Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) consisted of the following (in thousands):

	2022		2021		2020
Current:
Federal	$	15,518	$	17,019	$	29,762
State	5,174		4,568		6,528
	20,692		21,587		36,290
Deferred:
Federal	(7,264)		10,954		584
State	(1,143)		1,004		(91)
	(8,407)		11,958		493
Income tax expense	$	12,285	$	33,545	$	36,783

The following table provides a reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate:

	2022		2021		2020
Statutory federal income tax	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	6.4		3.0		2.4
R&D tax credits	(5.5)		(1.4)		(1.4)
Non-deductible compensation	1.7		1.5		1.0
Stock-based compensation	(1.2)		(6.3)		(2.4)
Changes in unrecognized tax benefits	(0.4)		(0.1)		0.3
Other	3.1		0.2		—
Effective income tax rate	25.1	%	17.9	%	20.9	%

The Company files income tax returns with the U.S. federal government and various state jurisdictions. In the normal course of business, the Company is subject to examination by federal and state taxing authorities. The Company is no longer subject to federal income tax examinations for years prior to 2019 or state income tax examinations prior to 2018.

Deferred Income Taxes

The tax effects of temporary differences that give rise to deferred income taxes were as follows (in thousands):

	2022		2021
Deferred tax assets:
Stock-based compensation	$	6,896	$	8,037
Operating lease liabilities	109,144		102,292
Warranty and returns liabilities	7,881		7,459
Net operating loss carryforwards and credits	2,051		1,939
Compensation and benefits	7,678		8,206
Research and development	13,860		—
Other	6,110		6,607
Total gross deferred tax assets	153,620		134,540
Valuation allowance	(615)		(615)
Total gross deferred tax assets after valuation allowance	153,005		133,925
Deferred tax liabilities:
Property and equipment	38,442		34,655
Operating lease right-of-use assets	99,311		92,778
Deferred revenue	4,394		5,460
Other	2,900		1,720
Total gross deferred tax liabilities	145,047		134,613
Net deferred tax assets (liabilities)	$	7,958	$	(688)

At December 31, 2022, the Company had net operating loss carryforwards for federal purposes of $0.5 million, which will expire between 2025 and 2027.

The Company evaluates its deferred income taxes quarterly to determine if valuation allowances are required. As part of this evaluation, the Company assess whether valuation allowances should be established for any deferred tax assets that are not considered more likely than not to be realized, using all available evidence, both positive and negative. This assessment considers, among other matters, the nature, frequency, and severity of historical losses, forecasts of future profitability, taxable income in available carryback periods and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified. The Company has provided a $0.6 million valuation allowance resulting primarily from its inability to utilize certain foreign net operating losses.

Unrecognized Tax Benefits

Reconciliations of the beginning and ending amounts of unrecognized tax benefits were as follows (in thousands):

	Federal and State Tax
	2022		2021		2020
Beginning balance	$	3,869	$	3,912	$	3,337
Increases related to current-year tax positions	910		831		860
Increases related to prior-year tax positions	252		4		27
Decreases related to prior-year tax positions	(328)		(33)		—
Lapse of statute of limitations	(1,058)		(845)		(312)
Ending balance	$	3,645	$	3,869	$	3,912

At December 31, 2022 and January 1, 2022, the Company had $3.2 million and $3.7 million, respectively, of unrecognized tax benefits, which if recognized, would affect its effective tax rate. The amount of unrecognized tax benefits is not expected to change materially within the next 12 months.