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 Income Taxes
The provision for income taxes for continuing operations - benefit (expense) consists of the following:
Year Ended December 31,
2021 2020 2019
(In millions)
Current:
Federal $ (80.4) $ (33.8) $ (62.0)
State (16.6) (16.6) (12.6)
Total current (97.0) (50.4) (74.6)
Deferred (12.3) 34.5  19.5 
Total provision for income taxes for continuing operations - benefit (expense) $ (109.3) $ (15.9) $ (55.1)
The reconciliation of the U.S. statutory federal income tax rate with our federal and state overall effective income tax rate from continuing operations is as follows:
Year Ended December 31,
2021 2020 2019
U.S. statutory federal income tax rate 21.0  % 21.0  % 21.0  %
Effective state income tax rate 2.6  % (8.5) % 4.1  %
Valuation allowance adjustments 0.2  % 7.5  % (0.2) %
Uncertain tax positions 0.2  % (0.6) % (0.5) %
Effect of goodwill impairment 0.0  % (60.2) % 0.0  %
Non-deductible compensation 0.6  % (7.1) % 1.5  %
Tax credits 0.0  % 7.4  % 0.0  %
Other (0.7) % (5.2) % 1.7  %
Effective income tax rate 23.9  % (45.7) % 27.6  %
    
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Significant components of our deferred tax assets and liabilities were as follows:
December 31, 2021 December 31, 2020
(In millions)
Deferred tax assets:
Accruals and reserves $ 39.5  $ 32.9 
State net operating loss carryforwards 6.5  9.0 
Basis difference in property and equipment —  9.9 
Basis difference in liabilities related to right-of-use assets 119.1  98.4 
Other 5.8  4.7 
Total deferred tax assets 170.9  154.9 
Deferred tax liabilities:
Basis difference in property and equipment (11.8) — 
Basis difference in goodwill (27.3) (24.5)
Basis difference in right-of-use assets (115.4) (95.0)
Other (1.4) (1.6)
Total deferred tax liabilities (155.9) (121.1)
Valuation allowance (4.1) (5.2)
Net deferred tax asset (liability) $ 10.9  $ 28.6 
Net long-term deferred tax asset balances were approximately $10.9 million and $28.6 million at December 31, 2021 and 2020, respectively, and are recorded in other assets on the accompanying consolidated balance sheets.
We have approximately $165.2 million in gross state net operating loss carryforwards that will expire between 2022 and 2040. Management reviews these carryforward positions, the time remaining until expiration and other opportunities to realize these carryforwards in making an assessment as to whether it is more likely than not that these carryforwards will be realized. The results of future operations, regulatory framework of the taxing authorities and other related matters cannot be predicted with certainty and, therefore, differences from the assumptions used in the development of management’s judgment could occur. As of December 31, 2021, we had recorded a valuation allowance amount of approximately $4.1 million related to certain state net operating loss carryforward deferred tax assets as we determined that we would not be able to generate sufficient state taxable income in the related entities to realize the accumulated net operating loss carryforward balances.
Sonic and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Sonic’s 2018 through 2021 U.S. federal income tax returns remain open to examination by the U.S. Internal Revenue Service. Sonic and its subsidiaries’ state income tax returns remain open to examination by state taxing authorities for years ranging from 2016 to 2021.