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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9. INCOME TAXES The Company's components of income tax (benefit) expense consisted of the following.
|  | Years Ended December 31, |
Income Tax Provision |  | 2023 |  |  | 2022 |  |  | 2021 |
Federal |  | $ | (80 | ) |  | $ | - |  |  | $ | - |
Foreign |  |  | 28 |  |  |  | 99 |  |  |  | 133 |
State and local |  |  | 117 |  |  |  | 233 |  |  |  | - |
Current provision |  |  | 65 |  |  |  | 332 |  |  |  | 133 |
Federal |  |  | (173 | ) |  |  | (4,390 | ) |  |  | - |
Foreign |  |  | - |  |  |  | (3 | ) |  |  | (18 | )
State and local |  |  | - |  |  |  | (1,327 | ) |  |  | - |
Deferred (benefit) provision |  |  | (173 | ) |  |  | (5,720 | ) |  |  | (18 | )
Income tax (benefit) expense |  | $ | (108 | ) |  | $ | (5,388 | ) |  | $ | 115 |
The following table presents a reconciliation of the Company’s effective tax rates for the periods indicated.
|  | Years Ended December 31, |
Rate Reconciliation |  | 2023 |  |  | 2022 |  |  | 2021 |
U.S. statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State rate net of fed benefit |  |  | 2.7 | % |  |  | 3.4 | % |  |  | 8.1 | %
Change in valuation allowance |  |  | (28.3 | %) |  |  | (18.2 | %) |  |  | (33.8 | %)
SPAC transaction costs |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 3.7 | %
Stock compensation |  |  | 0.0 | % |  |  | 2.0 | % |  |  | 0.0 | %
Permanent adjustments |  |  | (1.3 | %) |  |  | (0.2 | %) |  |  | (0.6 | %)
Deferred Adjustments |  |  | 4.4 | % |  |  | (2.8 | %) |  |  | 0.0 | %
Other |  |  | 1.7 | % |  |  | 0.1 | % |  |  | 1.4 | %
Effective Tax Rate |  |  | 0.2 | % |  |  | 5.3 | % |  |  | (0.2 | %)
Tax effects of temporary differences can give rise to significant portions of deferred tax assets and deferred tax liabilities. The components of deferred income tax assets and liabilities are as follows.
Tax Effects of Temporary Differences |  | As of December 31, |
|  | 2023 |  |  | 2022 |
Attributes |  |  |  |  |  |
Deferred tax asset |  |  |  |  |  |
Federal NOLs |  | $ | 42,166 |  |  | $ | 38,326 |
State NOLs |  |  | 10,518 |  |  |  | 9,782 |
Deferred revenue |  |  | 14,551 |  |  |  | 14,021 |
Capitalized R&D |  |  | 9,857 |  |  |  | 7,973 |
Other deferred tax assets |  |  | 7,968 |  |  |  | 9,187 |
Total deferred tax assets |  |  | 85,060 |  |  |  | 79,289 |
Less: Valuation allowance |  |  | (71,490 | ) |  |  | (61,683 | )
Total net deferred tax asset |  | $ | 13,570 |  |  | $ | 17,606 |
IRC 481(a) Adjustment |  |  | (714 | ) |  |  | (324 | )
Deferred costs of revenue |  |  | (5,733 | ) |  |  | (8,960 | )
Intangibles |  |  | (6,208 | ) |  |  | (7,408 | )
Other deferred tax liabilities |  |  | (971 | ) |  |  | (1,142 | )
Total deferred tax liabilities |  |  | (13,626 | ) |  |  | (17,834 | )
Net deferred tax liability |  | $ | (56 | ) |  | $ | (228 | )
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. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. As a result of historical cumulative losses, Management determined that, based on all available evidence, there was substantial uncertainty as to whether it will recover recorded net federal and state deferred taxes in future periods. Therefore, a valuation allowance equal to the amount of the net federal and state deferred tax assets was provided at December 31, 2023 and 2022. The net valuation allowance increased by $9,807 from $61,683 to $71,490 in 2023. As of December 31, 2023, the Company had U.S. federal net operating losses of $3.7 million that begin to expire in 2032 and $200.9 million which will be carried forward indefinitely. As of December 31, 2023, the Company had $193.4 million of state net operating loss carryforwards that expire on varying dates. The Company also has $0.1 million of R&D credits available that expire in 2039. The Tax Reform Act of 1986 (the "Act") provides for a limitation of the annual use of the net operating loss carryforwards following certain ownership changes (as defined by the Act and codified under IRC 382) that could limit the company's ability to utilize these carryforwards. Should the limitation apply, the related net operating loss and Section 163(j) deferred tax assets and the valuation allowance would be reduced by the same amount. The Company has not performed a Section 382 analysis. The Company recorded net deferred tax liabilities during the year ended December 31, 2022, due to the acquisition of SightPlan. Those net deferred tax liabilities provided a source of taxable income to offset future tax deductions from deferred tax assets, and as a result, management reduced the valuation allowance by $5,902 during the year ended December 31, 2022 (Note 13). The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the federal, state, and international taxes offset by a change in the valuation allowance. We have established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized in future periods if we report taxable income. We believe that we have established an adequate allowance for our uncertain tax positions, although we can provide no assurance that the final outcome of these matters will not be materially different. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. On August 16, 2022, the Inflation Reduction Act ("IRA") (H.R. 5376) was signed into law in the United States. The IRA implements a 15% minimum tax on financial statement income of certain large corporations and a 1% excise tax on stock repurchases, among other things. While the Company continues to evaluate the IRA, it does not believe it will have a material effect on its audited financial statements, including on its effective tax rate or on its liquidity. The Company files income tax returns in the U.S. federal and various state jurisdictions, as well as in Croatia and India. The Company is subject to U.S. federal and state income tax examinations by authorities for all tax years beginning in 2018, due to the accumulated net operating losses that are carried forward. Similarly, SightPlan is subject to U.S. federal and state income tax examination by authorities for all tax years beginning in 2012. The Company is subject to Croatian income tax examinations for all tax years beginning in 2018. The Company is subject to Indian income tax examinations for all tax years beginning in 2021. The Company evaluates uncertain tax positions which requires significant judgments and estimates regarding the recoverability of deferred tax assets, the likelihood of the outcome of examinations of tax positions that may or may not be currently under review and potential scenarios involving settlements of such matters. A summary of changes in the Company's gross unrecognized tax benefits for the years ended December 31, 2023 and 2022 is as follows (in thousands):
|  | As of December 31, |
|  | 2023 |  |  | 2022 |
Unrecognized tax benefits - January 1 |  | $ | 23,252 |  |  | $ | 8,757 |
Gross increases - tax positions in prior period |  |  | - |  |  |  | - |
Gross decreases - tax positions in prior period |  |  | (21,650 | ) |  |  | - |
Gross increases - tax positions in current period |  |  | 2,215 |  |  |  | 14,495 |
Settlement |  |  | - |  |  |  | - |
Lapse of statute of limitations |  |  | - |  |  |  | - |
Unrecognized tax benefits - December 31 |  | $ | 3,817 |  |  | $ | 23,252 |
Unrecognized tax benefits - December 31 (tax-effected) |  | $ | 1,172 |  |  | $ | 6,658 |
The total balance of unrecognized tax benefits as of December 31, 2023 would not impact the effective tax rate if recognized, as the Company is in a full valuation allowance and the unrecognized tax benefit is a deferred tax asset. The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefit as a component of income tax expense. The Company has no t accrued penalties and interest as of December 31, 2023. The Company expects the unrecognized tax benefits to reverse in full within the next 12 months.

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