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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The (benefit from) provision for income taxes consists of:
| Year Ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Current income tax: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | 179 |  |  | 182 |  |  | 293 |
Foreign | (4) |  |  | 186 |  |  | 41 |
| 175 |  |  | 368 |  |  | 334 |
Deferred income tax: |  |  |  |  |
Federal | (3,265) |  |  | (3,418) |  |  | 12,004 |
State | 104 |  |  | (584) |  |  | 1,805 |
| (3,161) |  |  | (4,002) |  |  | 13,809 |
(Benefit from) provision for income taxes | $ | (2,986) |  |  | $ | (3,634) |  |  | $ | 14,143 |
The components of net loss before income taxes for fiscal years 2020, 2019, and 2018 consisted of the following:
| 2020 |  | 2019 |  | 2018
United States | $ | (39,390) |  |  | $ | (19,092) |  |  | $ | (9,820) |
International | (158) |  |  | (113) |  |  | (159) |
Total net loss before income taxes | $ | (39,548) |  |  | $ | (19,205) |  |  | $ | (9,979) |
Deferred tax (liabilities) assets are comprised of the following at:
| December 31,
| 2020 |  | 2019 |  |
Deferred tax liabilities: |  |  |  |  |
Subordinated debt | $ | (6,482) |  |  | $ | (3,659) |  |  |
Indefinite lived intangibles | (168) |  |  | (64) |  |  |
Operating lease assets | (1,208) |  |  | (756) |  |  |
Software development costs | (2,814) |  |  | (1,219) |  |  |
Intangible assets | (281) |  |  | (446) |  |  |
Depreciation on property, plant and equipment | (931) |  |  | (352) |  |  |
Gross deferred tax liabilities | (11,884) |  |  | (6,496) |  |  |
Deferred tax assets: |  |  |  |  |
Allowances for bad debts and inventory | 3,392 |  |  | 3,013 |  |  |
Capitalized inventory costs | 185 |  |  | 141 |  |  |
Intangible asset | — |  |  | 117 |  |  |
Employee benefit accruals | 2,783 |  |  | 2,427 |  |  |
Interest expense limitation under section 163 (j) | 2,798 |  |  | 1,248 |  |  |
Operating lease liabilities | 1,208 |  |  | 772 |  |  |
Federal net operating loss carryforward | 15,719 |  |  | 8,563 |  |  |
State net operating loss carryforward | 3,569 |  |  | 2,317 |  |  |
Federal and state tax credit carryforwards | 7,549 |  |  | 5,777 |  |  |
Other | 944 |  |  | 912 |  |  |
Gross deferred tax assets | 38,147 |  |  | 25,287 |  |  |
Less valuation allowance | (26,431) |  |  | (18,855) |  |  |
Non-current net deferred tax liabilities | $ | (168) |  |  | $ | (64) |  |  |
The Company has Federal tax credit carryforwards of $7.2 million that expire in various tax years from 2028 to 2038. The Company has a Federal operating loss carryforward of $24.5 million expiring from 2029 through 2037 and a Federal operating loss carryforward of $50.2 million with an unlimited carryforward period. The Company also has state tax credit and net operating loss carryforwards of $68.1 million; these carryforwards vary by jurisdiction, ranging from $0.1 million to $20.7 million, and expire in various tax years through 2039. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. A valuation allowance is required to the extent it is more likely than not that the future benefit associated with certain Federal and state tax loss carryforwards will not be realized As a result of this analysis and based on the current year’s taxable income, and utilization of the Company's net deferred tax assets, management determined an increase in the valuation allowance in the current year to be appropriate. In calculating the valuation allowance, the Company was not permitted to use its existing deferred tax liabilities related to its indefinite-lived intangible assets (i.e. “naked credit deferred tax liabilities”) as a source of taxable income to support the realization of its existing finite-lived deferred tax assets. Due to the Tax Act, U.S. net operating losses (“NOLs”) arising in tax years ending after December 31, 2017 will no longer be subject to the limited 20-year carryforward period. Under the new law, these NOLs carry forward indefinitely, resulting in the creation of indefinite-lived deferred tax assets. Consequently, as the Company schedules its deferred taxes and considers the ability to realize its deferred tax assets in future periods, it needs to consider how existing deferred tax assets, other than historical NOLs, will reverse. If the reversal is expected to generate an indefinite carryforward NOL under the new law, this may impact the valuation allowance assessment. The indefinite carryforward period for NOLs also means that its deferred tax liabilities related to indefinite-lived intangibles, commonly referred to as “naked credits,” can be considered as support for realization. The adjustment for the income tax expense related to the 2020 naked credit resulted in a $0.2 million deferred tax liability. In the current year, the income tax provision includes a reduction of the Company’s valuation allowance due to the establishment of a deferred tax liability in connection with the issuance of the 2026 Notes convertible debt. The establishment of that deferred tax liability created “future taxable income”, partially utilization existing deferred tax assets of the Company and resulting in a $6.2 million reduction of the Company’s valuation allowance. In addition, the income tax provision includes an increase of the Company’s valuation allowance due to the reversal of a deferred tax liability in connection with the current year retirement of a portion of the 2024 Notes issued in 2019. The reversal of that deferred tax liability eliminated future taxable income for the utilization of existing deferred tax assets of the Company, resulting in a $3.0 million increase to the Company’s valuation allowance. In 2019, the income tax provision included a reduction of the Company’s valuation allowance due to the establishment of a deferred tax liability in connection with the issuance of the 2024 Notes. The establishment of that deferred tax liability created future taxable income for the utilization of existing deferred tax assets of the Company, resulting in the $4.1 million reduction of the Company’s valuation allowance. The Company records the benefits relating to uncertain tax positions only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. At December 31, 2020, the Company’s reserve for uncertain tax positions is not material and the Company believes the Company has adequately provided for its tax-related liabilities. The Company is no longer subject to federal income tax audits for years before 2015. The following table reconciles the Company's effective tax rate from the U.S. federal statutory tax rate of 21% for each of 2020, 2019, and 2018:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
State taxes, net of federal benefit | 2.8 |  |  | (4.5) |  |  | 4.4 |
Nondeductible expenses | (0.2) |  |  | (0.3) |  |  | (0.6) |
Tax credits (including R&D) | 4.5 |  |  | 4.0 |  |  | 4.6 |
Expired tax credit | — |  |  | (1.3) |  |  | (3.9) |
Deferred tax adjustment | 0.6 |  |  | (4.8) |  |  | — |
Stock based compensation | 0.4 |  |  | 1.9 |  |  | 0.8 |
Redemption of notes | (2.9) |  |  | — |  |  | — |
Valuation allowance | (19.6) |  |  | 3.2 |  |  | (167.0) |
Contingent purchase revaluation | — |  |  | — |  |  | (1.0) |
Other | 1.0 |  |  | (0.3) |  |  | (0.1) |
| 7.6 | % |  | 18.9 | % |  | (141.8) | %
The effective income tax rate was 7.6%, 18.9% and (141.8)% during the years ended December 31, 2020, December 31, 2019, and December 31, 2018 respectively. The decrease in 2020 compared to the statutory tax rate of 21.0% was primarily due to the valuation allowance, and only partially offset by the tax credits. The decrease in 2019 compared to the statutory tax rate of 21.0% was primarily due to deferred tax adjustments related to state taxes, offset by changes in the valuation allowance and excess tax benefits resulting from the exercise of non-qualified stock options. The effective tax rate for the year ended December 31,2018 was significantly impacted by recording an increase in a valuation allowance on the entire deferred tax assets.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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