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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For financial reporting purposes, income before income taxes includes the following components (in thousands):
202420232022
United States$57,521 $165,869 $141,288 
Foreign (Canada)286 434 187 
Total$57,807 $166,303 $141,475 
Income tax expense included in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands): 
 202420232022
Current:
Federal$23,362 $29,835 $20,910 
Foreign76 116 50 
State and local8,164 10,298 7,299 
Total31,602 40,249 28,259 
Deferred:
Federal(10,920)3,978 5,667 
State and local(3,913)1,108 2,195 
Total(14,833)5,086 7,862 
Total income tax expense 16,769 45,335 36,121 
The provision for income taxes attributable to income operations differed from the amount obtained by applying the federal statutory income tax rate to income before income taxes, as follows (in thousands, except percentages):
 202420232022
Tax at U.S. federal statutory rates$12,139 $34,924 $29,714 
State taxes (net of federal benefit)3,182 10,576 9,019 
Reserves for uncertain tax positions209 (241)337 
Share-based compensation(3,907)(5,820)(6,832)
Meals and entertainment1,193 1,168 337 
Non-deductible officers' compensation3,762 5,485 2,507 
Other, net191 (757)1,039 
Provision for income taxes $16,769 $45,335 $36,121 
Effective income tax rate29.0 %27.3 %25.5 %
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023, were as follows (in thousands):
 20242023
Deferred tax assets:
Net operating loss carryforwards$2,912 $1,515 
Allowance for doubtful accounts7,596 4,876 
Employee benefits and compensation45,122 38,137 
Acquisition-related costs9,110 — 
Deferred revenue4,446 — 
Property and equipment141 — 
Lease liabilities116,080 7,398 
Other deferred tax assets1,103 1,888 
Total gross deferred tax assets186,510 53,814 
Less: valuation allowance(2,941)(2,721)
Total deferred tax assets, net183,569 51,093 
Deferred tax liabilities:
Goodwill and other intangibles85,771 77,005 
Right of Use assets 105,478 — 
Property and equipment— 836 
Other deferred tax liabilities3,200 2,539 
Total gross deferred tax liabilities194,449 80,380 
Deferred income taxes, net$(10,880)$(29,287)
We have established valuation allowances for deferred tax assets related to certain employee benefits and compensation and state net operating loss (“NOL”) carryforwards at December 31, 2024 and December 31, 2023. The net increase in the valuation allowance of $0.2 million for the year ended December 31, 2024, related to changes in the valuation allowance for NOLs and certain employee benefits and compensation.
In assessing the realization of deferred tax assets, management considers all available positive and negative evidence, including projected future taxable income, scheduled reversal of deferred tax liabilities, historical financial operations and tax planning strategies. Based upon review of these items, management believes it is more-likely-than-not that the Company will realize the benefits of these deferred tax assets, net of the existing valuation allowances.
We file income tax returns in the United States, Canada, and most state jurisdictions. Beginning in 2024, we will file tax returns in the Philippines. In general, the examination of our material tax returns is complete for years ending prior to January 1, 2021. In the fourth quarter of 2024, the Internal Revenue Service selected our 2022 federal tax return for examination. As we are in the early stages of the examination, we have received no indications of material adjustments that will be assessed as a result of the examination.
With limited exceptions, our state and local income tax returns for years ending prior to January 1, 2020, and non-U.S. income tax returns for years ending prior to January 1, 2021, are no longer subject to tax authority examinations.
The availability of NOLs and state tax credits are reported as a component of deferred tax assets, net of applicable valuation allowances, in the accompanying Consolidated Balance Sheets. At December 31, 2024, we had state net operating loss carryforwards of $84.6 million and a state tax credit carryforward of $0.1 million. The state net operating loss carryforwards expire on various dates between 2026 and 2045 and the state tax credit carryforward expires in 2028.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
 202420232022
Balance at January 1$1,847 $2,111 $1,594 
Additions for tax positions of the current year197 178 175 
Additions for positions of prior years168 103 486 
Lapse of statutes of limitation(174)(545)(144)
Balance at December 31$2,038 $1,847 $2,111 
Included in the balance of unrecognized tax benefits at December 31, 2024 are $1.3 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. We believe it is reasonably possible that certain of these unrecognized tax benefits could change in the next twelve months. We expect reductions in the liability for unrecognized tax benefits of approximately $0.2 million within the next twelve months due to expiration of statutes of limitation. Given the number of years that are currently subject to examination, we are unable to estimate the range of potential adjustments to the remaining balance of unrecognized tax benefits at this time.
We recognize interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During 2024, we recorded an immaterial increase in accrued interest, and, as of December 31, 2024, we had recognized a liability for interest expense and penalties of $0.3 million and $0.2 million, respectively, relating to unrecognized tax benefits. During 2023, we recorded an immaterial increase in accrued interest, and, as of December 31, 2023, we had recognized a liability for interest expense and penalties of $0.3 million and $0.2 million, respectively, relating to unrecognized tax benefits.