Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s income tax provision was as follows:

	Year Ended December 31,
	2023		2022		2021
Current provision
Federal	$	43,214	$	31,348	$	16,273
State	10,255		8,798		4,605
Foreign	10		26		—
Total current provision	53,479		40,172		20,878
Deferred benefit
Federal	(8,863)		(5,061)		(578)
State	(269)		(1,608)		(984)
Foreign	—		(4)		—
Total deferred benefit	(9,132)		(6,673)		(1,562)
Total income tax expense	$	44,347	$	33,499	$	19,316

The Company paid income taxes of $54,678, $34,059 and $19,796 for the years ended December 31, 2023, 2022 and 2021, respectively.

The reconciliation of the federal statutory tax rate to the Company’s effective income tax rate was as follows:

	Year Ended December 31,
	2023		2022		2021
Statutory U.S. federal income tax rate:	21.00	%	21.00	%	21.00	%
Increase in rate resulting from:
Non-deductible meals & entertainment	0.12	%	0.01	%	0.10	%
Penalties	1.19	%	—	%	—	%
Qualified transportation fringe benefits	0.03	%	0.03	%	0.09	%
Equity compensation	0.23	%	0.27	%	19.22	%
Executive compensation limitation	0.86	%	0.16	%	1.28	%
State income tax, net of federal income tax effect	4.72	%	4.05	%	6.03	%
Unrecognized tax benefits	(0.11)	%	0.05	%	1.70	%
Research & development tax credit	(0.87)	%	(1.39)	%	(5.21)	%
Return to provision	(0.34)	%	0.06	%	(1.76)	%
Other, net	(0.35)	%	0.25	%	0.48	%
Effective rate	26.48	%	24.49	%	42.93	%

The components of the Company’s deferred income tax liability, net was as follows:

	December 31,
	2023		2022
Assets:
Accrued expenses	$	9,030	$	7,633
Federal benefit of state tax expense	6,180		5,790
Federal and state net operating loss carryforwards	12,938		15,598
Tax credit carryforwards	3,270		2,885
Operating lease liabilities	8,118		8,549
Share-based compensation	5,597		5,359
Other	47		103
Total deferred income tax assets	45,180		45,917
Liabilities:
Other intangible assets	169,372		170,407
Property and equipment, and capitalized software	6,137		14,307
Operating lease right-of-use assets	6,638		6,960
Other	2,105		1,740
Total deferred income tax liabilities	184,252		193,414
Net deferred income tax liability	$	139,072	$	147,497

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. During 2023 and 2022, the Company evaluated the realizability of its net deferred tax assets based on available positive and negative evidence. During 2023 and 2022, the Company concluded that it is more likely than not that all of the benefits of the deferred tax assets will be realized, except for a portion of its state net operating loss carryforwards that would expire unused. As a result, the Company has established a valuation allowance of $87 as of December 31, 2023 and 2022.

The Company's federal net operating loss carryforwards amounted to $8,282 and $13,380 as of December 31, 2023 and 2022, respectively. If unused, $4,733 of the Company’s federal net operating loss carryforwards will begin to expire in 2027. $3,549 of the Company’s net operating losses were generated after 2017 and will carryforward indefinitely. The Company's state net operating loss carryforwards amounted to $243,058 and $261,037, as of December 31, 2023 and 2022, respectively. It is expected that the utilization limitation of Internal Revenue Code Section 382 will cause $113,873 of the Company’s state net operating loss carryforwards to expire unused, and these amounts are not included in the Company’s gross deferred income tax asset. If unused, the Company’s state net operating loss carryforwards will begin to expire in 2027. The Company had state tax credit carryforwards of $3,270 and $2,762 as of December 31, 2023 and 2022, respectively, which do not expire and can be carried forward indefinitely.

The reconciliation of the beginning and ending amounts of the Company’s unrecognized tax benefits is as follows:

	December 31,
	2023		2022
Balance, beginning of year	$	5,655	$	4,918
Increases related to prior year tax positions	723		313
Decreases related to prior year tax positions	(224)		—
Decreases related to prior year tax positions due to closure of statute	(771)		(389)
Increases related to current year tax positions	918		813
Balance, end of year	$	6,301	$	5,655

The Company had unrecognized tax benefits of $6,301 and $5,655 as of December 31, 2023 and 2022, respectively, primarily related to research and development tax credits and states in which the Company had nexus but did not file tax returns. The total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $5,443 and $4,979 as of December 31, 2023 and 2022, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded an expense of $278, $145 and $296 for interest and penalties related to unrecognized tax benefits as part of income tax expense, respectively. Total accrued interest and penalties related to unrecognized tax benefits as of December 31, 2023 and 2022, were $1,124 and $845, respectively.

The Company files U.S. Federal income tax returns and various state and local tax returns. The Company is no longer subject to U.S. Federal and state tax examinations for years through 2018.