Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table summarizes the Company’s income before income taxes (in thousands):
Years Ended December 31,
2022 2021 2020
U.S income $ 63  $ 1,033  $ 6,623 
Non-U.S. income 67  224  920 
Income before income taxes $ 130  $ 1,257  $ 7,543 
The following table summarizes the Company’s components of the consolidated benefit from (provision for) income taxes (in thousands):
Years Ended December 31,
2022 2021 2020
U.S Federal income tax benefit (expense)
Current $ —  $ —  $ (11)
Deferred 44  150  8,346 
Total U.S. Federal income tax benefit 44  150  8,335 
State and local income tax (expense) benefit
Current (99) (167) (66)
Deferred (65) 3  1,725 
Total state and local income tax (expense) benefit (164) (164) 1,659 
Foreign income tax benefit (expense)
Current 8  177  (205)
Total income tax (expense) benefit $ (112) $ 163  $ 9,789 
The following table summarizes activity related to the Company’s valuation allowance (in thousands):
Years Ended December 31,
2022 2021 2020
Valuation allowance at the Beginning of Period $ —  $ —  $ (11,250)
Income tax expense —  —  — 
Increase in valuation allowance —  —  — 
Release of valuation allowance —  —  11,250 
Valuation allowance at the End of Period $ —  $ —  $ — 
The following table summarizes a reconciliation of the Company’s income tax (expense) benefit from the effective income tax rate to the U.S. federal statutory rate (in thousands):
Years Ended December 31,
2022 2021 2020
Income tax expense at the statutory rate $ (27) $ (264) $ (1,584)
State and local income tax expense (130) (130) (387)
Foreign income tax (4) (12) (12)
Share-Based compensation and other permanent differences (58) 462 633
Decrease in valuation allowance — — 11,250
Credits 79 34 —
Other adjustments 28 73 (111)
Income tax (expense) benefit at effective income tax rate $ (112) $ 163 $ 9,789
Effective income tax rate 86.0  % (12.9) % (129.8) %
The following table summarizes the temporary differences and carryforwards that give rise to deferred tax assets and liabilities (in thousands):
December 31, 2022 December 31, 2021
Deferred Federal tax assets –
Bad debt reserves $ 2,113  $ 1,576 
Stock-based compensation 1,428  1,350 
Net operating loss 7,507  8,022 
Operating lease liabilities 985  980 
Accrued compensation 449  253 
Inventories 518  246 
Goodwill and intangible assets —  21 
Research & development credits / Capitalized R&D 533  533 
Other credits 141  62 
Other 361  89 
Total deferred Federal tax assets 14,035  13,132 
Deferred Federal tax liabilities –
Depreciation and asset basis differences (3,661) (3,423)
Goodwill and intangible assets (650) — 
Right-of-use assets (875) (891)
Derivative financial instruments (475) (88)
Total deferred Federal tax liabilities (5,661) (4,402)
Net deferred Federal tax assets 8,374  8,730 
Total deferred state and local tax assets (a) 1,251  1,303 
Net deferred tax assets $ 9,625  $ 10,033 
(a) At December 31, 2022 and 2021, this includes state and local net operating losses of $1.2 million and $1.3 million, respectively.
The Company’s U.S. federal net operating loss carryforward for tax purposes was $35.7 million at December 31, 2022, resulting in a federal deferred tax asset of $7.5 million. Approximately $29.1 million of the Company’s U.S. federal net operating loss carryforwards will begin to expire in various years beginning in 2031. $6.6 million of U.S. federal net operating loss carryforwards have an indefinite life. The Company’s state net operating loss carryforward of approximately $1.2 million is comprised of various jurisdictions. These state net operating losses can be used for a period of 5 to 20 years and vary by state, and if unused, begin to expire in 2023, though a substantial portion expires beyond 2023. Approximately $0.1 million of the state net operating loss carryforwards have an indefinite life. Tax benefits of operating loss and tax credit carryforwards are
evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances.
The Company continues to monitor shifts in past ownership (as defined under Section 382 of the Code).
In the fourth quarter of 2020, it was determined that the valuation allowance against the U.S. federal and state deferred taxes was no longer required and the valuation allowance of $11.2 million that existed was released. The Company’s realization of its deferred tax assets is dependent upon many factors, including, but not limited to, the Company’s ability to generate sufficient taxable income. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. At December 31, 2022 and 2021, cumulative income in recent years and projected future taxable income is the basis for the Company’s assessment that the deferred tax assets do not require a valuation allowance.
The Company had no uncertain tax positions for the years ended December 31, 2022 and 2021.
The Company is subject to taxation for Federal and various state jurisdictions in the U.S. and Canada. The Federal income tax returns of the Company for the years 2019 through 2022 are open to examination by the Internal Revenue Service. The Company was under audit with the Internal Revenue Service in relation to the Company’s 2018 federal income tax return and the audit was closed on December 15, 2021. The state income tax returns and other state tax filings of the Company are subject to examination by the state taxing authorities, for various periods generally up to four years after they are filed. Canadian income tax returns of the Company for the years 2018 through 2022 are subject to examination by the Canada Revenue Agency.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted in response to the COVID-19 pandemic. The CARES Act among other things, allows employers to defer the deposit and payment of the employer's share of Social Security taxes. The Company, under the CARES Act, deferred paying $0.7 million of applicable gross payroll taxes as of December 31, 2020, which was included in other liabilities. The $0.7 million balance of the deferred Social Security taxes was paid in two annual installments during the years ending December 31, 2021 and 2022, respectively. On April 15, 2020, the Company received a $4.1 million loan under the Federal Paycheck Protection Program (“PPP”) created under the CARES Act. In response to revised eligibility guidelines announced by the U.S. Small Business Administration shortly thereafter, the Company repaid this loan in full on May 7, 2020.