended December 31, 2023 and 2022. The Company does not currently expect any of its remaining unrecognized tax benefits to be recognized in the next twelve months.

The Company files federal and state income tax returns. The 2019-2022 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.