Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

Significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of the periods below were as follows.

	As of the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Deferred tax assets:
Compensation	$	1,680		$	1,464
Allowance for credit losses		574			605
Lease obligations - including closed clinics		28,592			28,525
Deferred tax assets	$	30,846		$	30,594
Deferred tax liabilities:
Depreciation and amortization	$	(27,290	)	$	(23,836	)
Operating lease right-of-use assets		(26,427	)		(26,318	)
Gain on cash flow hedge		(955	)		(1,373	)
Change in revaluation of put-right liability		(586	)		-
Other		(403	)		(370	)
Deferred tax liabilities		(55,661	)		(51,897	)
Net deferred tax liabilities	$	(24,815	)	$	(21,303	)

The deferred tax assets and liabilities related to purchased interests not yet finalized may result in an immaterial adjustment.

As of December 31, 2023, the Company has a federal tax payable of $1.0 million and state tax receivables of $2.1 million. The federal and state income tax receivable is included in other current assets on the accompanying consolidated balance sheets.

The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, were as follows for the periods presented:

	For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2021
	(In Thousands)
U. S. tax at statutory rate	$	8,483	21.0	%	$	9,307	21.0	%	$	11,782		21.0	%
State income taxes, net of federal benefit		2,135	5.3	%		2,079	4.7	%		2,478		4.4	%
Shortfall (excess) equity compensation deduction		123	0.3	%		149	0.3	%		(246	)	-0.4	%
Non-deductible expenses		710	1.8	%		629	1.4	%		1,258		2.2	%
Return to provision adjustments		705	1.7	%		-	0.0	%		-		0.0	%
	$	12,156	30.1	%	$	12,164	27.4	%	$	15,272		27.2	%

Significant components of the provision for income taxes were as follows for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022			December 31, 2021
	(In Thousands)
Current:
Federal	$	6,996	$	(770	)	$	7,477
State		512		518			2,107
Total current		7,508		(252	)		9,584
Deferred:
Federal		3,819		9,933			4,866
State		829		2,483			822
Total deferred		4,648		12,416			5,688
Total income tax provision	$	12,156	$	12,164		$	15,272

Each year, the Company performs a detailed reconciliation of its federal and state taxes payable and receivable accounts along with its federal and state deferred tax asset and liability accounts. This process resulted in a $1.0 million increase in income tax expense in 2023. The Company considers this reconciliation process to be an annual control.

The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, 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 those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income in the periods which the deferred tax assets are deductible, management believes that a valuation allowance is not required, as it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

The Company’s U.S. federal returns remain open to examination for 2020 through 2022 and U.S. state jurisdictions are open for periods ranging from 2019 through 2022.

The Company does not believe that it has any significant uncertain tax positions at December 31, 2023 and December 31, 2022, nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation.

The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the years ended December 31, 2023, 2022 and 2021.