Income Taxes

12 Months Ended

Dec. 31, 2023

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)	2023		2022		2021
Current
Federal	$	33,523	$	40,113	$	75,525
State	10,171		19,107		24,974
Total current tax expense (benefit)	43,694		59,220		100,499
Deferred
Federal	789		(1,506)		(6,241)
State	605		(454)		(3,423)
Total deferred tax expense (benefit)	1,394		(1,960)		(9,664)
Total expense (benefit) for income taxes	$	45,088	$	57,260	$	90,835

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)	2023				2022				2021
Tax at statutory rate	$	39,178	21	%	$	34,416	21	%	$	74,271	21	%
State taxes, net of federal benefit	9,240		5	%	14,736		9	%	17,283		5	%
Excess tax benefits related to share-based compensation	(1,767)		(1)	%	(2,792)		(1)	%	(4,095)		(1)	%
Nondeductible compensation	2,106		1	%	2,356		1	%	3,461		1	%
Effect of net (income) loss attributable to noncontrolling interests	(2,299)		(1)	%	(1,435)		(1)	%	(2,637)		(1)	%
Change in valuation allowance	(1,547)		(1)	%	9,596		6	%	1,941		1	%
Other, net	177		—	%	383		—	%	611		—	%
Income tax expense (benefit)	$	45,088	24	%	$	57,260	35	%	$	90,835	26	%

The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of 24%, 35% and 26% for the years ended December 31, 2023, 2022 and 2021, respectively. The Company's tax position for the years ended December 31, 2023, 2022 and 2021 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)	2023		2022
Deferred tax assets:
Intangible assets	$	19,206	$	17,773
Net operating losses	10,754		11,881
Compensation accruals	19,614		16,813
Lease liability	19,009		10,026
Investments	11,643		18,283
Capital losses	6,139		2,197
Other	2,188		94
Gross deferred tax assets	88,553		77,067
Valuation allowance	(16,539)		(19,480)
Gross deferred tax assets after valuation allowance	72,014		57,587
Deferred tax liabilities:
Intangible assets	(26,746)		(24,163)
Right of use asset	(15,677)		(7,672)
Fixed assets	(4,197)		(1,869)
Other investments	(370)		(712)
Gross deferred tax liabilities	(46,990)		(34,416)
Deferred tax assets, net	$	25,024	$	23,171

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 $16.5 million and $19.5 million at December 31, 2023 and 2022, respectively, relating to deferred tax assets on items of a capital nature as well as certain state deferred tax assets.

As of December 31, 2023, the Company had net operating loss carry-forwards for federal income tax purposes represented by a $6.1 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, 2023, the Company had state net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a $4.6 million deferred tax asset. Certain state net operating loss carry-forwards are scheduled to begin to expire in 2024.

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, 2023, the Company had pre-change losses represented by deferred tax assets totaling $7.0 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)	2023		2022		2021
Balance, beginning of year	$	856	$	1,235	$	1,021
Decrease related to tax positions taken in prior years	(214)		(593)		—
Increase related to positions taken in the current year	214		214		214
Balance, end of year	$	856	$	856	$	1,235

If recognized, $0.7 million of the $0.9 million gross unrecognized tax benefit balance at December 31, 2023 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, 2023, 2022 and 2021.

The earliest federal tax year that remains open for examination is 2020. The earliest open years in the Company's major state tax jurisdictions are 2010 for Connecticut and 2020 for all of the Company's remaining state tax jurisdictions.