Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income Tax Expense
The following table sets forth the loss before income taxes and the total income tax expense.
Year Ended December 31,
2021 2020 2019
(in thousands)
Loss before income taxes:
U.S. $ (11,100) $ (85,223) $ (66,379)
Foreign (7,517) (2,916) (3,164)
Loss before income taxes $ (18,617) $ (88,139) $ (69,543)
Income tax expense (benefit):
Current income taxes:
U.S. federal $ —  $ (85) $ (78)
U.S. state 445  672  251 
Foreign 756  448  64 
Total current income tax expense 1,201  1,035  237 
Deferred income taxes:
U.S. federal 545  1,669  — 
U.S. state 1,653  1,901  1,147 
Foreign (713) (667) (464)
Total deferred income tax expense 1,485  2,903  683 
Total income tax expense $ 2,686  $ 3,938  $ 920 
The following table sets forth the reconciliations of the statutory federal income tax rate to actual rates based upon the loss before income taxes:
Year Ended December 31,
2021 2020 2019
Income tax expense (benefit) and rate attributable to: % % %
U.S. federal income tax (21.0) % (21.0) % (21.0) %
U.S. state income tax, net of federal benefit 2.3  % (1.5) % (4.8) %
Change in valuation allowances (0.4) % 25.5  % 25.9  %
U.S. tax on foreign operations 19.4  % 0.8  % 0.9  %
Change in tax rates 6.6  % 0.8  % —  %
Non-deductible IPO costs 5.6  % —  % —  %
Other 1.9  % (0.1) % 0.4  %
Effective income tax expense and rate 14.4  % 4.5  % 1.4  %
The effective tax rate for the year ended December 31, 2021 differs from the Federal statutory rate of 21% primarily due to U.S. tax on foreign operations, non-deductible IPO costs, and change in tax rates. U.S. tax on foreign operations consists principally of Global Intangible Low-taxed Income (“GILTI”) and Base Erosion Anti-avoidance Tax (“BEAT”). The rate for the year ended December 31, 2020 differs from the Federal statutory rate of 21% primarily due to valuation allowances and state taxes.
Deferred Tax Assets and Liabilities
Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows:
December 31,
2021 2020
(in thousands)
Deferred tax assets:
Income tax loss carryforwards $ 83,342  $ 86,359 
Accrued expenses and other liabilities 10,770  12,191 
Interest expense carryovers 38,444  31,530 
Interest rate swap 2,188  11,235 
Other 581  853 
135,325  142,168 
Valuation allowances (100,339) (107,109)
Net deferred tax assets 34,986  35,059 
Deferred tax liabilities:
Property and equipment (5,120) (6,180)
Capitalized expenses (4,414) (3,938)
Intangible assets (40,217) (38,508)
Total deferred tax liabilities (49,751) (48,626)
Net deferred tax liabilities $ (14,765) $ (13,567)
Realization of the Company’s deferred tax assets is dependent upon future earnings, if any. The timing and amount of future earnings are uncertain. Because of the Company’s lack of U.S. earnings history, the Company’s net U.S. deferred tax assets have been fully offset by valuation allowances, excluding a portion of its deferred tax liabilities for tax deductible goodwill.
Net Operating Losses
As of December 31, 2021, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $303.6 million, of which $72.8 million may be carried forward indefinitely and $230.8 million will begin to expire in 2036. The Company had total state NOL carryforwards of approximately $341.5 million, which will begin to expire in 2025.
Utilization of some of the U.S. federal and state NOL and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of NOL and credits before utilization. The net operating losses are presented net of any expirations associated with such limitations.
At December 31, 2021, the Company had foreign net operating losses of $8.2 million which will begin to expire in 2036.
Taxation of Unremitted Foreign Earnings
Undistributed foreign earnings of the Company’s foreign subsidiaries were approximately $116.5 million and $125.9 million at December 31, 2021 and 2020, respectively. During the year ended December 31, 2020 the Company re-evaluated its position to repatriate foreign earnings and concluded undistributed foreign earnings will be permanently reinvested in its foreign subsidiaries. The Company believes that it can maintain a sufficient level of liquidity for its U.S. operations arising from the normal course of operations, including liquidity needs associated with U.S. debt service requirements. As a result, deferred taxes associated with foreign withholding taxes of $0.5 million and $0.6 million have not been recorded for repatriation of undistributed foreign earnings as of December 31, 2021 and 2020, respectively.
Unrecognized Tax Benefits
ASC 740, Income Taxes, prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income tax benefits recognized in an enterprise’s financial statements. The Company’s unrecognized tax benefits are associated with tax positions taken during prior years and amounted to $0.1 million as of December 31, 2021. There were no unrecognized tax benefits as of December 31, 2020.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits, if any, within the income tax expense in the consolidated statements of operations. As of December 31, 2021, the Company accrued a nominal amount of interest and penalties. There was no interest expense or penalties accrued for the year ended December 31, 2020. If the Company is eventually able to recognize the uncertain positions, the Company’s effective tax rate would be reduced. The Company currently has a valuation allowance against its U.S. federal and state net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or foreign income tax examination by taxing authorities for years prior to 2016.
CARES Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Because the Company has historical federal losses, the CARES Act does not provide a material cash benefit.
Income Tax Receivable Agreement
In connection with the Company’s IPO during the fourth quarter of 2021, the Company entered into the TRA, which provides for the payment by the Company over a period of approximately 12 years to pre-IPO equityholders or their permitted transferees of 85% of the benefits, if any, that the Company and its subsidiaries realize, or are deemed to realize (calculated using certain assumptions) in U.S. federal, state, and local income tax savings as a result of the utilization (or deemed utilization) of certain existing tax attributes. As of December 31, 2021, the Company recorded a total liability of $210.6 million and a reduction to Additional paid-in capital of $210.6 million in connection with the projected obligations under the TRA on its consolidated balance sheets.