The Company applied the intra-period tax allocation rules to allocate income taxes between continuing operations and discontinued operations as prescribed by U.S. GAAP, where the tax effect of income (loss) before income taxes is computed without regard to the tax effects of income (loss) before income taxes from the other categories. Income tax expense (benefit) from continuing operations consisted of the following (in thousands):


	Year Ended December 31,
	2022		2021			2020
Current:
Federal	$	113	$	—		$	—
State		997		1,289			856
		1,110		1,289			856
Deferred:
Federal		288		(166	)		38
State		242		(237	)		(29	)
		530		(403	)		9
Income tax expense (benefit)	$	1,640	$	886		$	865

The principal items accounting for the difference between taxes computed at the U.S. statutory rate and taxes recorded consisted of the following (in thousands):


	Year Ended December 31,
	2022			2021			2020
Computed tax at US federal statutory rate of 21%	$	(21,211	)	$	(84,966	)	$	(13,129	)
Increase (decrease) in taxes resulting from:
State taxes, net of federal impact		723			715			840
Stock-based compensation		(47,868	)		(44,088	)		—
Nondeductible compensation		23,570			4,054			—
Unrecognized tax benefit		—			238			(71	)
Permanent differences		(155	)		1,336			850
Valuation allowance		45,234			122,599			12,443
Other, net		1,347			998			(68	)
Income tax expense (benefit)	$	1,640		$	886		$	865

The net deferred tax liability comprises the tax effect of temporary differences between U.S. GAAP and tax reporting related to the recognition of income and expenses. The net deferred income tax liabilities are included in other liabilities in the consolidated balance sheets. Components of the net deferred tax liability consisted of the following (in thousands):


	December 31,
	2022			2021
Deferred income tax assets:
Net operating and capital losses	$	293,221		$	237,877
State taxes		260			332
Accrued expenses		15,920			19,828
Transaction costs		736			811
Stock-based compensation		6,314			4,331
Lease liabilities		3,285			2,610
Interest limitation		4,226			5,850
Intangible assets		—			4,022
Other, net		1,156			111
Total deferred income tax assets	$	325,118		$	275,772
Deferred income tax liabilities:
Property and equipment	$	—		$	(203	)
ROU assets		(3,155	)		(2,728	)
Intangible assets		(6,220	)		(11,032	)
Investments in partnerships and affiliates		(2,238	)		(1,402	)
Total deferred income tax liabilities	$	(11,613	)	$	(15,365	)
Valuation allowance		(314,166	)		(260,571	)
Net deferred income tax liabilities	$	(661	)	$	(164	)

The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. In making this assessment, the Company is required to consider all available positive and negative evidence to determine whether, based on such evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized in future periods. As of December 31, 2022 and 2021, the Company believed that it is more likely than not that its deferred tax assets in excess of deferred tax liabilities will not be realized. Accordingly, the Company has provided a valuation allowance of $314.2 million and $260.6 million on the Company’s deferred tax assets as of December 31, 2022 and 2021, respectively. The increase in valuation allowance of $53.6 million recorded in current year activities is primarily attributable to current year losses. The net deferred tax liability as of December 31, 2022 principally relates to deferred tax liabilities associated with long-term investments in partnerships and affiliates, which are expected to reverse against net operating losses which can only offset 80% of taxable income.

As of December 31, 2022, the Company has federal and state net operating losses of $1.2 billion and $676.1 million, respectively. As of December 31, 2021, the Company has federal and state net operating losses of $1.0 billion and $570.3 million, respectively. As of December 31, 2022, $1.2 billion of the total federal net operating losses are carried forward as indefinite-lived net operating losses. The remaining net operating losses are carried forward and will expire beginning in 2027 if unutilized. Utilization of these operating loss carryforwards may be subject to an annual limitation based on changes in ownership, as defined by Section 382 of the Internal Revenue Code of 1986, as amended. As of December 31, 2022, $32.3 million and $32.7 million of the Company’s federal and state net operating loss carryforward, respectively, are attributable to prior acquisition transactions and are subject to Section 382 limitations. The Company’s analysis indicates that none of the acquired net operating loss carryforwards will expire unutilized solely as a result of the Section 382 limitations. As of December 31, 2022, the Company has both federal and state capital loss carryforward of $0.8 million, which will expire in 2026 if unused.

As of December 31, 2022, the Company had unrecognized tax benefits of $5.2 million, $0.9 million of which, if recognized, would impact its effective tax rate. As of December 31, 2021, the Company had unrecognized tax benefits of $5.9 million, $1.5 million of which, if recognized, would impact its effective tax rate. As of December 31, 2020, the Company had unrecognized tax benefits of $8.9 million, $7.1 million of which, if recognized, would impact its effective tax rate.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):


	December 31,
	2022			2021			2020
Balance at beginning of the year	$	5,919		$	8,914		$	10,839
Additions related to current year		35			2,636			384
Additions (reductions) related to prior years		(137	)		—			565
Reductions related to settlements with taxing authorities		(605	)		(5,631	)		—
Reductions related to the lapse of applicable statute of limitations		—			—			(2,874	)
Balance at end of the year	$	5,212		$	5,919		$	8,914

As of December 31, 2022, the Company recorded a liability for unrecognized tax benefit of $1.6 million, inclusive of $0.7 million of accrued interest and penalties. As of December 31, 2021, the Company recorded a liability for unrecognized tax benefit of $2.1 million, inclusive of $0.6 million of accrued interest and penalties. As of December 31, 2020, the Company recorded a liability for unrecognized tax benefit of $10.0 million, inclusive of $2.9 million of accrued interest and penalties. As of both December 31, 2022 and 2021, $4.3 million of unrecognized benefits were reflected as a reduction in deferred tax asset balances. The unrecognized tax benefit of $1.6 million is subject to a tax indemnification agreement between the prior owners of some of the Company’s California subsidiaries and the Company. Thus, the Company does not bear significant risk for these uncertain tax positions, as any assessment on future tax examinations is expected to be recovered from the prior owners. The indemnification assets are reflected in other assets in the consolidated balance sheets. During the year ended December 31, 2022, the Company reversed $0.6 million of tax liability and $0.1 million of accrued interest on unrecognized tax benefits due to payments of an amended state return related to the period ended June 30, 2016. During the year ended December 31, 2021, the Company reversed $5.6 million of tax liability, $1.1 million of accrued interest and $1.1 million of accrued penalties on unrecognized tax benefits and realized a tax benefit of $1.8 million attributable to discontinued operations due to the settlement of the IRS exam for the period ended June 30, 2016. During the year ended December 31, 2020, due to expiration of the 2015 state statute of limitations, the Company reversed $2.9 million of tax liability, $0.6 million of accrued interest and $0.6 million of accrued penalties on unrecognized tax benefits and realized a tax benefit of $4.1 million attributable to discontinued operations. The tax benefit from the statute expiration was offset by $0.6 million, $0.6 million, and $0.1 million of additional accruals for taxes, interest, and penalties, respectively, on uncertain tax positions during 2020 resulting in a net tax benefit of $2.8 million attributable to discontinued operations. It is reasonably possible that during the next 12 months the Company may realize a $0.5 million decrease in its liability for uncertain tax positions, inclusive of $0.1 million related to the reversal of interest and penalties on uncertain tax positions, as a result of closing of the tax years.

The amount of income taxes the Company pays is subject to ongoing audits. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of the relevant risks, facts, and circumstances existing at the time. However, future results of operations may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are made or resolved. The Company operates in several taxing jurisdictions, including U.S. federal and multiple U.S. states. The statute of limitations has expired for all tax years prior to 2019 for federal and prior to 2016 for various state tax purposes. However, the net operating loss generated on the Company’s federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities.

For additional discussion regarding income taxes and unrecognized tax benefits related to discontinued operations, see Note 20.

On August 16, 2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act includes various tax provisions, which are effective for tax years beginning on or after January 1, 2023. For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022. These changes in tax laws did not have a material impact on the Company’s results of operations for the years ended December 31, 2022 and 2021. The Company will continue to monitor possible future impact of changes in tax legislation.