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10. Income taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income taxes

Note 10 – Income taxes

The provision (benefit) for income taxes consists of the following:

		For the Years Ended December 31,
		2019				2018
Current:
Federal		$	(27	)		$	(13	)
State and local			276				249
Total current			249				236
Deferred			533				(461	)
Provision (benefit) for income taxes		$	782			$	(225	)

A reconciliation of the U.S. federal statutory rate to the effective tax rate used in the provision for income taxes is as follows:

		2019								2018
		Amount				Percentage				Amount				Percentage
Federal income tax at statutory rate		$	259				21.0%			$	(695	)			21.0%
State and local tax, net			180				14.5%				(47	)			1.4%
Goodwill impairment			–				0.0%				324				(9.8)%
Oher permanent differences			14				1.1%				147				(4.4)%
Section 162m			105				8.5%				–				0.0%
Stock based compensation			149				12.1%				–				0.0%
Uncertain tax positions			79				6.4%				–				0.0%
Change in tax rates			8				0.7%				(37	)			1.1%
Change in tax estimate			(12	)			(1.0)%				83				(2.5)%
Benefit for income taxes		$	782				63.3%			$	(225	)			6.8%

The tax effects of temporary differences giving rise to deferred income tax assets and liabilities are as follows:

		December 31,
		2019				2018
Deferred tax liabilities attributable to:
Accumulated depreciation and amortization		$	(2,015	)		$	(2,062	)
Unrealized gains			(465	)			–
Total deferred tax liabilities			(2,480	)			(2,062	)
Deferred tax assets attributable to:
Net operating losses			507				595
Capital loss carry-forward & investment impairment			–				115
Accrued compensation			89				–
Incentive compensation			473				448
Inventory			312				355
Allowances for doubtful accounts and discounts			115				109
Deferred revenue			40				–
Other			22				50
Total net deferred tax assets			1,558				1,672
Net deferred tax liabilities		$	(922	)		$	(390	)

The following table details the Company's tax attributes related to net operating losses for which it has recorded deferred tax assets.

Tax Attributes			Net Attribute Amount				Net Attribute Amount				Expiration Years
U.S. net operating losses		$	1,759			$	370				No expiration
Illinois net operating losses			1,762				132				2030 - 2031
Other state net operating losses			119				5				2034 - 2038
						$	507

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2019				2018
Balance at January 1		$	63			$	181
Additions based on tax positions of prior years			79				–
Reduction for tax positions of prior years			–				(118	)
Balance at December 31		$	142			$	63

Lifeway is subject to U.S. federal income tax as well as income tax in multiple state and city jurisdictions. With limited exceptions, our calendar year 2016 and subsequent federal and state tax years remain open by statute. The annual effective tax rate would have decreased by 11.5% as of December 31, 2019 if the unrecognized tax benefits were recognized. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was not significant as of December 31, 2018.

The amount of interest and penalties recognized in the consolidated statements of operations was $41 and $0 during 2019 and 2018, respectively. The amount of accrued interest and penalties recognized in the consolidated balance sheets was $60 and $19 at December 31, 2019 and 2018, respectively.