Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes:

The components of the income tax provision (benefit) are as follows (in thousands):

	December 31,
	2023		2022			2021
Federal:
Current	$	8,040	$	38,877		$	41,592
Deferred		1,467		(19,679	)		(20,373	)
		9,507		19,198			21,219
State:
Current		770		2,700			16,888
Deferred		1,772		(3,092	)		(10,866	)
		2,542		(392	)		6,022
Total	$	12,049	$	18,806		$	27,241

The Company files its tax return on a consolidated basis with its subsidiaries, and its affiliated professional contractors file tax returns on an individual basis.

The effective tax rate for continuing operations was (24.9)%, 23.1% and 20.1% for the years ended December 31, 2023, 2022 and 2021, respectively. The effective tax rate for the year ended December 31, 2023 includes $17.8 million of expense related to non-cash impairment charges related to goodwill and a cost-method investment. The effective tax rate for the year ended December 31, 2021 includes a $10.8 million benefit related to a change in estimate of an income tax receivable based on loss carryback provisions under the CARES Act which allow 2020 net operating loss to be carried back for refund at prior 35% federal tax rate. The income tax receivable resulted from a mutual agreement reached with the buyer of our former anesthesiology services medical group to treat a portion of the divestiture as an asset sale for tax purposes.

The differences between the effective rate and the United States federal income tax statutory rate are as follows:

	December 31,
	2023			2022			2021
Tax at statutory rate		21.00	%		21.00	%		21.00	%
State income tax, net of federal benefit		2.79			1.53			4.72
Non-deductible expenses		(4.43	)		1.48			3.42
Equity compensation adjustments		(3.98	)		1.35			0.77
Change in accrual estimates relating to    uncertain tax positions		0.67			(3.28	)		(1.08	)
Change in valuation allowance		(13.82	)		1.72			(0.26	)
Goodwill impairment		(26.67	)	─			─
Other, net		(0.48	)		(0.69	)		(0.46	)
Change in tax law	─			─				(7.97	)
Income tax provision		(24.92	)%		23.11	%		20.14	%

All of the Company’s deferred tax assets and liabilities are classified as long-term. The significant components of deferred income tax assets and liabilities are as follows (in thousands):

	December 31,
	2023			2022
Allowance for uncollectible accounts	$	139,998		$	152,526
Reserves and accruals		59,218			66,969
Stock-based compensation		3,022			3,694
Operating loss and other carryforwards		34,739			28,773
Capital loss carryforwards		422,809			422,793
Operating lease assets		19,133			19,096
Property and equipment		2,056			2,481
Other		5,520			256
Deferred tax assets before valuation    allowance		686,495			696,588
Less: Valuation allowance		(435,940	)		(429,260	)
Deferred tax assets, net of valuation    allowance		250,555			267,328
Gross deferred tax liabilities:
Amortization		(162,538	)		(176,398	)
Operating lease liabilities		(17,342	)		(16,510	)
Other		(2,131	)		(2,133	)
Total deferred tax liabilities		(182,011	)		(195,041	)
Net deferred tax assets	$	68,544		$	72,287

The Company’s net deferred tax assets were $68.5 million as of December 31, 2023, as compared to $72.3 million at December 31, 2022. The decrease in net deferred tax assets of $3.8 million during the year ended December 31, 2023 was primarily related to decreases in deferred tax assets for allowance for uncollectible accounts of $12.5 million, reserves and accruals of $7.8 million and valuation allowance of $6.7 million, partially offset by increases in deferred tax assets for operating and other loss carryforwards of $5.9 million, other items of of $5.2 million and a decrease in deferred tax liabilities for amortization of $13.9 million. The increase in valuation allowance of $6.7 million primarily related to the effect of the impairment of a cost-method investment included in other.

For the years ended December 31, 2023, 2022 and 2021, income tax expense of $1.9 million, $1.1 million and $1.0 million, respectively, was recognized for excess tax deficiencies associated with equity compensation.

The Company has $1.71 billion of capital loss carryforwards as of December 31, 2023 which were generated from disposal of its former anesthesiology and radiology services medical groups, of which the majority expire in 2025. As of December 31, 2023, management has determined that it is more likely than not that the tax benefits related to these carryforwards will not be realized and has recorded a full valuation allowance against the related deferred tax assets. Additionally, the Company had net operating loss carryforwards for federal and state tax purposes totaling $56.4 million, $46.7 million and $61.7 million at December 31, 2023, 2022 and 2021, respectively. With respect to the December 31, 2023 balance, $18.3 million expires at various times from 2033 through 2042, and $38.1 million does not expire.

As of December 31, 2023, 2022 and 2021, the Company’s liability for uncertain tax positions, excluding accrued interest and penalties, was $2.4 million, $2.8 million and $4.9 million, respectively. As of December 31, 2023, the Company had $2.4 million of uncertain tax positions that, if recognized, would favorably impact its effective tax rate.

The following table summarizes the activity related to the Company’s liability for uncertain tax positions for the years ended December 31, 2023, 2022 and 2021 (in thousands):

	Years Ended December 31,
	2023			2022			2021
Balance at beginning of year	$	2,838		$	4,928		$	6,168
Increases related to prior year tax positions		70			379			—
Increases related to current year tax    positions		200			800			900
Decreases related to lapse of statutes    of limitation		(659	)		(3,269	)		(2,140	)
Balance at end of year	$	2,449		$	2,838		$	4,928

During the year ended December 31, 2023, the Company decreased its liability for uncertain tax positions by $0.4 million, primarily related to expiration of statutes of limitation, partially offset by additional taxes on current year and prior year positions. During the year ended December 31, 2022, the Company decreased its liability for uncertain tax positions by $2.1 million, primarily related to expiration of statutes of limitation, partially offset by additional taxes on current year positions. In addition, the Company anticipates that its liability for uncertain tax positions will increase by $0.8 million over the next 12 months.

The Company includes interest and penalties related to income tax liabilities in income tax expense. During the year ended December 31, 2023, 2022 and 2021, the Company included $0.2 million, $0.3 million and $0.4 million, respectively, of interest and penalties in income tax expense. At December 31, 2023 and 2022, the Company's accrued liability for interest and penalties related to income tax liabilities totaled $0.3 million and $0.2 million, respectively.

The Company is currently subject to U.S. Federal and various state income tax examinations for the tax years 2020 through 2022.