v3.25.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the Company’s income tax expense attributable to operations are as follows:
Year Ended December 31,
202420232022
(in thousands)
Current tax expense (benefit)
Federal$69 $10,091 $22,029 
State223 1,682 4,516 
Deferred tax expense (benefit)
Federal57,037 (2,821)(4,165)
State13,076 (2,164)4,540 
Income tax expense$70,405 $6,788 $26,920 
The Company’s income tax expense attributable to operations differs from the expected tax expense (benefit) amount computed by applying the statutory federal income tax rate to income (loss) before taxes is as follows:
Year Ended December 31,
202420232022
Income tax expense computed at the statutory rate21.0 %21.0 %21.0 %
State income taxes4.5 — 7.7 
Officer's compensation limitation under 162(m)(1.3)2.5 0.7 
Stock-based compensation(0.7)1.1 0.5 
Valuation allowance(133.2)— — 
Other, net0.7 (1.1)(1.1)
Effective tax rate
(109.0)%23.5 %28.8 %
The effective tax rate for the year ended December 31, 2023 includes a decrease in state income tax expense associated with the remeasurement of the Company’s deferred tax assets for increases to estimated tax rates expected to be applied in future years.
The components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
20242023
(in thousands)
Deferred tax assets
Amortizable intangible assets$68,262 $73,650 
Operating lease liability996 995 
Accrued expenses1,332 1,418 
Excess profit share receipts11,692 — 
Carryforwards6,839 — 
Other26 — 
Total deferred tax assets(1)
89,147 76,063 
Valuation allowance(86,050)— 
Total deferred tax assets, net of valuation allowance$3,097 $76,063 
Deferred tax liabilities
Contract assets(1,997)(4,056)
Operating lease right-of-use asset(953)(972)
Property and equipment(147)(463)
Other— (459)
Total deferred tax liabilities(3,097)(5,950)
Deferred tax asset, net$— $70,113 
As of December 31, 2024, the Company has assessed whether it is more likely than not that the Company’s deferred tax assets will be realized and given the magnitude of the current year losses related the Company’s profit share revenue change in estimate, recorded a full valuation allowance of $86.1 million. The valuation allowance will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances. The exact timing and amount of the valuation allowance release are subject to change based on the level of profitability the Company is able to achieve.
At December 31, 2024, the Company generated net operating loss (“NOL”) carry forwards for U.S. federal income tax purposes of approximately $26.5 million which will be available to offset future U.S. federal taxable income and do not expire.
At December 31, 2024, the Company generated NOL carry forwards for U.S. state income tax purposes of approximately $15.9 million, which will be available to offset future state taxable income and will begin to expire in various dates starting in 2039. At December 31, 2024, it is more likely than not that the benefit from Federal and state NOL carryforwards will not be realized.
The aggregate changes in the balance of unrecognized tax benefits were as follows:
Year Ended December 31,
202420232022
(in thousands)
Balance, beginning of year$3,968 $3,935 $— 
Increases for tax positions related to the current year68 109 77 
Increases for tax positions related to prior years674 397 3,858 
Decreases for tax positions related to prior years— (473)— 
Balance, end of year$4,710 $3,968 $3,935 
At December 31, 2024 and 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $0.6 million and $0.4 million, respectively.
As of December 31, 2024, the liability for unrecognized tax benefits includes certain tax uncertainties related to research tax credits and tax positions in various state jurisdictions. The Company believes it is not reasonably possible that the unrecognized tax benefits will significantly change during the next twelve months.
The Company files its federal and state income tax returns and some of these returns remain open for examination, with the earliest open years in its key jurisdictions as follows:
U.S. Federal2016
State of Texas2016
State of New York2017
State of Illinois2021