Income Taxes

12 Months Ended

Dec. 31, 2020

The Company is taxed as a C Corporation. On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. This allowed the Company to carryback net operating losses generated in 2018 and 2019 to prior tax years and generate a tax refund. The total refund generated by this carryback was $1.6 million, of which $1.4 million has been received. The remaining $0.2 million is included as an income tax receivable at December 31, 2020.

The income tax provision (benefit) from income taxes for December 31, 2020 and 2019 consists of the following:


	For the Years Ended
(in thousands)	December 31, 2020		December 31, 2019
Current tax provision
U.S. Federal	$	1,274	$	69
State and local	1,209		258
Total current tax provision	2,483		327

Deferred tax benefit
U.S. Federal	(643)		(356)
State and local	(658)		(253)
Total deferred tax benefit	(1,301)		(609)
Income tax provision (benefit)	$	1,182	$	(282)

In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all 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 periods in which those temporary differences become deductible. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. After giving consideration to these factors, management concluded that it was more likely than not that the deferred tax assets would be fully realized, and as a result, no valuation allowance against the deferred tax assets was deemed necessary at December 31, 2020 and 2019.

The components of deferred tax assets (liabilities) were as follows:


(in thousands)	As of December 31, 2020		As of December 31, 2019
Deferred tax assets:
Accrued expenses	$	2,096	$	850
Allowance for doubtful accounts	71		81
Intangibles	784		987
Goodwill	3,746		4,257
Startup costs	91		101
Percentage of completion	—		105
Stock-based compensation	501		679
Net operating losses and credits	—		841
Interest	—		507
Lease liabilities	5,268		5,960
Accrued bonuses and commissions	2,030		6
Warrant	535		101
Other	—		69
Total deferred tax assets	15,122		14,544

Deferred tax liabilities:
Fixed assets	(3,813)		(3,897)
Right-of-use assets	(4,975)		(5,586)
Debt discounts	(155)		(275)
Percentage of completion	(92)		—
Total deferred tax liabilities	(9,035)		(9,758)

Net deferred tax asset	$	6,087	$	4,786

At December 31, 2020, the Company had no net operating loss carryforwards. At December 31, 2019, there were $1.1 million in net operating loss carryforwards.

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


	For the Years Ended
	December 31, 2020		December 31, 2019
Federal statutory income tax rate	21.0	%	21.0	%
State income taxes, net of federal tax effect	6.3	%	0.8	%
Change in uncertain tax benefits	(0.6)	%	(8.0)	%
Stock based compensation – restricted stock	2.0	%	(7.5)	%
Return to provision adjustment	(0.7)	%	4.8	%
Permanent differences	1.1	%	(9.8)	%
Tax credits	(2.7)	%	10.8	%
CARES Act carryback	(9.4)	%	—	%
Other	—	%	1.6	%
Effective tax rate	17.0	%	13.7	%

The Company is subject to taxation in various jurisdictions. The Company’s 2017 through 2019 tax returns are subject to examination by U. S. federal authorities. The Company’s tax returns are subject to examination by various state authorities for the years 2017 and forward.

The Company had previously recorded a liability for unrecognized tax benefits (“UTB”) related to tax positions taken on its various income tax returns in open tax periods. If recognized, a portion of unrecognized tax benefits would favorably impact the effective tax rate that is reported in future periods. The Company filed to change an improper tax method of accounting in the fourth quarter of 2020 related to the UTB that affords the Company IRS audit protection in past periods. Therefore, the total unrecognized tax benefits were reduced in the current period.

The following is a reconciliation of the beginning and ending unrecognized tax benefits:


	December 31, 2020		December 31, 2019
Balance at beginning of period	$	1,130	$	—
Gross increases in prior period tax positions	—		722
Gross increases in current period tax positions	—		408
Decreases related to prior year tax positions	(1,130)		—
Balance at end of period	$	—	$	1,130