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Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

Note 18. Income Taxes

U.S. and international components of income (loss) before income taxes is as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(Thousands)		2022			2021			2020
U.S.	​	​	(51,607)	​	​	(28,573)	​	​	(147,196)
International	​	​	(3,743)	​	​	3,897	​	​	786
Loss before income taxes	​	$	(55,350)	​	$	(24,676)	​	$	(146,410)

​

Income tax expense (benefit) consisted of the following:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(Thousands)		2022			2021			2020
Current expense (benefit)	​	​	​	​	​	​	​	​	​
Federal	​	$	—	​	$	—	​	$	—
State	​	​	529	​	​	179	​	​	201
Foreign	​	​	1,619	​	​	(99)	​	​	510
Total current	​	​	2,148	​	​	80	​	​	711
Deferred expense (benefit)	​	​	​	​	​	​	​	​	​
Federal	​	​	173	​	​	(4,617)	​	​	(15,230)
State	​	​	81	​	​	(901)	​	​	(3,003)
Foreign	​	​	(2,291)	​	​	2,070	​	​	(23)
Total deferred	​	​	(2,037)	​	​	(3,448)	​	​	(18,256)
​	​	​	​	​	​	​	​	​	​
Income tax expense (benefit)	​	$	111	​	$	(3,368)	​	$	(17,545)

​

A reconciliation of income tax expense (benefit) to the federal statutory rate is as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(Thousands)		2022			2021			2020
Income tax expense (benefit) at US statutory income tax rate	​	$	(11,624)	​	$	(5,182)	​	$	(30,746)
State income tax expense (benefit), net of federal benefit	​	​	(1,507)	​	​	(773)	​	​	(2,844)
Foreign rate differential	​	​	(15)	​	​	(304)	​	​	(179)
Change in fair value of warrants	​	​	6,232	​	​	—	​	​	—
Goodwill impairment	​	​	—	​	​	—	​	​	16,624
Global intangible low-taxed income ("GILTI") inclusion	​	​	—	​	​	1,095	​	​	22
Transaction costs	​	​	—	​	​	260	​	​	507
Other permanent differences	​	​	323	​	​	78	​	​	136
Step-up on C Corp conversion	​	​	—	​	​	—	​	​	(1,578)
Change in valuation allowance	​	​	7,319	​	​	632	​	​	513
Provision to return adjustments	​	​	(320)	​	​	(166)	​	​	—
Effect of change in foreign tax rates	​	​	(552)	​	​	1,181	​	​	—
Other	​	​	255	​	​	(189)	​	​	—
Income tax expense (benefit)	​	$	111	​	$	(3,368)	​	$	(17,545)
​	​	​	​	​	​	​	​	​	​
Effective tax rate	​	​	(0.20%)	​	​	13.6%	​	​	12.0%

​

Deferred income tax assets and liabilities were recognized on temporary differences between the financial and tax basis of existing assets and liabilities as follows:

​

​	​	​	​	​	​	​
(Thousands)		December 31, 2022			December 31, 2021
Deferred tax assets	​	​	​	​	​	​
Liabilities and reserves	​	$	2,300	​	$	3,501
Interest limitation	​	​	16,256	​	​	8,884
Net operating losses	​	​	13,483	​	​	8,850
Transaction expenses	​	​	206	​	​	79
Inventories	​	​	1,449	​	​	—
Stock compensation	​	​	794	​	​	—
Derivatives	​	​	552	​	​	—
Operating lease liabilities	​	​	2,430	​	​	—
Other	​	​	269	​	​	711
Total	​	​	37,739	​	​	22,025
Valuation allowance	​	​	(8,464)	​	​	(1,145)
Total deferred tax assets, net	​	$	29,275	​	$	20,880
Deferred tax liabilities	​	​	​	​	​	​
Property, plant and equipment	​	$	(13,334)	​	$	(10,581)
Intangible assets	​	​	(27,358)	​	​	(29,221)
Derivatives	​	​	—	​	​	(4,451)
Inventories	​	​	—	​	​	(2,035)
Right-of-use assets	​	​	(2,403)	​	​	—
Other	​	​	(535)	​	​	(107)
Total	​	​	(43,630)	​	​	(46,395)
Net deferred tax liability	​	$	(14,355)	​	$	(25,515)

​

We establish a valuation allowance to reduce deferred tax assets if, based on the weight of the available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance related to domestic deferred tax assets of $6.9 million was recorded, of which $5.5 million was against a portion of the Company’s Section 163(j) interest limitation carryforward, and the remainder was against certain state net operating losses as of December 31, 2022. There was no such valuation allowance against domestic deferred tax assets as of December 31, 2021. A valuation allowance related to foreign deferred tax assets of $1.6 million and $1.1 million was recorded against certain foreign net operating losses as of December 31, 2022 and 2021, respectively. The amount of deferred tax assets considered realizable could be adjusted in the near term, resulting in an increase to the valuation allowance, if estimates of future taxable income during the carryforward period are reduced.

Activity in the valuation allowance is as follows:

​

​	​	​	​	​	​	​
(Thousands)		December 31, 2022			December 31, 2021
Beginning balance	​	$	1,145	​	$	513
Additions	​	​	7,319	​	​	632
Ending Balance	​	$	8,464	​	$	1,145

​

As of December 31, 2022, the Company had federal net operating loss carryforwards of approximately $42.9 million which do not expire. As of December 31, 2022, the Company had post-apportionment state net operating loss carryforwards of approximately $38.5 million which begin to expire in 2031. As of December 31, 2022, the Company had foreign net operating loss carryforwards of approximately $5.9 million which begin to expire in 2026.

As of December 31, 2022 and 2021, the Company’s reserve for uncertain tax positions was $0.1 million and includes potential interest and penalties, which are recorded as a component of income tax expense (benefit). The Company does not expect any significant changes to unrecognized tax benefits within the next twelve months.

As a result of the U.S. Tax Cuts and Jobs Act of 2017, or the Tax Act, our accumulated foreign earnings have been subjected to U.S. tax. Moreover, all future foreign earnings will be subject to a new territorial tax system and dividends received deduction regime in the U.S. As of December 31, 2022, undistributed earnings of certain foreign subsidiaries of approximately $8.9 million are intended to be permanently reinvested outside the U.S. Accordingly, no provision for foreign withholding tax or state income taxes associated with a distribution of these earnings has been made. Determination of the amount of the unrecognized deferred tax liability on these unremitted earnings is not practicable.

​

We are subject to taxation in the United States and various states and foreign jurisdictions, including the United Kingdom. As of December 31, 2022, we have no tax years under examination by the IRS, and there are currently no state or foreign income tax examinations in process. The Company is subject to United States federal income tax examinations for years after 2018 and to state and foreign income tax examinations for years after 2017.

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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

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-Publisher FASB
-Name Accounting Standards Codification
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