Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various states and Canada. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian examinations by tax authorities for years before 2014.

    The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2021, 2020 and 2019 consisted of the following:

  2021 2020 2019
Current:
Federal $ 29,533  $ 11,914  $ 15,612 
State 7,918  3,907  4,681 
  37,451  15,821  20,293 
Deferred:
Federal 209  922  5,766 
State 1,212  (150) 1,323 
  1,421  772  7,089 
  $ 38,872  $ 16,593  $ 27,382 

A reconciliation of income taxes computed at the U.S. federal statutory income tax rate (21.0% for 2021, 2020 and 2019) to the provision for income taxes reflected in the Company’s Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 is as follows:
  2021 2020 2019
Tax expense at the statutory rate $ 32,542  $ 14,566  $ 23,038 
State income taxes, net of federal income tax benefit 7,448  2,602  4,594 
Share-based compensation (933) (298) (587)
Other permanent differences 31  48  (5)
Non-deductible compensation 293  751  421 
Change in income tax contingency reserves (260) (400) — 
Federal income tax credits (76) (37) (83)
Other (173) (639) 4 
  $ 38,872  $ 16,593  $ 27,382 

        
The significant components of the deferred tax assets and liabilities at December 31, 2021 and 2020 were as follows:
December 31,
2021		 December 31,
2020
Deferred tax assets:
Accrued expenses $ 14,837  $ 12,095 
Allowance for doubtful accounts 839  577 
Operating lease liabilities 37,967  31,309 
Share-based compensation 3,769  3,554 
Accruals for income tax contingencies 154  166 
Capital loss carryforwards 4,230  — 
Net operating loss carryforwards 647  671 
Total gross deferred tax assets 62,443  48,372 
Valuation allowance (4,625) (395)
Total net deferred tax assets 57,818  47,977 
Deferred tax liabilities:
Tax over book depreciation 27,880  24,964 
Prepaid expenses 5,615  6,499 
Operating lease right-of-use assets 38,010  31,277 
Goodwill 20,502  17,368 
Intangible assets 9,218  9,855 
Total deferred tax liabilities 101,225  89,963 
Net deferred tax liabilities $ (43,407) $ (41,986)

The Company paid income taxes, net of refunds, of $35,766, $13,463 and $19,959 for the years ended December 31, 2021, 2020 and 2019, respectively.

The sale of Pool resulted in a capital loss in the amount of $4,230, which expires in 2026. The Company concluded that it was more likely than not that the capital loss carryforward will not be realized and therefore, established a valuation allowance of $4,230 to reserve against its capital loss carryforward. The Company also maintains a valuation allowance to reserve against its state net operating loss carryforwards of $395. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies. In making this assessment, all available evidence was considered including economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the valuation allowance, in future years.     
As a result of the Towne acquisition, the Company had approximately $2,000 of federal net operating losses which the Company fully utilized in 2020.

As of December 31, 2021, the Company had state net operating loss carryforwards of $13,819, and as of both December 31, 2020 and 2019, the Company had state net operating loss carryforwards of $16,926, that expire between 2021 and 2032. The state net operating loss carryforwards are limited to the future taxable income of separate legal entities. The valuation allowance on the state net operating loss carryforwards stayed the same in 2021, 2020 and 2019.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of and during the years ended December 31, 2021 and 2020 is as follows:
Balance at December 31, 2019 $ 987 
Reductions for settlement with state taxing authorities (466)
Additions for tax positions of current year 23 
Balance at December 31, 2020 544 
Reductions for settlement with state taxing authorities (326)
Additions for tax positions of current year 23 
Balance at December 31, 2021 $ 241 
The Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain. At December 31, 2021 and 2020, the Company had $241 and $544, respectively, of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. At December 31, 2021 and 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of $88 and $168, respectively.  The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in “Interest expense, net” and “Other operating expenses”, respectively.