INCOME TAXES
The components of the income tax provision (benefit) from continuing operations were as follows:
| | | | | | | | | | | |
| ($ in millions) | 2024 | | 2023 |
| Current | | | |
| Federal | $ | (0.1) | | | $ | 0.4 | |
| State | 0.3 | | | 0.4 | |
| Total current income tax expense | 0.2 | | | 0.8 | |
| Deferred | | | |
| Federal | (0.2) | | | 49.5 | |
| State | (0.2) | | | 9.0 | |
| Total deferred income tax provision (benefit) | (0.4) | | | 58.5 | |
| Income tax provision (benefit) | $ | (0.2) | | | $ | 59.3 | |
A reconciliation of the statutory U.S. Federal income tax rate of 21% to our effective income tax rate follows:
| | | | | | | | | | | |
| 2024 | | 2023 |
| U.S. Federal statutory rate | 21.0% | | 21.0% |
| Change in valuation allowance | (20.1)% | | (52.7)% |
| Stock-based compensation | (0.7)% | | (0.9)% |
| State and local, net of federal benefit | (0.1)% | | (4.7)% |
| Executive compensation | —% | | (0.3)% |
| Other | 0.3% | | (0.7)% |
| Effective tax rate | 0.4% | | (38.3)% |
Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting and amounts used for tax purposes. The major components of deferred tax assets and liabilities are as follows:
| | | | | | | | | | | |
| ($ in millions) | 2024 | | 2023 |
| Deferred tax assets: | | | |
| Net operating loss carryforward | $ | 33.8 | | | $ | 26.5 | |
| Business interest carryforward | 31.5 | | | 21.5 | |
| Goodwill and intangible assets | 46.9 | | | 43.8 | |
| Lease liabilities | 47.4 | | | 49.4 | |
| Inventory reserve | — | | | 2.6 | |
| Transaction costs | 1.1 | | | 1.2 | |
| Stock-based compensation | 0.4 | | | 0.3 | |
| Other | 0.6 | | | 0.5 | |
| Total gross deferred tax assets | 161.7 | | | 145.8 | |
| Valuation allowance | (113.0) | | | (93.6) | |
| Deferred tax assets, net | 48.7 | | | 52.2 | |
| Deferred tax liabilities: | | | |
| ROU assets | 36.5 | | | 39.0 | |
| Property and equipment | 12.2 | | | 12.5 | |
| Debt issuance costs amortization | — | | | 0.7 | |
| Other | — | | | 0.4 | |
| Deferred tax liabilities | 48.7 | | | 52.6 | |
| Net deferred tax asset (liability) | $ | — | | | $ | (0.4) | |
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. As of December 31, 2024 and 2023, management has evaluated the realizability of the Company’s deferred tax assets and recorded a valuation allowance against the Company’s federal and state deferred tax assets, as it is more likely than not that the deferred tax assets will not be realized based on the evidence evaluated.
| | | | | | | | | | | |
| ($ in millions) | 2024 | | 2023 |
| Valuation allowance as of beginning of the year | $ | 93.6 | | | $ | 0.7 | |
| Increases recorded to income tax provision | 19.4 | | | 92.9 | |
| | | |
| Valuation allowance as of end of year | $ | 113.0 | | | $ | 93.6 | |
As of December 31, 2024 and 2023, the Company has federal net operating loss carryforwards of $140.2 million and $112.4 million, all of which were generated in years beginning in 2018 and can be carried forward indefinitely. As of December 31, 2024 and 2023, the Company had state net operating loss carryforwards of $100.2 million and $64.8 million, a portion of which begin to expire in 2029. As a result of various ownership changes, the Company’s federal and state net operating losses are subject to limitations under Internal Revenue Code Section 382.
We do not have unrecognized tax benefits related to uncertain tax positions. Tax years 2019 through 2023 remain open to examination by the U.S. federal and state taxing jurisdictions, as carryforward attributes generated in prior years may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have been or will be used in a future period. The Company files income tax returns in the U.S. federal and various state jurisdictions. There are currently no federal or state audits in progress.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.