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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes [Abstract] |
Income Taxes | 9. Income Taxes Income Tax Expense (Loss) income before income taxes consists of the following (in thousands): 61 2021 2020 2019Domestic$ (10,263) $ (11,443) $ 6,369Foreign (4,564) (5,731) (4,725)(Loss) income before income taxes$ (14,827) $ (17,174) $ 1,644 Income tax expense (benefit) consists of the following (in thousands): 2021 2020 2019Current: Federal$ 1,896 $ (2,460) $ 48State 551 445 80Foreign 3,391 707 2,041 5,838 (1,308) 2,169Deferred: Federal (2,801) 1,721 (850)State (307) 384 (131)Foreign (2,723) (1,289) (1,264) (5,831) 816 (2,245)Income tax expense (benefit)$ 7 $ (492) $ (76) Our income tax expense (benefit) in 2021, 2020 and 2019 included our federal, state, and foreign tax obligations. Our effective income tax rate was break-even for the year ended December 31, 2021. Our effective income tax was a tax benefit of 3% and 5% for the years ended December 31, 2020 and 2019, respectively. Our income tax rate for the year ended December 31, 2021 was primarily impacted by excess tax benefits on stock compensation, the research and development tax credit, non-deductible executive compensation, changes in our valuation allowance against our net deferred tax assets, and changes in our uncertain tax position liabilities. Our income tax rate for the year ended December 31, 2020 was primarily impacted by changes in our valuation allowance against our net deferred tax assets and changes in our uncertain tax position liabilities. Our income tax rate for the year ended December 31, 2019 was primarily impacted by excess tax benefits on stock compensation, the research and development tax credit, and changes in our uncertain tax position liabilities. The income tax benefit amounts differ from the amounts computed by applying the US federal statutory income tax rate of 21% for the years ended December 31, 2021, 2020, and 2019 to pretax income as a result of the following (in thousands): 2021 2020 2019Tax expense (benefit) at statutory rate$ (3,114) $ (3,606) $ 345 Increase (reduction) in income taxes resulting from: Valuation allowance change 1,566 3,952 153Foreign income taxes 1,138 378 425Nondeductible executive compensation 1,075 580 778Net change in uncertain tax positions 762 (1,115) (360)Foreign interest disallowance 307 298 292State income taxes, net of federal benefit 73 (455) (108)Nondeductible entertainment expenses 65 94 201Foreign deferred items 53 (63) 365Equity compensation (477) (204) (1,921)Research and development credit (959) (457) (400)Other (482) 106 154Total income tax expense (benefit)$ 7 $ (492) $ (76) Deferred Taxes We generate deferred tax assets primarily as a result of net operating losses, excess interest carryforward, accrued compensation, stock compensation, and capital leases. Our deferred tax liabilities are primarily made up of intangible assets acquired in previous years, unrealized gains and losses, and capital leases. The tax effects of temporary differences which give rise to deferred tax assets and liabilities at December 31 are as follows (in thousands): 2021 2020Deferred tax assets: Finance and operating leases$ 13,762 $ 6,880Loss carryforwards 6,649 7,911Excess interest carryforward 3,547 2,660Accrued expenses 2,088 2,002Stock compensation 2,007 2,034Deferred compensation 1,535 1,326Property 1,356 1,397Credit carryforwards 601 1,214Inventory and deferred preservation costs write-downs 397 308Other 3,770 2,798Less valuation allowance (13,282) (7,170)Total deferred tax assets, net 22,430 21,360 2021 2020Deferred tax liabilities: Intangible assets (29,086) (35,770)Finance and operating leases (13,404) (6,617)Unrealized gains and losses (4,088) (4,929)Debt costs (1,024) (1,528)Prepaid items (395) (417)Inventory and deferred preservation costs write-downs (105) --Financing arrangements -- (4,700)Other (770) (665)Total deferred tax liabilities (48,872) (54,626) Total deferred tax liabilities, net$ (26,442) $ (33,266) As of December 31, 2021 and 2020 we maintained a net deferred tax liability of $26.4 million and $33.3 million, respectively. As of December 31, 2021 and 2020 we maintained valuation allowances against our deferred tax assets of $13.3 million and $7.2 million, respectively, primarily related to net operating loss carryforwards and disallowed excess interest carryforwards. As of December 31, 2021 we had approximately $2.0 million of federal net operating loss carryforwards related to the acquisitions of Cardiogenesis and Hemosphere that we anticipate partially utilizing before expiration, approximately $3.0 million of state net operating loss carryforwards, that will begin to expire in 2022, approximately $1.8 million of foreign net operating loss carryforwards that will begin to expire in 2025, and approximately $500,000 in research and development tax credit carryforwards that begin to expire in 2030, and $110,000 in credits from other jurisdictions that mostly expire in 2027. As of December 31, 2021 we had a deferred tax asset of $3.5 million of disallowed interest expense deduction carryforwards as a result of the interest deductibility rule imposed by the “Tax Cuts and Jobs Act” of 2017 (“Tax Act”), and later modified by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). This deferred tax asset can be carried forward indefinitely. This rule disallows interest expense to the extent it exceeds 30% of adjusted taxable income, modified to be 50% in 2020 and 2019 by the CARES Act. For the years ended December 31, 2021 and 2020 our interest deduction was limited to $11.7 million and $15.8 million, respectively. During the twelve months ended December 31, 2021 we corrected certain immaterial prior year errors primarily related to the release of a valuation allowance, reduction of income taxes payable, and an increase in the tax reserve. On correcting the errors, we recorded an income tax benefit of $2.1 million. We believe that the realizability of our acquired net operating loss carryforwards will be limited in future periods due to a change in control of our former subsidiaries Hemosphere, Inc. (“Hemosphere”) and Cardiogenesis Corporation (“Cardiogenesis”), as mandated by Section 382 of the Internal Revenue Code of 1986, as amended. We believe that our acquisitions of these companies each constituted a change in control as defined in Section 382 and that, prior to our acquisition, Hemosphere had experienced other equity ownership changes that should be considered such a change in control. The deferred tax assets recorded on our Consolidated Balance Sheets exclude amounts that we expect will not be realizable due to changes in control. A portion of the acquired net operating loss carryforwards is related to state income taxes for which we believe it is more likely than not, that some will not be realized. Therefore, we recorded a valuation allowance against these state net operating loss carryforwards. In addition, during the year, the realizability of a portion of our net operating loss carryforwards and other deferred tax assets was limited. We recorded a valuation allowance against these deferred tax assets. Reinvestment of Unremitted Earnings We intend to reinvest substantially all of the unremitted earnings of our non-US subsidiaries to fund working capital, strategic investments, and debt repayment and postpone their remittance indefinitely. Accordingly, no provision for state and local taxes or foreign withholding taxes was recorded on these unremitted earnings in the accompanying Consolidated Statements of Operations and Comprehensive Loss. The Company is permanently reinvested with respect to the outside basis differences in its non-US subsidiaries with the exception of one of its German subsidiaries. As of December 31, 2021 we had a deferred tax liability of $175,000 for the tax effects of this outside basis difference in its Consolidated Statements of Operations and Comprehensive Loss. Uncertain Tax Positions A reconciliation of the beginning and ending balances of our uncertain tax position liability, excluding interest and penalties, is as follows (in thousands): 2021 2020 2019Beginning balance$ 2,574 $ 3,523 $ 3,889Increases related to current year tax positions 1,661 473 691Decreases due to the lapsing of statutes of limitations (241) (1,703) (880)Decreases related to prior year tax positions (170) (238) (154)(Decreases) increases for foreign exchange differences (121) 99 (22)Increases (decreases) related to prior year tax positions 386 420 (1)Ending balance$ 4,089 $ 2,574 $ 3,523 We recorded non-current liabilities of $220,000 and $261,000 related to interest and penalties on uncertain tax positions on our Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively. We included income of $35,000 and $180,000 for December 31, 2021 and 2020, respectively, and expense of $27,000 for December 31, 2019 for interest and penalties related to unrecognized tax benefits in our Consolidated Statements of Operations and Comprehensive Loss. As of December 31, 2021 our uncertain tax liability of $4.3 million, including interest and penalties, was recorded as a reduction to deferred tax assets of $300,000, and a non-current liability of $4.0 million on our Consolidated Balance Sheets. The amount of uncertain tax liabilities that are expected to affect our tax rate if recognized were $3.2 million, $2.6 million, and $3.5 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2020 our total uncertain tax liability, including interest and penalties of $2.8 million, was recorded as a reduction to deferred tax assets of $300,000 and as a non-current liability of $2.5 million on our Consolidated Balance Sheets. We believe it is reasonably possible that approximately $185,000 of our uncertain tax liability will be recognized in 2022 due to the lapsing of various federal and state and foreign statutes of limitations, of which substantially all would affect the tax rate. Other Our tax years 2018 and forward generally remain open to examination by the major taxing jurisdictions to which we are subject. However, certain returns from years prior to 2018, in which net operating losses and tax credits have arisen, are still open for examination by the tax authorities.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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