Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the provision for income taxes were as follows: 

	Years Ended December 31,
(in thousands)	2021		2020		2019
Current
Federal	$	75,525	$	27,852	$	23,066
State	24,974		9,751		6,129
Total current tax expense (benefit)	100,499		37,603		29,195
Deferred
Federal	(6,241)		3,899		3,535
State	(3,423)		2,433		2,447
Total deferred tax expense (benefit)	(9,664)		6,332		5,982
Total expense (benefit) for income taxes	$	90,835	$	43,935	$	35,177

The following presents a reconciliation of the provision (benefit) for income taxes computed at the federal statutory rate to the provision (benefit) for income taxes recognized on the Consolidated Statements of Operations for the years indicated: 

	Years Ended December 31,
(in thousands)	2021				2020				2019
Tax at statutory rate	$	74,271	21	%	$	34,419	21	%	$	29,544	21	%
State taxes, net of federal benefit	17,283		5		9,775		6		6,859		5
Excess tax benefits related to share-based compensation	(4,095)		(1)		239		—		(1,298)		(1)
Nondeductible compensation	3,461		1		2,686		2		2,080		2
Effect of net (income) loss attributable to noncontrolling interests	(2,637)		(1)		(1,939)		(1)		(968)		(1)
Change in valuation allowance	1,941		1		(1,383)		(1)		(1,330)		(1)
Other, net	611		—		138		—		290		—
Income tax expense (benefit)	$	90,835	26	%	$	43,935	27	%	$	35,177	25	%

The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of 26%, 27% and 25% for the years ended December 31, 2021, 2020 and 2019, respectively. The Company's tax position for the years ended December 31, 2021, 2020 and 2019 was impacted by changes in the valuation allowance related to the unrealized and realized gains and losses on the Company's investments.

Deferred taxes resulted from temporary differences between the amounts reported on the consolidated financial statements and the tax basis of assets and liabilities. The tax effects of temporary differences were as follows: 

	December 31,
(in thousands)	2021		2020
Deferred tax assets:
Intangible assets	$	11,216	$	3,237
Net operating losses	12,743		13,490
Compensation accruals	17,034		12,971
Lease liability	11,857		5,835
Investments	6,335		3,758
Capital losses	1,083		1,255
Other	595		984
Gross deferred tax assets	60,863		41,530
Valuation allowance	(7,296)		(6,107)
Gross deferred tax assets after valuation allowance	53,567		35,423
Deferred tax liabilities:
Intangible assets	(21,297)		(18,170)
Right of use asset	(9,830)		(4,328)
Fixed assets	(1,661)		(1,900)
Other investments	(1,575)		(1,487)
Gross deferred tax liabilities	(34,363)		(25,885)
Deferred tax assets, net	$	19,204	$	9,538

At each reporting date, the Company evaluates the positive and negative evidence used to determine the likelihood of realization of its deferred tax assets. The Company maintained a valuation allowance in the amount of $7.3 million and $6.1 million at December 31, 2021 and 2020, respectively, relating to deferred tax assets on items of a capital nature as well as certain state deferred tax assets.

As of December 31, 2021, the Company had net operating loss carry-forwards for federal income tax purposes represented by an $7.9 million deferred tax asset. The related federal net operating loss carry-forwards are scheduled to begin to expire in the year 2031. As of December 31, 2021, the Company had state net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a $4.9 million deferred tax asset. Certain state net operating loss carry-forwards are scheduled to begin to expire in 2022.

Internal Revenue Code Section 382 ("Section 382") limits tax deductions for net operating losses, capital losses and net unrealized built-in losses after there is a substantial change in ownership in a corporation's stock involving a 50-percentage point increase in ownership by 5% or larger stockholders. At December 31, 2021, the Company had pre-change losses represented by deferred tax assets totaling $8.7 million that are subject to Section 382 limits. The utilization of these assets is subject to an annual limitation of $1.1 million.

Activity in unrecognized tax benefits were as follows:

	Years Ended December 31,
(in thousands)	2021		2020		2019
Balance, beginning of year	$	1,021	$	1,172	$	—
Decrease related to tax positions taken in prior years	—		(365)		—
Increase related to positions taken in the current year	214		214		1,172
Balance, end of year	$	1,235	$	1,021	$	1,172

 If recognized, $1.0 million of the $1.2 million gross unrecognized tax benefit balance at December 31, 2021 would favorably impact the Company's effective income tax rate. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next 12 months.

The Company recognizes interest and penalties related to income tax matters within income tax expense. The Company recorded no interest or penalties related to unrecognized tax benefits at December 31, 2021, 2020 and 2019.The earliest federal tax year that remains open for examination is 2018. The earliest open years in the Company's major state tax jurisdictions are 2010 for Connecticut and 2018 for all of the Company's remaining state tax jurisdictions.