|12 Months Ended|
Dec. 31, 2021
|Income Tax Disclosure [Abstract]|
NOTE 10 – INCOME TAXES
The benefit from income taxes for the years ended December 31, 2021 and 2020 consists of the following (in thousands):
SCHEDULE OF INCOME TAX PROVISION (BENEFIT)
The reconciliation of the effective income tax rate to the federal statutory rate is as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE TO THE FEDERAL STATUTORY RATE
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows (in thousands):
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted and signed into law in response to the COVID-19 pandemic. Under the CARES Act, net operating loss (“NOL”s) carryforwards arising in tax years beginning after December 31, 2017, and before January 1, 2021 (e.g., NOLs incurred in 2018, 2019, or 2020 by a calendar-year taxpayer) may be carried back to each of the five tax years preceding the tax year of such loss. Since the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), NOLs generally could not be carried back but could be carried forward indefinitely. Further, the TCJA limited NOL absorption to 80% of taxable income. The CARES Act temporarily removes the 80% limitation, reinstating it for tax years beginning after 2020.
Based on the passage of Cares Act, the Company determined that the NOL carryback provision in the CARES Act would result in a cash benefit to us for the fiscal years 2017, 2018, and 2019. As a result, during the year ended December 31, 2020, an income tax benefit of $2,139 was recorded related to U.S. Federal loss carryforwards that became eligible for carryback. At December 31, 2020, we recorded total income taxes receivable of $2,357, of which $1,702 pertained to the benefit of carrying back the NOLs for 2018 and 2019 to the tax year ended September 30, 2016, and $655 pertained to the benefit of carrying back NOL for fiscal year 2020 to the short tax period ended December 31, 2016. During the year ended December 31, 2021, the Company received $1,570 of the income taxes receivable, and the balance of $787 remained outstanding at December 31, 2021.
At December 31, 2021, the Company had available Federal and state NOLs carryforwards to reduce future taxable income of approximately $10.7 million and $12.9 million, respectively. The Federal NOL can be carried forward indefinitely, but can only offset 80% of taxable income in future years. The state carryforward expires in 2039 through 2040.
Authoritative guidance issued by the ASC Topic 740 – Income Taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. The Company considers all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgement about the forecast of future taxable income is consistent with the plans and estimates we are using to manage the underlying business. Based on their evaluation, the Company determined that their net deferred tax assets do not meet the requirements to be realized, and as such, the Company has provided a full valuation allowance against them.
The Company follows FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At December 31, 2021 and 2020, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.
The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for tax years after 2017.
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2017 through 2021 remain open to examination by the major taxing jurisdictions to which the Company is subject.
No definition available.
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