Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 7. Income Taxes

The following is a reconciliation of our effective tax rate to the federal statutory tax rate:

	Years Ended December 31,
	2022				2021				2020
U.S. federal statutory rate		21.0		%		21.0		%		21.0		%
State taxes, net of federal benefit		3.5				3.5				3.6
Federal and state incentives		(1.4	)			(0.5	)			(1.1	)
State law changes		0.4				1.1				(0.2	)
Permanent differences		0.2				0.6				0.2
Net effective rate		23.7		%		25.7		%		23.5		%

The following is a summary of our provision for income taxes (in thousands):

	Years Ended December 31,
	2022			2021			2020
Current
Federal	$	85,831		$	51,918		$	11,913
State and local		25,162			13,876			3,597
Foreign		32			38			11
		111,025			65,832			15,521
Deferred
Federal		7,366			(5,125	)		6,548
State and local		(7,388	)		(1,254	)		465
Foreign		7			(17	)		7
		(15	)		(6,396	)		7,020
Total provision	$	111,010		$	59,436		$	22,541

The following is a summary of our deferred tax assets and liabilities (in thousands):

	December 31,
	2022			2021
Accrued compensation		21,035			19,226
Other reserves		30,588			17,896
Tax credit carryforwards		8,156			8,286
Operating loss carryforwards		166			881
Lease accounting liability		29,185			11,956
Total gross deferred income taxes		89,130			58,245
Valuation allowances		(1,567	)		(5,023	)
Total deferred tax assets		87,563			53,222
Prepaids		(6,077	)		(6,607	)
Property and equipment		(156,961	)		(135,768	)
Intangibles		(54,796	)		(55,466	)
Lease right-of-use asset		(25,652	)		(11,325	)
Total deferred tax liabilities		(243,486	)		(209,166	)
Total deferred taxes	$	(155,923	)	$	(155,944	)

We are subject to income taxation in the United States, numerous state jurisdictions, Mexico and Canada. Because income tax return formats vary among the states, we file both unitary and separate company state income tax returns. We do not permanently reinvest our foreign earnings, all amounts are accrued and accounted for, though not material.

We acquired a federal net operating loss carryforward of $4.1 million through the acquisition by way of merger with CaseStack, LLC in December 2018. The Internal Revenue Service ("IRS") loss limitation rules allowed us to utilize $1.3 million in each of the 2021, 2020 and 2019 tax years. The remaining net operating loss of $0.2 million was fully utilized in 2022. Our state tax net operating losses total $0.2 million. Some of those state losses have no expiration date while others will expire between December 31, 2023, and December 31, 2041. Management believes it is more likely than not that the loss carryforward deferred tax assets will be fully realized.

Our federal incentive tax credit carryforward of $0.1 million expires between December 31, 2025, and December 31, 2028. Our state incentive tax credit carryforwards of $8.1 million expire between December 31, 2023, and December 31, 2027. Management believes it is more likely than not that approximately $6.6 million of the incentive carryforward deferred tax assets will be realized and a valuation allowance of $1.6 million has been established for the remainder which are not expected to be realized.

As of December 31, 2022 and December 31, 2021, the amount of unrecognized tax benefits was $11.1 million and $6.6 million, respectively. If recognized, these benefits would decrease our income tax provision by $9.0 million and $5.4 million, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2022			2021
Gross unrecognized tax benefits - beginning of the year	$	6,647		$	4,292
Gross increases related to prior year tax positions		425			997
Gross increases related to current year tax positions		4,665			1,794
Lapse of applicable statute of limitations		(621	)		(436	)
Gross unrecognized tax benefits - end of year	$	11,116		$	6,647

We recognize interest and penalties related to income tax liabilities in our provision for income taxes. In 2022, we included $0.1 million in our provision for income taxes.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. Though some provisions of the CARES Act do impact the Company, there was no material effect on the Company’s consolidated financial condition or results of operations for the years ended December 31, 2022, December 31, 2021 or December 31, 2020.

On December 27, 2020, the Consolidated Appropriations Act (“CAA”) was enacted in further response to the COVID-19 pandemic, in combination with omnibus spending for the 2021 federal fiscal year. The CAA extended many of the provisions enacted by the CARES Act, the extension of which likewise did not have a material impact on the Company’s consolidated financial statements for the years ended December 31, 2022, December 31, 2021 or December 31, 2020.

The Inflation Reduction Act of 2022 was signed into law on August 16, 2022, and the CHIPS and Science Act of 2022 was signed into law on August 9, 2022. These laws implement new tax provisions, primarily a 15% corporate alternative minimum tax and a nondeductible 1% excise tax on the fair market value of stock repurchased by publicly traded corporations. As of December 31, 2022, we do not anticipate any material impact of these provisions which are effective January 1, 2023. The two acts also provide various tax credits, several of which are transferable or refundable, for the investment in or production of clean-energy effective January 1, 2023. We will continue to evaluate potential tax benefits available under the acts as additional guidance is issued in future periods.