|12 Months Ended|
Dec. 31, 2022
8. INCOME TAXES
The income tax (benefit) expense attributable to the Company’s (loss) income before income taxes consisted of the following:
A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate is as follows:
The Company’s deferred tax assets (liabilities) consisted of the following:
As of December 31, 2022, the Company had federal net operating loss carryforwards totaling $13.7 million and state tax carryforwards of $111.9 million. In general, our federal tax net operating loss carryforwards can be carried forward indefinitely and our state tax carryforwards can be carried forward 20 years. The Company also has general business credits of $0.9 million, which begin to expire in 2035.
In assessing the realizability of its deferred tax assets (“DTAs”), the Company considered whether it is more likely than not that some portion or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considered all of the available positive and negative evidence when determining the need for a valuation allowance, including, but not limited to, the scheduled reversal of existing deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2022, the Company continues to provide a valuation allowance against its DTAs that cannot be offset by existing deferred tax liabilities. In accordance with ASC 740, this assessment has taken into consideration the jurisdictions in which these DTAs reside. The valuation allowance against DTAs has no effect on the actual taxes paid or owed by the Company. In the future, if it is determined that we meet the more likely than not threshold of utilizing our deferred tax assets as required under ASC 740, we may reverse some or all of our valuation allowance. We will continue to evaluate the need for the valuation allowance during each interim period in 2023. Should net income improve in the future, the valuation allowance could be reversed by the end of 2023, absent any unforeseen impact to our operations.
As of December 31, 2022 and 2021, the Company had $1.0 million and $1.1 million, respectively, of deferred tax liabilities relating to goodwill and other indefinite-lived intangibles net of the maximum benefit allowed under the statute after netting with the indefinite-lived DTAs.
The Company’s utilization of net operating loss (“NOL”) and the general business tax credit carryforwards may be subject to an annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions due to ownership changes that may have occurred or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by IRC Sections 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has completed a preliminary Section 382 analysis as of the date of this report and determined it is more likely than not that there have not been any of such greater-than-50% ownership changes within a three-year period during the last five years that would require an analysis of any potential limitation.
Management has made an annual analysis of its federal and state tax returns and concluded that the Company has no recordable liability, as of December 31, 2022 or 2021, for unrecognized tax benefits as a result of uncertain tax positions taken.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is generally not subject to federal or state examination for periods prior to December 31, 2019. However, as the Company utilizes its NOLs, prior periods can be subject to examination.
On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IR Act”), which, among other things, introduces a 15% minimum tax based on adjusted financial statement income of certain large corporations with a three-year average adjusted financial statement income in excess of $1 billion and a 1% excise tax on corporate stock buybacks. Interim guidance on the application of the minimum tax and excise tax was issued on December 27, 2022, but several aspects of the Inflation Reduction Act remain uncertain and the Treasury regulations implementing its provisions are forthcoming. We do not anticipate material impacts from the passage of this legislation, though we will continue to evaluate the IR Act and its potential impact on future periods.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef