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
The provision for income taxes consists of the following:
Year Ended December 31,
2020 2019 2018
Current:
Federal $ 1,537  $ 532  $ 211 
State and Local 168  109  73 
Total Current Provision $ 1,705  $ 641  $ 284 
Deferred:
Federal $ —  $ —  $ — 
State and Local —  —  — 
Total Deferred Provision $ —  $ —  $ — 
Total Provision for Income Taxes $ 1,705  $ 641  $ 284 
The Company is subject to U.S. federal and state corporate income tax. As of December 31, 2020, the Company has a gross net operating loss carryforward of approximately $435.2 million that is available to offset future U.S. federal taxable income, if and when it arises. The net operating loss carryforward will begin to expire in 2029. A portion of the net operating loss carryforward may be limited in its use due to certain provisions of the Code, including, but not limited to Section 382, which imposes an annual limit on the amount of net operating loss and net capital loss carryforwards that the Company can use to offset future taxable income.
On March 27, 2020, as part of the business stimulus package in response to the COVID-19 pandemic, the U.S. government enacted the CARES Act. The CARES Act established new tax provisions including, but not limited to: (1) five-year carry back of NOLs generated in 2018, 2019 and 2020, and a temporary suspension of certain other limitations on the use of NOLs; (2) accelerated refund of AMT credit carry forwards; and (3) retroactive changes to allow accelerated depreciation for certain depreciable property. The legislation does not have a material impact on the Company’s tax positions due to the lack of taxable income in the carry back periods and the fact the Company was already expecting to receive a cash benefit for AMT credits in 2020. The Company filed a claim to accelerate its refund of remaining AMT credit carryforwards that was received in the third quarter of 2020.

As of December 31, 2020, the Company has a capital loss carryforward of approximately $27.2 million. The capital loss carryforward will begin to expire in 2022. In addition, the Company has a receivable of $0.6 million related to refundable alternative minimum tax (“AMT”) credits.
The Company and its subsidiaries file U.S. federal and state income tax returns in various jurisdictions. Generally, the Company is no longer subject to tax examinations by tax authorities for years prior to 2017.
The Company has assessed its tax positions for all open years. As of December 31, 2020, the Company reported a total of $1.2 million of unrecognized tax benefits which, if recognized, would affect the Company’s effective tax rate. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within the next twelve months.
A reconciliation of the unrecognized tax benefits is as follows:
Balance as of December 31, 2019 $ 1,192 
Increase due to tax positions of current year 4 
Balance as of December 31, 2020 $ 1,196 
Generally, the Company’s effective tax rate differs from the federal statutory rate as a result of state and local taxes and changes in the valuation allowance.
The difference between the Company's reported provision for income taxes and the U.S. federal statutory rate of 21% is as follows:
December 31,
2020 2019 2018
Provision at the statutory rate 21.00  % 21.00  % 21.00  %
Permanent items (0.56) % (0.17) % (1.07) %
Excess Inclusion Income (2.80) % (0.45) % (0.05) %
State and local taxes (0.25) % (0.16) % (0.15) %
Valuation allowance (20.61) % (21.11) % (19.97) %
Unrecognized tax benefits (0.01) % (0.86) % (1.84) %
Tax credits —  % —  % 1.36  %
Other 0.11  % 0.57  % —  %
Total Benefit (Expense) (3.12) % (1.18) % (0.72) %

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2020 and 2019 are presented below:
December 31,
2020 2019
Deferred tax assets:
Allowance for loan losses $ 283  $ 308 
Depreciation and amortization 8,158  3,939 
Accrued expenses 2,956  2,488 
Interest 3,757  3,661 
Operating lease liabilities 59,804  56,803 
Net operating losses 126,163  107,415 
Capital losses 7,749  7,437 
Deferred revenue 1,956  2,124 
Investment in Partnership 5,330  155 
Impairment Loss 1,822  2,248 
Other 1,342  3,215 
Total deferred tax assets 219,320  189,793 
Less valuation allowance (152,884) (123,434)
Net deferred tax assets $ 66,436  $ 66,359 
Deferred tax liabilities:
Operating lease right-of-use assets 61,467  59,716 
Membership deposit liabilities 4,969  6,643 
Total deferred tax liabilities $ 66,436  $ 66,359 
Net deferred tax assets $ —  $ — 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible.
As of December 31, 2020, the Company recorded a full valuation allowance against its net deferred tax assets as management does not believe that it is more likely than not that the net deferred tax assets will be realized.
The following table summarizes the change in the deferred tax asset valuation allowance:
Valuation allowance at December 31, 2019 $ 123,434 
Increase due to current year operations 29,450 
Valuation allowance at December 31, 2020 $ 152,884