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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for income taxes charged to operations consists of the following (in thousands):
Year Ended December 31,
202120202019
Current Expense:
Federal$(8)$17,248 $1,709 
State(668)4,196 803 
Foreign60 — — 
(616)21,444 2,512 
Deferred Expense (Benefit):
Federal(9,085)(2,799)20,576 
State(1,017)60 1,746 
(10,102)(2,739)22,322 
Total Income Tax Expense (Benefit)$(10,718)$18,705 $24,834 
Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
December 31,
20212020
Deferred Tax Assets:
Bad debts$32 $156 
Inventories2,411 2,050 
Accrued warranties1,242 841 
Accrued compensation315 271 
Accrued settlement— 524 
Net operating loss1,944 506 
Equity-based compensation948 154 
Lease liabilities2,661 — 
Premium on capped call12,356 — 
Interest expense carryforward5,301 — 
Other275 239 
Deferred Tax Assets27,485 4,741 
Valuation allowance(222)(208)
Deferred Tax Assets, net27,263 4,533 
Deferred Tax Liabilities:
Property, plant, and equipment(1,083)(1,043)
Intangible assets(14,165)(16,604)
ROU assets(2,670)— 
Deferred Tax Liabilities(17,918)(17,647)
Deferred Tax Asset (Liability), net$9,345 $(13,114)
A reconciliation of income tax expense computed at the federal statutory rate of 21% to actual income tax expense at the Company’s effective rate is as follows (in thousands):
Year Ended December 31,
202120202019
Income tax rate reconciliation
Income tax expense (benefit) at U.S. statutory rate$(12,835)$16,333 $13,562 
State income taxes
(1,545)3,375 2,049 
Permanent differences:
Derecognition of tax assets from IRS examination— — 9,284 
Equity-based compensation1,542 852 168 
Contingent consideration567 5,553 134 
Credits(620)(79)(284)
Other nondeductible expenses69 437 40 
Effect of CARES Act— (6,608)— 
Foreign income benefit— (1,201)(155)
Officer’s compensation435 — — 
Transaction costs950 — — 
Change in valuation allowance14 — (45)
Other705 43 81 
Total Income Tax Expense (Benefit)
$(10,718)$18,705 $24,834 

The Company files income tax returns in the U.S. federal jurisdiction and in multiple states. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2015.

As of December 31, 2021, the Company had federal income tax net operating loss (“NOL”) carryforwards of approximately $5.1 million. The Company has state income tax NOL carryforwards of approximately $9.7 million that will expire in future years beginning in 2029.

Realization of deferred tax assets associated with federal and state net operating loss and federal tax credit carryforwards is dependent upon generating sufficient taxable income of the appropriate type, and in the appropriate jurisdictions, to utilize them prior to their expiration, if any. It is not more likely than not that deferred tax assets from certain state net operating loss and federal tax credit carryforwards would be realized due to type and location of future earnings and as such the Company increased the valuation allowance $14 thousand for the years ended December 31, 2021 and none for the year ended December 31, 2020.

ASC 740, Income Taxes, addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. In accordance with ASC 740, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company’s assessments of its tax positions in accordance with ASC 740 did not result in changes that had a material impact on results of operations, financial condition or liquidity. The Company had no unrecognized income tax benefits at either December 31, 2021 or 2020.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act provided the ability for taxpayers to carryback a net operating loss (“NOL”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 to each of the five years preceding the year of the loss. The Company generated a significant NOL during its tax year ended March 31, 2019 and filed a carryback claim in June 2020 for this NOL. As a result of the carryback claim, the Company recorded an income tax benefit of $10.7 million on its consolidated statement of operations for the year ended December 31, 2020, resulting from the difference in the current U.S. federal tax rate of 21% and the tax rate of 35% applicable in the carryback year.

The Company’s 2017 federal income tax return was selected for examination by the IRS in 2018. As a result of the examination, an adjustment related to the value allocated to the developed technology for tax purposes was potentially required. During 2019, the Company settled the 2017 examination and agreed to a reduction in the developed technology value from $210 million to $188 million for federal income tax purposes. As a result of this change in the value of the acquired developed technology, the Company reduced its NOL carryforwards by approximately $2.8 million for previously taken amortization and increased the deferred tax liability related to the revised developed technology tax basis by approximately $4.6 million. In addition, the Company will no longer receive tax basis upon payment of the Tax Receivable Agreement (“TRA”) liability, as such the related deferred tax asset of $4.7 million for the TRA was also written off during 2019. The adjustments resulting from the change in developed technology value have been recorded as an income tax expense for the year ended December 31, 2020. Refer to Note 16 - Commitments and Contingencies, for detail on the TRA, which was contingent consideration at the time of the Array acquisition.