Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 13. 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 $39.1 million as of December 31, 202
1
,
to offset $39.1 million of the deferred tax assets related to federal 
and
state net operating loss carryforwards of $20.7 million
and $14.4 million respectively, along with $4 million of
 
other financial statement accrual
s
 
for a total valuation allowance of $39.1 million
.
This balance represents a
de
crease of $9.0 million during the year, from $48.1 million valuation allowance as of December 31, 20
2
0
.

The consolidated provision for income taxes is as follows:
 
 
  
Year Ended December 31,
 
 
  
2020
 
  
2021
 
 
  
(Dollars in thousands)
 
Current:
  
      
  
      
Federal
    $ —       
 
$
—
 
State
      169     
 
1,112
 
    
 
 
     
 
 
  
       169     
 
1,112
 
Deferred:
                  
Federal
      17,283     
 
(1,277
) 
State
      12,822     
 
(594
 )
 
    
 
 
     
 
 
  
       30,105     
 
(1,871
 )
 
    
 
 
     
 
 
  
Provision for income taxes
    $ 30,274     
 
$
(759
 )
 
    
 
 
     
 
 
  
Consolidated deferred tax assets and liabilities consist of the following:
 
 
  
As of December 31,
 
 
  
2020
 
  
2021
 
 
  
(Dollars in thousands)
 
Deferred tax assets:
  
      
  
      
Financial statement accruals not currently deductible
    $ 2,908     
 
$
2,738
 
Allowance for bad debt reserve
      3,672     
 
3,399
 
Net operating loss, AMT credit and other carryforwards
      44,154     
 
35,290
 
State taxes
      35     
 
216
 
Operating lease liabilities under ASC 842
      14,909     
 
13,596
 
Other
      2,440     
 
3,965
 
    
 
 
     
 
 
  
Total deferred tax assets
      68,118     
 
59,204
 
Valuation allowance for deferred tax assets
      (48,073 )     
 
(39,135
 )
 
    
 
 
     
 
 
  
Net deferred tax assets
    $ 20,045     
$
20,069
 
    
 
 
     
 
 
  
     
Deferred tax liabilities:
                  
Excess of net book value of property and equipment and software for financial reporting purposes over tax basis
    $ 1,066     
$
145
 
Excess of net book value of intangible assets for financial reporting purposes over tax basis
      75,380     
 
75,747
 
Operating lease
right-of-use
assets under ASC 842
      12,482     
 
11,189
 
    
 
 
     
 
 
  
Total deferred tax liabilities
      88,928     
 
87,081
 
    
 
 
     
 
 
  
Net deferred tax liabilitie
s
    $ (68,883 )   
$
(67,012
 )
 
    
 
 
     
 
 
  
The following table reconciles the above net deferred tax liabilities to the financial statements:
 
 
  
As of December 31,
 
 
  
2020
 
  
2021
 
 
  
(Dollars in thousands)
 
Deferred income tax asset per balance sheet
    $ —       
$
—  
 
Deferred income tax liability per balance sheet
      (68,883 )    
 
(67,012
 )
 
    
 
 
     
 
 
  
     $ (68,883 )    
$
(67,012
 )
 
    
 
 
     
 
 
  
A reconciliation of the statutory federal income tax rate to the provision for income tax is as follows:

 
 
  
Year Ended December 31,
 
 
  
2020
 
  
2021
 
 
  
(Dollars in thousands)
 
Statutory federal income tax (statutory tax rate)
    $ (4,995 )    
$
8,559
 
Effect of state taxes, net of federal
      10,468     
 
643
 
Permanent items
      379     
 
172
 
PPP loan forgiveness
      —       
 
(2,351
)
State rate change
      63     
 
531
 
Valuation allowance
      24,302     
 
(8,903
 )
 
Stock based compensation cancellation
      196     
 
181
 
Other, net
      (139 )     
 
409
 
    
 
 
     
 
 
  
Provision for (benefit from) income taxes
    $ 30,274     
$
(759
 )
 
    
 
 
     
 
 
  
At December 31, 202
1
, we had net operating loss carryforwards for federal income tax purposes of approximately $98.4 million that expire in years 2024 through 2038
 and for state income tax purposes of approximately $607.7 million that expire in years 2022 through 2041. 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 which resulted in recognition of a $
48.1 million
valuation allowance for the year ended December 31, 2020,
related to
the
federal and state net operating loss
carry forwards. During 2021, through operational activity of the company primarily through various land sales throughout the year, we utilized our operating loss carryforwards and adjusted the related valuation allowance by
 $9 million
bringing the total valuation allowance
to $
39.1
 million for the year ended December 31, 2021. 
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.
We utilized certain benefits of the CAA through receipt of PPP loans in the amount of $11.2 million. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness.
During
July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a
pre-tax
gain on the forgiveness of $11.2 million. The effects of the CAA have resulted in a favorable permanent tax effected adjustment of $2.4 million.