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Note 14 - Income Taxes
 3 Months Ended
Mar. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 14 INCOME TAXES

 

Income tax expense (benefit) for the three months ended March 31, 2023 and March 31, 2022 varies from the amount that would result by applying the applicable U.S. federal corporate income tax rate of 21% to income (loss) from continuing operations before income tax expense (benefit). The following table summarizes the differences:

 

(in thousands)

 

Three months ended March 31,

 
  

2023

  

2022

 

Income tax expense (benefit) at U. S. statutory income tax rate

 $5,981  $(928)

Valuation allowance

  (5,904)  293 

Non-deductible compensation

  29   47 

Investment income

  18   (3)

State income tax

  489   45 

Indefinite life intangibles

  80   54 

Contingent consideration

  —   65 

Other

  6   5 

Income tax expense (benefit)

 $699  $(422)

The Company maintains a valuation allowance for its gross deferred tax assets at March 31, 2023 and December 31, 2022. The Company's operations have generated substantial operating losses in prior years. These losses can be available to reduce income taxes that might otherwise be incurred on future taxable income; however, it is uncertain whether the Company will generate the taxable income necessary to utilize these losses or other reversing temporary differences. This uncertainty has caused management to place a full valuation allowance on its March 31, 2023 and December 31, 2022 net deferred tax asset, excluding the deferred income tax asset and liability amounts set forth in the paragraph below.  For the three months ended March 31, 2023 and March 31, 2022, the Company released into income zero and $0.5 million, respectively, of its valuation allowance associated with business interest expense carryforwards with an indefinite life.

 

 

KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2023

 

The Company carries net deferred income tax liabilities of $4.3 million and $4.2 million at March 31, 2023 and December 31, 2022, respectively, that consists of:

 

 

•

$3.9 million and $3.8 million of deferred income tax liabilities related to indefinite lived intangible assets; and

 

•

$0.4 million and $0.4 million of deferred state income tax liabilities.

 

As of March 31, 2023 and December 31, 2022, the Company carried a liability for unrecognized tax benefits of zero. The Company classifies interest and penalty accruals, if any, related to unrecognized tax benefits as income tax expense.  The Company recorded income tax expense of zero and less than $0.1 million related to interest and penalty accruals for the three months ended March 31, 2023 and March 31, 2022, respectively.