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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
NOTE 10. | INCOME TAXES
We are subject to taxation in all jurisdictions in which we operate that impose an income tax on our business activities. The components of the income tax expense for the years ended December 31, and the tax effects of temporary differences that give rise to deferred taxes at December 31, are as follows:
|  | December 31, |
|  | 2023 |  |  | 2022 |
Income tax (provision) benefit: |  |  |  |  |  |  |  |
Current federal income tax expense |  | $ | - |  |  | $ | - |
Current state income tax expense |  |  | 166,223 |  |  |  | 256,971 |
Deferred federal income tax benefit |  |  | (2,138,204 | ) |  |  | (1,004,743 | )
Deferred state income tax benefit |  |  | (1,006,757 | ) |  |  | (1,757,161 | )
Total income tax benefit before valuation allowance |  |  | (2,978,738 | ) |  |  | (2,504,933 | )
Valuation allowance |  |  | - |  |  |  | - |
Total income tax benefit |  | $ | (2,978,738 | ) |  | $ | (2,504,933 | )
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 18,672,782 |  |  | $ | 7,011,687 |
Tax credits |  |  | 643,945 |  |  |  | 643,945 |
Lease liabilities |  |  | 14,555,615 |  |  |  | 15,644,321 |
Premium adjustments and IBNR |  |  | 580,373 |  |  |  | 906,208 |
Disallowed interest expense carryforwards |  |  | 1,204 |  |  |  | 201,725 |
Other |  |  | 70,452 |  |  |  | 54,714 |
Total Deferred Tax Assets |  |  | 34,524,371 |  |  |  | 24,462,600 |
Valuation allowance |  |  | (846,633 | ) |  |  | (832,123 | )
Net deferred tax assets |  | $ | 33,677,738 |  |  | $ | 23,630,477 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  | $ | (19,504,745 | ) |  | $ | (14,785,116 | )
Intangibles |  |  | (8,269,752 | ) |  |  | (5,637,973 | )
Right of use assets |  |  | (14,684,988 | ) |  |  | (15,721,959 | )
Investment in unconsolidated subsidiaries |  |  | (2,570,253 | ) |  |  | (745,464 | )
Unrealized gain on securities |  |  | (759,812 | ) |  |  | (1,679,572 | )
Total deferred tax liabilities |  |  | (45,789,550 | ) |  |  | (38,570,084 | )
Net deferred tax liabilities |  | $ | (12,111,812 | ) |  | $ | (14,939,607 | )
The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards and credits. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. During the year ended December 31, 2022, we reversed the valuation allowance recorded related to the net deferred tax asset recorded for Yellowstone Acquisition Company which merged with Sky Harbour LLC as part of a business combination on January 25, 2022, effectively removing Yellowstone from our consolidated financial statements. As of December 31, 2023, we have only recorded a valuation allowance against certain state net operating loss deferred tax assets that we have determined to be more-likely-than-not not realizable.
As of December 31, 2023, we have available federal tax operating loss carry forwards of approximately $72.5 million. Of the $72.5 million, $7.1 million arose in tax years beginning before December 31, 2017 and may be carried forward 20 years. The remaining tax net operating losses were generated in years beginning after December 31, 2017. Tax net operating loss carry forwards generated in years beginning after December 31, 2017 may be carried forward indefinitely but are only available to offset 80% of future taxable income. We have available state tax operating loss carry forwards of approximately $75.0 million, which are available to reduce future state taxable income and expire at various times and amounts. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, annual use of our net operating losses may be limited if it is determined that an ownership shift has occurred. An ownership shift is generally defined as a cumulative change in equity ownership by ‘‘5% shareholders’’ that exceeds 50 percentage points over a rolling three-year period. At this time, a Section 382 study has not been performed to determine if such an ownership shift has occurred. A reconciliation between the federal statutory income tax rate and our actual effective income tax rate is as follows:
|  | For the Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Federal income tax at statutory rate |  | $ | (1,941,583 | ) |  | $ | 1,653,579 |
State tax income taxes, net of federal benefit |  |  | (1,118,721 | ) |  |  | (279,305 | )
Non-controlling interest |  |  | (213,753 | ) |  |  | (38,802 | )
Provision to return adjustments |  |  | 129,405 |  |  |  | 275,920 |
Warrant income |  |  | - |  |  |  | (489,221 | )
Gain on deconsolidation of Yellowstone |  |  | - |  |  |  | (3,979,091 | )
Permanent differences |  |  | 137,649 |  |  |  | 58,975 |
Valuation allowance |  |  | 14,510 |  |  |  | 334,861 |
Other |  |  | 13,755 |  |  |  | (41,849 | )
Total income tax benefit |  | $ | (2,978,738 | ) |  | $ | (2,504,933 | )
Uncertain Tax Positions We believe that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12 months of the reporting date. As of December 31, 2023 we do not have any open or ongoing exams by any taxing authorities. The federal and state statutes of limitation for assessment of tax liability generally lapse three and four years, respectively, after the date the tax returns are filed. However, income tax attributes that are carried forward, such as net operating loss carryforwards, may be challenged and adjusted by taxing authorities at any time prior to the expiration of the statute of limitations for the tax year in which they are utilized.

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