Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 14. INCOME TAXES
We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our consolidated financial statement carrying amount of assets and liabilities and their respective tax bases. We measure these deferred tax assets and liabilities using enacted tax rates expected to apply in the years in which these temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change.
For financial reporting purposes, we recorded a valuation allowance of $28.4 million as of December 31, 2020 to offset $28.4 million of the deferred tax assets related to the federal net operating loss carryforwards, and $19.7 million of the deferred tax assets related to state net operating loss carryforwards of $15.7 
million and other financial statement accrual assets of $4.0 million, for a total valuation allowance of
$48.1 
 million for the year ended December 31, 2020. This balance represents an increase of $35.1 million during the year, from $13.0 million valuation allowance as of December 31, 2019.
The consolidated provision for income taxes is as follows:
 
    
Year Ended December 31,
 
           2019           
      2020      
 
    
(Dollars in thousands)
 
Current:
                 
Federal
   $ —       
$
 
 
 
State
     471     
 
169
 
    
 
 
    
 
 
 
       471     
 
169
 
Deferred:
                 
Federal
     (1,445   
 
17
,
283
 
State
     4,951     
 
12,822
 
    
 
 
    
 
 
 
       3,506     
 
30,105
 
    
 
 
    
 
 
 
Provision for income taxes
   $ 3,977     
$
30,274
 
    
 
 
    
 
 
 
 
Consolidated deferred tax assets and liabilities consist of the following:
 
    
As of December 31,
 
     2019     
2020
 
    
(Dollars in thousands)
 
Deferred tax assets:
                 
Financial statement accruals not currently deductible
   $ 4,652     
$
6,580
 
Net operating loss, AMT credit and other carryforwards
     45,521     
 
44,154
 
State taxes
     70     
 
35
 
Operating lease liabilities under ASC 842
     16,618     
 
14,909
 
Other
     6,847     
 
11,222
 
    
 
 
    
 
 
 
Total deferred tax assets
     73,708     
 
76,900
 
Valuation allowance for deferred tax assets
     (12,977   
 
(48,073
)
 
    
 
 
    
 
 
 
Net deferred tax assets
   $ 60,731     
$
28,827
 
    
 
 
    
 
 
 
Deferred tax liabilities:
                 
Excess of net book value of property and equipment and software for financial reporting purposes over tax basis
   $ 2,391     
$
1,065
 
Excess of net book value of intangible assets for financial reporting purposes over tax basis
     82,939     
 
84,163
 
Operating lease
right-of-use
assets under ASC 842
     14,179     
 
12,482
 
Other
     —       
 
—  
 
    
 
 
    
 
 
 
Total deferred tax liabilities
     99,509     
 
97,710
 
    
 
 
    
 
 
 
Net deferred tax liabilities
   $ (38,778   
$
(68,883
)
 
    
 
 
    
 
 
 
The following table reconciles the above net deferred tax liabilities to the financial statements:
 
    
As of December 31,
 
     2019     
2020
 
    
(Dollars in thousands)
 
Deferred income tax asset per balance sheet
   $ —       
$
—  
 
Deferred income tax liability per balance sheet
     (38,778   
 
(68,883
    
 
 
    
 
 
 
     $ (38,778   
$
(68,883
    
 
 
    
 
 
 
A reconciliation of the statutory federal income tax rate to the provision for income tax is as follows:
 
    
Year Ended December 31,
 
           2019           
      2020      
 
    
(Dollars in thousands)
 
Statutory federal income tax (statutory tax rate)
   $ (5,045   
$
(4,995
Effect of state taxes, net of federal
     3,714     
 
10,468
 
Permanent items
     329     
 
379
 
State rate change
     668     
 
63
 
Valuation allowance
     4,105     
 
24,302
 
Tax Cuts and Jobs Act of 2017
     —             
Other, net
     206     
 
57
 
    
 
 
    
 
 
 
Provision for income taxes
   $ 3,977     
$
30,274
 
    
 
 
    
 
 
 
At December 31, 2020, we had net operating loss carryforwards for federal income tax purposes of approximately $135.3 million that expire in years 2021 through 2038 and for state income tax purposes of approximately $610.8 million that expire in years 2021 through 2040. For financial reporting purposes at December 31, 2019, we had a valuation allowance of $8.9 million, net of federal benefit, to offset the deferred tax assets related to the state net operating loss carryforwards along with a valuation allowance of $4.1 million to offset the deferred tax assets related to the federal net operating loss carryforwards. As a result of our adjusted cumulative three-year
pre-tax
book loss as of December 31, 2020, we performed an assessment of positive and negative evidence with respect to the realization of our net deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, the availability of carryforwards and estimates of projected future taxable income. The economic uncertainty from the
COVID-19
pandemic provided additional negative evidence that outweighed positive evidence resulting in our conclusion that additional deferred tax assets of $35.1 million related to federal and state net operating loss carryforwards are more likely than not to be not realized. As such, an additional valuation allowance of $35.1 million was recorded, for a total valuation allowance of $48.1 million as of the year ended December 31, 2020. 
The amortization of our indefinite-lived intangible assets for tax purposes, but not for book purposes, creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (1) become impaired; or (2) are sold, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods exclusive of any impairment losses in future periods. These deferred tax liabilities and net operating loss carryforwards result in differences between our provision for income tax and cash paid for taxes.