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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 8 - INCOME TAXES The Company’s consolidated income tax provision consisted of the following components (in thousands):
| Year Ended December 31,
| 2023 |  | 2022
Current: |  |  |
Federal | $ | — |  |  | $ | — |
State | 33 |  |  | (16) |
Deferred: |  |  |
Federal | — |  |  | — |
State and local | 7 |  |  | (7) |
Total income tax provision (benefit) | $ | 40 |  |  | $ | (23) |
The reconciliation of the income tax provision computed at the Company’s effective tax rate is as follows (in thousands except for rates):
| Year Ended December 31,
| 2023 |  | 2022
Income/(loss) before income taxes | $ | 15,062 |  |  | $ | (6,428) |
Statutory income tax rate | 21.0 | % |  | 21.0 | %
Expected income tax expense/(benefit) | 3,163 |  |  | (1,349) |
Noncontrolling interest | 10,052 |  |  | — |
Nontaxable entity | — |  |  | 1,348 |
Fair value activity on earn-out liability | (13,913) |  |  | — |
Other permanent differences | (1,796) |  |  | — |
Research and development benefit | (611) |  |  | — |
State income tax expense | (703) |  |  | (23) |
Change in valuation allowance | 3,949 |  |  | 1 |
Other | (101) |  |  | — |
Total income tax provision (benefit) | $ | 40 |  |  | $ | (23) |
Effective tax rate | 0.27 | % |  | 0.36 | %
The Company’s effective tax rates for the years ended December 31, 2023 and 2022 were 0.27% and 0.36%, respectively. For year ended December 31, 2023, our effective tax rate differed from the statutory rate of 21% primarily due to deferred taxes for which no benefit is being recorded and losses attributable to noncontrolling interest unitholders that are taxable on their respective share of taxable income. For the year ended December 31, 2022, our effective tax rate differed from the statutory rate of 21% primarily due to Intuitive Machines, LLC's status as a partnership for United States federal income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| Year Ended December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Net operating losses | $ | 391 |  |  | $ | 165 |
Restricted stock options | 184 |  |  | — |
Property and equipment | — |  |  | 11 |
Inventory | — |  |  | 148 |
Deferred revenue | 9 |  |  | 12 |
Investment in Intuitive Machines, LLC | 67,599 |  |  | — |
Other deferred tax assets | 1,103 |  |  | — |
Total deferred tax assets | 69,286 |  |  | 336 |
Valuation allowance | (69,265) |  |  | (324) |
Net deferred tax assets | 21 |  |  | 12 |
Deferred tax liabilities: |  |  |
Section 481(a) adjustment | (21) |  |  | (5) |
Total deferred tax liabilities | (21) |  |  | (5) |
Net deferred tax asset (liability) | $ | — |  |  | $ | 7 |
As a result of the Business Combination, the Company was appointed as the sole managing member of Intuitive Machines, LLC. Prior to the close of the Business Combination, the Company's financial reporting predecessor, Intuitive Machines, LLC, was treated as a pass-through entity for tax purposes and no provision, except for certain state taxes, was made in the consolidated financial statements for income taxes. Any income tax items for the periods prior to the close of the Business Combination are related to Intuitive Machines, LLC. The Company is a corporation and thus is subject to United States (“U.S.”) federal, state and local income taxes. Intuitive Machines, LLC is a partnership for U.S. federal income tax purposes and therefore does not pay U.S. federal income tax on its taxable income. Instead, the Intuitive Machines, LLC unitholders, including the Company, are liable for U.S. federal income tax on their respective shares of Intuitive Machines, LLC’s taxable income. Intuitive Machines, LLC is liable for income taxes in those states which tax entities classified as partnerships for U.S. federal income tax purposes. The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be settled or recovered. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. Valuation Allowance The Company has established a valuation allowance related to its domestic and state net deferred tax assets. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this assessment. The Company continues to closely monitor and weigh all available evidence, including both positive and negative, in making its determination whether to maintain a valuation allowance. Net Operating Loss As of December 31, 2023, the company had approximately $1.8 million of federal net operating loss carryforwards (“NOL carryforwards”), which do not have an expiration date. The Company’s deferred tax assets, including these NOL carryforwards have been reduced by a valuation allowance due to a determination made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. Uncertain Tax Positions For the periods ending December 31, 2023, and 2022, the Company has no reserves for uncertain tax positions. The Company filed Form 3115, Application for Change in Accounting Method, with the Internal Revenue Service (“IRS”) to request permission to change from its impermissible method of accounting for launch costs to a permissible method. The requested change is nonautomatic and as such requires advance consent from the IRS. On October 18, 2023, the Company received affirmative written consent from the IRS and subsequently reversed the uncertain tax position. The Company files income tax returns in the U.S., including federal and various state filings. The number of years that are open under the statute of limitations and subject to audit varies depending on the tax jurisdiction. We remain subject to U.S. federal tax examinations for years after 2019. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them. Research and development expenses must be amortized over five years for research performed in the U.S. and fifteen years for research performed outside the U.S. Although Congress is considering legislation that would defer the amortization requirement to later years, it is not certain that the provision will be repealed or otherwise modified. In 2023, the company has estimated $26.0 million of research and expenditures subject to capitalization and subsequent amortization for federal tax purposes.

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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 -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
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