INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 17. INCOME TAXES

The domestic and foreign components of income (loss) before income taxes consisted of the following:

$s in thousands	2021		2020		2019
Domestic	$	(10,567)	$	(403,492)	$	30,706
Foreign		20,669		9,891		19,093
Income (loss) before income taxes	$	10,102	$	(393,601)	$	49,799

The components of the income tax expense (benefit) consisted of the following:

$s in thousands	2021		2020		2019
Current:
U.S. Federal	$	(1,534)	$	(9,905)	$	3,120
State		68		3,062		1,547
Foreign		6,948		6,768		5,426
Total current		5,482		(75)		10,093
Deferred:
U.S. Federal		(509)		1,384		5,977
State		503		(2,859)		714
Foreign		(711)		(2,692)		(125)
Total deferred		(717)		(4,167)		6,566
Income tax expense (benefit)	$	4,765	$	(4,242)	$	16,659

A reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows:

	2021		2020		2019
Taxes computed at federal statutory rate	21.0	%	21.0	%	21.0	%
Goodwill impairment charges	—		(20.4)		—
State income taxes (net of federal income tax benefit)	9.8		0.3		5.7
Share-based compensation	4.6		(0.1)		(0.4)
Research and development credits	(4.4)		0.1		(0.8)
Non-deductible transaction costs	1.6		—		3.4
Global intangible low taxed income	—		—		1.1
Foreign rate differential	11.0		(0.3)		2.5
Net operating loss reduction	—		(1.7)		—
Change in unrecognized tax benefits	—		1.7		—
State deferred rate differential	—		(0.1)		(1.6)
State credits	(5.1)		—		—
Assumed contingent liability	3.1		—		—
Non-deductible executive compensation	1.5		—		—
Non-deductible foreign expenses	4.3		—		—
Non-deductible political contributions	1.3		—		—
Net operating loss carryback rate differential	(4.6)		—		—
Other	3.1		0.6		2.6
	47.2	%	1.1	%	33.5	%

The components of the total net deferred tax assets and liabilities as of December 31, 2021 and 2020 consisted of the following:

$s in thousands	2021		2020
Deferred tax assets:
Net operating losses	$	16,963	$	18,751
Operating leases		10,980		12,875
Foreign tax credit and capital loss carry forwards		5,579		4,928
Accruals, allowances and other		4,963		8,691
Environmental compliance and other site related costs		10,833		10,909
Unrealized foreign exchange gains		819		790
Total deferred tax assets		50,137		56,944
Less: valuation allowance		(4,164)		(4,207)
Net deferred tax assets		45,973		52,737
Deferred tax liabilities:
Property and equipment		(50,601)		(53,838)
Intangible assets		(106,504)		(107,109)
Operating leases		(10,980)		(12,875)
Other		(1,370)		102
Total deferred tax liabilities		(169,455)		(173,720)
Net deferred tax liability	$	(123,482)	$	(120,983)

All deferred tax assets and liabilities are recorded in Deferred income taxes, net on the consolidated balance sheets as of December 31, 2021 and 2020.

Utilization of the Company’s net operating loss carryforwards are subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss carryforwards before utilization. Management believes that the limitation will not limit utilization of the carryforwards prior to their expiration based on the historic profitability of the Company and certain favorable adjustments available to the annual limitation calculations.

As of December 31, 2021, we had approximately $58.5 million, $7.2 million, and $52.2 million of federal, foreign, and state and local net operating losses (“NOLs”), respectively. A portion of the federal NOLs begin to expire in 2029 and the remaining federal NOLs have no expiration date. Approximately $26.4 million of the US Federal NOLs are indefinite lived and the remainder expire between 2029 and 2037. Foreign NOLs are indefinite lived and therefore have no expiration date. State and local NOLs expire between 2022 and 2041. We have historically recorded a valuation allowance for certain deferred tax assets due to uncertainties regarding future operating results and limitations on utilization of state and local NOLs for tax purposes. At December 31, 2021 and 2020, we maintained a valuation allowance of approximately $37,000 and $79,000, respectively, for state and local NOLs that are not expected to be utilizable prior to expiration.

The valuation allowance as of December 31, 2021 and 2020 was primarily related to foreign tax credit that, in the judgment of management, was not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment. The net valuation allowance decreased $42,000 for the year ended December 31, 2021 compared to December 31, 2020.

Changes to unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019, were as follows:

$s in thousands	2021		2020		2019
Unrecognized tax benefits, beginning of year	$	239	$	8,335	$	555
Gross increases - tax positions in prior period		9		—		8,088
Gross decreases - tax positions in prior period		—		(8,091)		(9)
Gross increases - tax positions in current period		58		50		52
Settlements		—		—		(284)
Lapse of statute of limitations		(50)		(55)		(67)
Unrecognized tax benefits, end of year	$	256	$	239	$	8,335

As of December 31, 2021, the total amount of unrecognized tax benefits was $256,000, of which $237,000, if recognized, would favorably impact our future earnings. The $8.1 million decrease in prior period tax positions in 2020 related to the acquired NRC net operating losses that were recorded as a reduction to our net operating losses deferred tax asset in 2019 for which an election to treat them as expired was made during 2020. We do not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12 months. Accrued interest and penalties related to unrecognized tax benefits as of December 31, 2021 and December 31, 2020 were not significant. There is no accrual for penalties.

The Company files income tax returns in the U.S. Federal and various state, local and foreign jurisdictions. The Company is subject to examination by the IRS for tax years 2018 through 2021. The 2017 through 2021 state tax returns are subject to examination by state tax authorities. Stablex Canada, Inc. is currently under examination by the Canadian Revenue Agency for years 2018 through 2020. The tax years 2017 through 2021 remain subject to examination in our significant foreign jurisdictions. The Company does not anticipate any material change as a result of any current examinations in progress.