INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The current and deferred components of the income tax (benefit) provision included in the Consolidated and Combined Consolidated Statements of Operations are as follows: 

	Year Ended December 31,
	2022		2021		2020
Current:
Federal	$	2	$	13	$	4
State and local	482		224		329
Foreign	—		—		(41)
Total current provision	484		237		292
Deferred:
Federal	3,824		(3,820)		(2,272)
State and local	154		(44)		—
Foreign	6		(3)		(4)
Total deferred (benefit) provision	3,984		(3,867)		(2,276)
Total	$	4,468	$	(3,630)	$	(1,984)

Prior to the spin-off, we were taxed as a disregarded entity for U.S. federal income tax purposes and our taxable income or loss generated was allocated to investors by our Former Parent, which was treated as a partnership for U.S. federal income tax purposes. In addition, certain of our subsidiaries were taxed as separate corporations for U.S. federal income tax purposes. Taxable income or loss generated by us and our corporate subsidiaries following the spin-off and by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business.

A valuation allowance has been established against our net U.S. federal and state deferred tax assets, including net operating loss carryforwards. As a result, our income tax provision is primarily related to separate company state taxes, deferred taxes for tax deductible goodwill, and deferred taxes for certain long-lived assets.

Our effective tax rate differs from the U.S. federal tax rate of 21% primarily due to state taxes and the valuation allowances against a significant portion of the deferred tax assets of our corporate subsidiaries.

The difference between our reported total provision for income taxes and the U.S. federal statutory rate of 21% is as follows:

 

	Year Ended December 31,
	2022		2021		2020
U.S. federal tax at statutory rate	21.00	%	21.00	%	21.00	%
Income not subject to tax at statutory rate	—	%	9.91	%	4.15	%
State and local taxes	1.77	%	(0.06)	%	(0.45)	%
Foreign taxes	—	%	—	%	0.06	%
Noncontrolling interest	(2.58)	%	—	%	—	%
Other	0.46	%	(4.43)	%	0.06	%
Change in valuation allowance	(23.09)	%	(23.05)	%	(22.13)	%
Provision for income taxes	(2.44)	%	3.37	%	2.69	%

Significant components of our deferred tax assets and liabilities are as follows:

	December 31,
	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	142,067	$	112,999
Accrued expenses	2,118		2,275
Interest expense	35,624		23,483
Operating lease liabilities	58,919		48,665
Investment in partnerships	49,488		15,524
Other	3,623		803
Total deferred tax assets	291,839		203,749
Less valuation allowance	(214,003)		(143,604)
Net deferred tax assets	77,836		60,145
Deferred tax liabilities:
Fixed assets and goodwill	(29,051)		(16,900)
Operating lease right-of-use assets	(52,624)		(43,101)
Net deferred tax assets (liabilities)	$	(3,839)	$	144

Deferred tax assets and liabilities are reported net in Other assets or Other liabilities in the Consolidated and Combined Consolidated Balance Sheets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. We have analyzed our deferred tax assets and have determined, based on the weight of available evidence, that it is more likely than not that a significant portion will not be realized. Accordingly, valuation allowances have been recognized as of December 31, 2022, 2021, and 2020 of $214.0 million, $143.6 million, and $94.1 million, respectively, related to certain deductible temporary differences and net operating loss carryforwards.

A summary of the changes in the valuation allowance is as follows:

	December 31,
	2022		2021		2020
Valuation allowance at beginning of period	$	143,604	$	94,139	$	81,313
Change due to current year losses	70,399		49,465		12,826
Valuation allowance at end of period	$	214,003	$	143,604	$	94,139

As of December 31, 2022, certain of our corporate subsidiaries had U.S. federal net operating loss carryforwards of approximately $623.6 million that are available to offset future taxable income. If not utilized, $168.5 million of these carryforwards will begin to expire in the year 2034, with $455.1 million of these carryforwards having no expiration date. The utilization of the net operating loss carryforwards to reduce future income taxes will depend on the relevant corporate subsidiary's ability to generate sufficient taxable income prior to the expiration of the carryforward period, if any. In addition, the maximum annual use of net operating loss carryforwards may be limited after certain changes in stock ownership.

As of and for the year ended December 31, 2022, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to 2018. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date.