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 Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows at the respective year ends: 
(in thousands) 2020 2019
Deferred income tax assets:    
Inventory valuation reserves 176  199 
Inventory capitalization 1,120  1,696 
Accrued bonus 328  497 
State net operating loss carryforwards 1,669  1,835 
Federal net operating loss carryforwards —  139 
Equity security mark to market —  217 
Lease liabilities 7,484  8,945 
Interest limitation carryforwards —  754 
Accrued Federal Insurance Contributions Act ("FICA") deferral 299  — 
Intangible asset basis differences 3,706  — 
Other 534  445 
Total deferred income tax assets 15,316  14,727 
Federal & State valuation allowance (4,243) (1,700)
       Total net deferred income tax assets 11,073  13,027 
Deferred income tax liabilities:
Fixed asset basis differences 5,562  4,859 
Prepaid expenses 276  296 
Lease assets 7,067  8,537 
Interest rate swap 68  77 
Other 57  48 
Total deferred income tax liabilities 13,030  13,817 
Deferred income taxes $ (1,957) $ (790)


Significant components of the provision for income taxes are as follows:
(in thousands) 2020 2019
Current:    
Federal $ (6,024) $ (10)
State 23  57 
Total current (6,001) 47 
Deferred:    
Federal 1,011  (833)
State 284  59 
Total deferred 1,295  (774)
Total $ (4,706) $ (727)
The reconciliation of income tax computed at the U. S. federal statutory tax rates to income tax expense is:
(in thousands) 2020 2019
Amount % Amount %
Tax at U.S. statutory rates $ (6,714) 21.0  % $ (790) 21.0  %
State income taxes, net of federal tax benefit
 73  (0.2) % 165  (4.4) %
Federal and State valuation allowance 2,541  (7.9) % (60) 1.6  %
CARES Act carryback benefits (1,123) 3.5  % —  —  %
Stock option compensation 65  (0.2) % (155) 4.1  %
Executive compensation limitation 280  (0.9) % 57  (1.5) %
Other nondeductible expenses 35  (0.1) % 64  (1.7) %
Other, net 137  (0.5) % (8) 0.2  %
Total $ (4,706) 14.7  % $ (727) 19.3  %

The Company made income tax payments of $16,000 and $1.2 million in 2020 and 2019, respectively. The Company has no U.S. Federal net operating loss carryforwards and no interest limitation carryforwards at the end of 2020 compared with $0.7 million of U.S. Federal net operating loss carryforwards and $3.5 million of interest limitation carryforwards at the end of 2019. During the current period, in response to the COVID-19 pandemic, the Coronavirus, Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. Among various income and payroll tax provisions, the CARES Act permitted the Company to carryback net operating losses realized in 2020 and 2019, refunding previous taxes paid over tax years 2014 through 2018, resulting in no U.S. Federal net operating loss carryforwards to 2021. This resulted in $1.1 million of income tax benefits realized in 2020 due to tax rate differentials between the tax years.
During 2020, the Company increased the combined U.S. federal and state valuation allowance by $2.5 million because it is not more likely than not that the underlying deferred tax assets will be realized in the foreseeable future. While no U.S. federal net operating losses exist as of December 31, 2020, the current year increase in the valuation allowance is principally related to deferred tax assets created in the current year associated with the impairment of intangible assets. In addition, on a gross basis the Company had state operating loss carryforwards of $39.4 million and $43.6 million at the end of 2020 and 2019, respectively. The majority of these losses will expire between the years of 2021 and 2038, while certain losses are not subject to expiration. A valuation allowance has been established for $39.4 million and $40.3 million of these state net operating losses at the end of 2020 and 2019, respectively, or $1.7 million on an after-tax basis at each period.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company is no longer subject to U.S. federal examinations for years before 2015 or state examinations for years before 2014.
The Company had no uncertain tax position activity during 2020 or 2019. The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in the provision for income taxes. The Company had no accruals for uncertain tax positions including interest and penalties at the end of 2020.