Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Taxes

Schedule of components of the Company's income tax expense

The components of the Company’s income tax expense from operations for the year ended December 31, consisted of (in thousands):

	2020		2019		2018
Current:
Federal	$	38,843	$	10,605	$	13,828
State		12,294		4,080		5,598
Deferred:
Federal		5,016		9,140		11,970
State		1,590		5,757		(606)
Income tax expense	$	57,743	$	29,582	$	30,790

Schedule of reconciliation of income tax expense from operations to the federal statutory rate

A reconciliation of income tax expense from operations to the federal statutory rate for the year ended December 31, is as follows (in thousands):

	2020		2019		2018
Income taxes computed at federal statutory rate(1)	$	84,411	$	(19,051)	$	20,238
State income taxes – net of federal benefit(1)		3,741		(4,728)		4,313
Other differences:
Federal alternative minimum tax and state and local taxes on pass-through entities		2,965		937		1,076
Income taxes computed at the effective federal and state statutory rate for pass-through entities not subject to tax for the Company (2)		(53,147)		(22,089)		(41,367)
Tax benefit from of transfer assets(3)		—		(14,170)		—
Increase in valuation allowance due to transfer of assets(3)		—		26,350		—
Increase in valuation allowance		19,058		59,552		43,175
Impact of other state tax rate changes		(915)		1,653		(2,020)
Goodwill impairment		—		—		6,158
Other		1,630		1,128		(783)
Income tax expense	$	57,743	$	29,582	$	30,790

(1) Federal and state income tax for 2019 and 2018 include the tax effect of $2.5 million of income tax benefit and $0.3 million of income tax expense, respectively, relating to the revaluation in the Tax Receivable Agreement liability. The amount related to 2020 was insignificant.

(2) The related income is taxable to the non-controlling interest.

(3) These amounts represent the net income tax expense of $12.2 million (composed of an increase in the valuation allowance against the Company’s overall deferred tax assets of $26.4 million, offset by the income tax benefit associated with the transferred assets of $14.2 million) related to the transfer of certain assets, including the Good Sam Club and co-branded credit cards as discussed below.

Summary of significant items comprising the net deferred tax asset

Significant items comprising the net deferred tax assets at December 31, were (in thousands):

	2020		2019
Deferred tax liabilities
Accelerated depreciation	$	(5)	$	(3)
Prepaid expenses		(1,690)		(1,676)
Intangible assets		(2,865)		(3,704)
Operating lease assets		(67,400)		(71,221)
Lease incentives		(63)		(5,226)
		(72,023)		(81,830)
Deferred tax assets
Investment impairment		22,169		21,601
Inventory-related		5,494		5,029
Gift cards		1,788		1,385
Deferred revenues		6,996		6,859
Accrual for employee benefits and severance		2,485		1,555
Stock option expense		469		(10)
Investment in partnership ("Outside Basis Deferred Tax Asset")(1)		241,805		203,663
Tax Receivable Agreement liability		36,486		28,715
Net operating loss carryforward		124,117		114,617
Intangible assets		1,456		2,086
Goodwill		1,433		2,396
Deferred depreciation		1,283		1,002
Operating lease liabilities		79,639		82,785
Other reserves		8,057		6,309
		533,677		477,992
Valuation allowance		(295,946)		(266,452)
Net deferred tax assets	$	165,708	$	129,710

(1) This amount is the deferred tax asset the Company recognizes for its book to tax basis difference in its investment in CWGS, LLC.