CWH is organized as a Subchapter C corporation (“C-Corp”) and, as of December 31, 2022, is a 50.2% owner of CWGS, LLC (see Note 18 — Stockholders’ Equity and Note 19 — Non-Controlling Interests). CWGS, LLC is organized as a limited liability company (“LLC”) and treated as a partnership for U.S. federal and most applicable state and local income tax purposes and as such, is generally not subject to any U.S. federal entity-level income taxes. However, certain CWGS, LLC subsidiaries, including Americas Road and Travel Club, Inc., Camping World, Inc. (“CW”) prior to the LLC Conversion (defined below), and FreedomRoads RV, Inc. and their wholly-owned subsidiaries, are subject to entity-level taxes as they are C-Corps.

The components of the Company’s income tax expense from operations for the years ended December 31, 2022, 2021 and 2020 consisted of (in thousands):

A reconciliation of income tax expense from operations to the federal statutory rate for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands):

LLC Conversion

CW, including certain of its subsidiaries, were taxable as C-Corps and subject to entity-level taxes. CW had historically generated operating losses for tax purposes. Only losses subject to taxes in certain state jurisdictions were available to offset taxable income generated by the Company’s other businesses. The Company completed the steps necessary to convert CW and certain of its subsidiaries from C-Corps to LLCs with an effective date of January 2, 2023 (the “LLC Conversion”). All required filings for conversion to LLC were made by December 31, 2022. Accordingly, the effect of the LLC Conversion was recorded during the year ended December 31, 2022, as the filings were perfunctory pursuant to the rules prescribed under ASC 740, Income Taxes. Beginning with the year ending December 31, 2023, the operating losses of CW and its subsidiaries will offset taxable income generated by the Company’s other LLC businesses. As a result, both income tax expense recognized by CWH and the amount of required tax distributions paid to holders of common units in CWGS, LLC, under the CWGS LLC Agreement, will decrease. The LLC Conversion will allow the Company to more easily integrate its retail and dealership operations and more seamlessly share resources within the RV and Outdoor Retail segment, while providing an expected future cash flow benefit for the operating companies.

The LLC Conversion resulted in additional income tax expense in the year ended December 31, 2022 of $28.4 million, which was comprised of $208.8 million of gross deferred tax assets written off, partially offset by the release of $180.4 million of valuation allowance (see table above for reconciliation of income tax expense from operations to the federal statutory rate).

Deferred Income Taxes

Deferred income taxes 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

and operating loss and tax credit carryforwards. Significant items comprising the net deferred tax assets at December 31, 2022 and 2021 were (in thousands):


	2022		2021
Deferred tax liabilities
Operating lease assets	$	(5,897)	$	(63,143)
Other		(80)		(3,456)
		(5,977)		(66,599)
Deferred tax assets
Investment impairment		—		20,619
Investment in partnership ("Outside Basis Deferred Tax Asset")⁽¹⁾		253,550		271,513
Tax Receivable Agreement liability		43,223		46,328
Net operating loss carryforward		22		137,377
Operating lease liabilities		6,150		73,476
Other reserves		1,234		28,695
		304,179		578,008
Valuation allowance		(154,975)		(312,088)
Net deferred tax assets	$	143,227	$	199,321

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

The Company evaluates its deferred tax assets on a quarterly basis to determine if they can be realized and establishes valuation allowances when it is not more likely than not that all or a portion of the deferred tax assets can be realized. At December 31, 2022 and 2021, the Company determined that all of its deferred tax assets (except those of CW at December 31, 2021 and the Outside Basis Deferred Tax Asset at December 31, 2022 and 2021) are more likely than not to be realized. Prior to the LLC Conversion discussed above, the Company maintained a valuation allowance against the deferred tax assets of CW, excluding certain state deferred tax assets included in the state combined unitary income tax returns. At December 31, 2022 , as a result of the LLC Conversion, the Company wrote off all of the remaining deferred tax assets and related valuation allowance associated with CW. The Company maintains a valuation allowance against the Outside Basis Deferred Tax Asset pertaining to the portion that is not amortizable for tax purposes, since the Company would likely only realize the non-amortizable portion of the Outside Basis Deferred Tax Asset if the investment in CWGS, LLC was divested.

Net Operating Loss Carryforwards

At December 31, 2022, certain subsidiaries of CWH had federal and state net operating loss carryforwards of approximately $622.5 million and $461.4 million, respectively, which will no longer be available after the LLC Conversion effective date on January 2, 2023. The income tax expense associated with writing off these operating loss carryforwards at December 31, 2022 was $14.7 million, which consisted of $158.9 million of operating loss carryforward deferred tax assets, partially offset by the release of the related valuation allowance of $144.2 million.

Tax Legislation

As further described in Note 1 — Summary of Significant Accounting Policies — COVID-19, in response to the COVID-19 pandemic, many governments had enacted measures to provide aid and economic stimulus. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., included measures to assist companies, including temporary changes to income and non-income-based tax laws. For the years ended December 31, 2022 and 2021, there were no material impacts to the Company’s consolidated financial statements relating to the CARES Act other than the deferral of non-income-based payroll taxes of $29.2 million for the year ended December 31, 2020 of which $14.6 million was paid during each of the years ended December 31, 2022 and 2021. Of this deferred amount, $14.6 million was included in accrued liabilities in the accompanying consolidated balance sheet at December 31, 2021. Furthermore, on March 11, 2021 the American Rescue Plan Act, a $1.9 trillion tax-and-spending package aimed at addressing the continuing economic and health impacts of the coronavirus pandemic, was enacted. The

American Rescue Plan Act provisions do not have a material impact on the Company’s income tax expense and effective tax rate.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022 with certain exclusions for (a) repurchased shares for withholding taxes on vested restricted stock units (“RSUs”) and (b) treasury shares reissued in the same tax year for settlement of stock option exercises or vesting of RSUs. While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.

Uncertain Tax Positions

As of December 31, 2022 and 2021, the balance of the Company’s uncertain tax positions was $4.5 million and $2.9 million, respectively. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months.

Tax Receivable Agreement

The Company is party to a tax receivable agreement (the “Tax Receivable Agreement”) that provides for the payment by the Company to the Continuing Equity Owners and Crestview Partners II GP, L.P. of 85% of the amount of tax benefits, if any, the Company actually realizes, or in some circumstances is deemed to realize, as a result of (i) increases in the tax basis from the purchase of common units from Crestview Partners II GP, L.P. in exchange for Class A common stock in connection with the consummation of the IPO and the related transactions and any future redemptions that are funded by the Company and any future redemptions of common units by Continuing Equity Owners as described above and (ii) certain other tax benefits attributable to payments made under the Tax Receivable Agreement. The above payments are predicated on CWGS, LLC making an election under Section 754 of the Internal Revenue Code effective for each tax year in which a redemption of common units for cash or stock occur. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners or Crestview Partners II GP, L.P. maintaining a continued ownership interest in CWGS, LLC. In general, the Continuing Equity Owners’ or Crestview Partners II GP, L.P.’s rights under the Tax Receivable Agreement are assignable, including to transferees of its common units in CWGS, LLC (other than the Company as transferee pursuant to a redemption of common units in CWGS, LLC). The Company expects to benefit from the remaining 15% of the tax benefits, if any, which may be realized. During the twelve months ended December 31, 2022 and 2021, 50,000 and 4,722,251 common units in CWGS, LLC, respectively, were redeemed for Class A common stock subject to the provisions of the Tax Receivable Agreement. The Company recognized a liability for the Tax Receivable Agreement payments due to those parties that redeemed common units, representing 85% of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the redemption, after concluding it was probable that the Tax Receivable Agreement payments would be paid based on estimates of future taxable income. As of December 31, 2022, and December 31, 2021, the amount of Tax Receivable Agreement payments due under the Tax Receivable Agreement was $170.6 million and $182.4 million, respectively, of which $10.9 million and $11.3 million, respectively, were included in current portion of the Tax Receivable Agreement liability in the accompanying consolidated balance sheets.

During the year ended December 31, 2022, the Continuing Equity Owners redeemed 50,000 common units in CWGS, LLC for 50,000 shares of the Company’s Class A common stock. During the year ended December 31, 2022, the Tax Receivable Agreement liability and Deferred Tax Assets increased $0.5 million and $0.6 million, respectively, as a result of common unit redemptions and were recorded to additional paid-in capital (see the consolidated statements of stockholders’ equity). Payments pursuant to the Tax Receivable Agreement relating to this redemption will begin during the year ending December 31, 2023.

During the year ended December 31, 2021, the Continuing Equity Owners, primarily Crestview Partners II GP, L.P., redeemed a combined 4.7 million common units in CWGS, LLC for 4.7 million shares of the Company’s Class A common stock. During the year ended December 31, 2021, the Tax Receivable Agreement liability and Deferred Tax Assets increased $41.7 million and $26.5 million, respectively, as a result of common

unit redemptions and were recorded to additional paid-in capital (see the consolidated statements of stockholders’ equity). Payments pursuant to the Tax Receivable Agreement relating to these redemptions began during the year ended December 31, 2022.

On January 1, 2023, transferees of common units transferred by CWGS Holding, LLC, a wholly owned subsidiary of ML Acquisition Company, LLC, which is indirectly owned by Stephen Adams, a former member of the Company’s Board of Directors, and Marcus Lemonis, the Company’s Chairman and Chief Executive Officer, redeemed 2.0 million common units in CWGS, LLC for 2.0 million shares of the Company’s Class A common stock (see Note 19 — Non-Controlling Interests). The estimated increase in deferred tax assets, the non-current portion of the Tax Receivable Agreement liability, and additional paid-in capital resulting from these redemptions is $6.3 million, $5.4 million, and $0.9 million, respectively. Payments pursuant to the Tax Receivable Agreement relating to these redemptions would begin during the year ending December 31, 2024.

Income Tax Audits

For tax years beginning on or after January 1, 2018, CWGS, LLC is subject to partnership audit rules enacted as part of the Bipartisan Budget Act of 2015 (the “Centralized Partnership Audit Regime”). Under the Centralized Partnership Audit Regime, any IRS audit of CWGS, LLC would be conducted at the CWGS, LLC level, and if the IRS determines an adjustment, the default rule is that CWGS, LLC would pay an “imputed underpayment” including interest and penalties, if applicable. CWGS, LLC may instead elect to make a “push-out” election, in which case the partners for the year that is under audit would be required to take into account the adjustments on their own personal income tax returns. If CWGS, LLC does not elect to make a “push-out” election, CWGS, LLC has agreements in place requiring former partners to indemnify CWGS, LLC for their share of the imputed underpayment. The partnership agreement does not stipulate how CWGS, LLC will address imputed underpayments. If CWGS, LLC receives an imputed underpayment, a determination will be made based on the relevant facts and circumstances that exist at that time. Any payments that CWGS, LLC ultimately makes on behalf of its current partners will be reflected as a distribution, rather than tax expense, at the time such distribution is declared.

The Company and its subsidiaries file U.S. federal income tax returns and tax returns in various states. During the year ended December 31, 2022, one of CWGS, LLC’s indirect wholly-owned subsidiaries was notified by the Internal Revenue Service that their 2020 tax year was under examination. The Company does not expect any material adjustments as a result of the examination. The Company will continue to monitor the examination progress and evaluate its impact as further information becomes available. The Company is not under any other material audits in any jurisdiction. With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2019.