INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

For the years ended December 31, 2024, 2023 and 2022, we have the following income (loss) before income taxes (in thousands):

	December 31,
	2024		2023
US Domestic	$	60,704	$	60,374
Foreign	(15,842)		(21,564)
Income before income taxes	$	44,862	$	38,810

For the years ended December 31, 2024, 2023 and 2022, we recognized income tax expense comprised of the following (in thousands):

	December 31,
	2024		2023
Federal current tax	$	—	$	—
State current tax	2,375		3,442
Foreign current tax	1,302		638
Other current tax	—		—
Federal deferred tax	3,269		8,960
State deferred tax	(246)		(2,724)
Foreign deferred tax	(674)		(1,843)
Income tax expense	6,026		8,473

A reconciliation of the statutory U.S. federal rate and effective rates is as follows:

	Years Ended December 31,
	2024		2023
Federal tax	$	9,416	$	8,150
State franchise tax, net of federal benefit	3,652		3,730
Other non deductible expenses	781		133
Stock-based compensation	(2,367)		63
Officer compensation	1,435		1,199
Noncontrolling interests in partnerships	(7,581)		(5,752)
Changes in valuation allowance	4,675		(2,569)
Return to provision	(1,237)		5,987
Deferred true-ups and other	(1,332)		483
Foreign rate differential	(670)		(1,083)
Uncertain tax provisions	(274)		(884)
Tax rate adjustment	(458)		(984)
Other differences	(14)		—
Income tax expense	$	6,026	$	8,473

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards.

Our deferred tax assets and liabilities comprise the following (in thousands):

	December 31,
Deferred tax assets:	2024		2023
Net operating losses	$	46,868	$	43,247
Accrued expenses	5,087		4,432
Operating lease liability	138,842		136,097
Amortization of research and experimental expenditures	9,977		5,243
Equity compensation	3,813		4,179
Allowance for doubtful accounts	2,411		2,198
Limitation of business interest	16,083		9,515
Other	1,182		997
Valuation allowance	(13,797)		(9,688)
Total deferred tax assets	$	210,466	$	196,220
Deferred tax liabilities:
Property and equipment	(20,383)		(7,851)
Goodwill	(45,794)		(42,419)
Intangibles	(13,206)		(15,578)
Operating lease right-of-use asset	(124,427)		(122,840)
Outside basis difference	(27,066)		(18,547)
Other	(1,820)		(4,761)
Total deferred tax liabilities	$	(232,696)	$	(211,996)
Net deferred tax liability	$	(22,230)	$	(15,776)

As of December 31, 2024, we had federal net operating loss carryforwards of approximately $128.2 million, which is comprised of definite and indefinite net operating losses. We had federal net operating loss carryforwards of approximately $63.2 million, which expire at various intervals from the years 2026 to 2037, and had carryforwards of $65.0 million of net operating losses which do not expire. Federal net operating losses generated in tax years following December 31, 2017 carryover indefinitely and may be used to offset up to 80% of future taxable net income. We also had state net operating loss carryforwards of approximately $145.3 million, which expire at various intervals from the years 2025 through 2042. As of December 31, 2024, $24.9 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. and the 2019 acquisition of Nulogix Health, Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. We also had foreign net operating loss carryforwards of approximately $56.3 million, which do not expire and are carried over indefinitely.

We considered all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2024, we have determined that deferred tax assets of $210.5 million are more likely-than-not to be realized. We have also determined deferred tax liabilities of $45.8 million are related to book basis in goodwill that has an indefinite life.

We file consolidated income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019. We do not anticipate the results of any open examinations would result in a material change to our financial position.

A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended are as follows (in thousands):

	December 31,
	2024		2023
Balance at beginning of year	$	3,082	$	4,144
Increases related to prior year tax positions	276		54
Increases related to current year tax positions	45		62
Expiration of the statute of limitations for the assessment of taxes	(381)		(1,180)
Increase related to change in rate	2		2
Balance at end of year	$	3,024	$	3,082

At December 31, 2024, we had unrecognized tax benefits of $3.0 million of which $2.5 million will affect the effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2024 the Company accrued approximately $22 thousand of interest and penalties. As of December 31, 2024, accrued interest and penalties amounted to approximately $0.4 million. We do not anticipate the uncertain tax position to change materially within the next 12 months.

The Organization for Economic Co-operation and Development issued Pillar Two model rules for a global minimum tax of 15% effective January 1, 2024. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. Pillar Two had no impact on our 2024 ETR, and we do not currently expect Pillar Two to significantly impact our ETR going forward.