Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

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 years ended December 31, 2022, 2021 and 2020 consisted of (in thousands):

	2022		2021		2020
Current:
Federal	$	44,613	$	74,124	$	38,843
State		11,170		23,890		12,294
Deferred:
Federal		17,588		13,024		5,016
State		25,713		(18,914)		1,590
Income tax expense	$	99,084	$	92,124	$	57,743

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 years ended December 31, 2022, 2021 and 2020 were as follows (in thousands):

	2022		2021		2020
Income taxes computed at federal statutory rate(1)	$	94,524	$	154,182	$	84,411
State income taxes – net of federal benefit(1)		8,362		15,261		3,741
Other differences:
State and local taxes on pass-through entities		3,736		5,004		2,965
Income taxes computed at the effective federal and state statutory rate for pass-through entities not subject to tax for the Company (2)		(53,461)		(81,013)		(53,147)
Effect of LLC Conversion(3)		208,833		—		—
(Decrease) increase in valuation allowance(4)		(164,257)		(2,234)		19,058
Impact of other state tax rate changes		967		1,927		(915)
Other		380		(1,003)		1,630
Income tax expense	$	99,084	$	92,124	$	57,743

(1) Federal and state income tax for 2021 includes $0.7 million of income tax expense relating to the revaluation in the Tax Receivable Agreement liability due to fluctuations in state income tax rates. The amounts related to 2022 and 2020 were insignificant.

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

(3) These amounts represent the tax impact of the LLC Conversion (defined and discussed below), which is comprised of a $209.4 million adjustment to CW’s deferred tax assets inclusive of tax operating losses, net of a $0.6 million reduction to CWH’s outside basis deferred tax asset.

(4) For 2022, these amounts include a $180.4 million decrease in valuation allowance associated with the LLC Conversion, partially offset by $16.8 million of increases to the valuation allowance for activity not related to the LLC conversion, which is primarily resulting from losses of CW for which no benefit is recognized for the U.S. federal and non-unitary states, net of a $0.6 million decrease in valuation allowance associated with CWH’s outside basis deferred tax asset. During 2021, and as a result of CWH’s ownership of CWGS increasing above 50% during the first quarter of 2021, the amount for the year ended December 31, 2021 included a decrease in the valuation allowance of CW in certain state deferred tax assets of $15.2 million, partially offset by $13.0 million of increases to the valuation allowance primarily resulting from losses of CW for which no benefit is recognized for the U.S. federal and non-unitary states.

Summary of significant items comprising the net deferred tax asset

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.