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14. Income Tax
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Tax

The Company files a consolidated federal income tax return including all its domestic subsidiaries. State tax returns are filed on a consolidated, combined or separate basis depending on the applicable laws relating to the Company and its subsidiaries.

 

Components of tax expense (benefit) consist of the following:

 

    2020     2019  
Current:            
Federal   $  -     $  -  
State and Local     8       8  
Foreign     -       -  
      8       8  
                 
Deferred:                
Federal     -       -  
State and Local     -       -  
Foreign     (984 )     1,123  
Income tax expense (benefit)   $  (976 )   $  1,131  

 

The deferred tax liability resulted as India subsidiary had income for the year ended December 31, 2019. U.S. loss and foreign income (loss) before income taxes are as follows:

 

    Year Ended December 31,  
    2020     2019  
             
United States   $  (37,496 )   $  (43,419 )
Foreign     (139 )     5,073  
Pretax loss   $  (37,635 )   $  (38,346 )

 

Income tax benefit differs from the amounts computed by applying the statutory U.S. federal income tax rate (21%) to loss before income taxes as a result of the following:

 

    Year Ended December 31,  
    2020     2019  
Income tax benefit at the federal statutory rate   $  (7,903 )   $  (8,052 )
State tax benefit and change in effective rates     (4,066 )     (48 )
Foreign tax differential and changed in enacted rates     (185 )     900  
Stock-based compensation     166       133  
Interest Expense     1,315       478  
GILTI Inclusion     -       849  
Prior year true-ups     (770 )     1,493  
Other     258       166  
Credits     (1,388 )     -  
Valuation Allowance     11,597       5,212  
Income Tax expense (benefit)   $  (976 )   $  1,131  
Effective Tax Rate     2.59 %     -2.95 %

 

The Company recorded an approximate $0.1 million and $1.1 million deferred tax liability as of December 31, 2020 and 2019 which is recorded in other long term liabilities in the Consolidated Balance Sheets.

 

The components of the net deferred tax asset or (liability) are as follows:

 

Deferred Tax Assets & (Liabilities)   Year Ended December 31,  
    2020     2019  
             
Deferred Tax Assets:            
Organizational Costs, Start-up and Intangible Assets   $  6,325     $  3,997  
Stock Based Compensation     397       328  
NOLs, Unabsorbed Depreciation and R&D Credits     56,530       53,400  
Interest expense carryover     13,389       9,131  
Ethanol Credits     1,500       1,500  
Carbon Oxide Sequestration Credit     1,387       -  
Accrued expenses      2,813       2,532  
Operating lease liability      1,232       152  
Other     486       140  
Total Deferred Tax Assets     84,059       71,180  
Valuation Allowance     (71,145 )     (59,547 )
Net Deferred Tax Assets     12,914       11,633  
                 
Deferred Tax Liabilities:                
Right of Use Asset     (1,362 )     (147 )
Property, Plant & Equipment     (11,600 )     (12,554 )
Other      (91 )     (55 ) 
Total Deferred Tax Liabilities     (13,053 )     (12,756 )
Net Deferred Tax Liabilities   $  (139 )   $  (1,123 )

 

The Company does not provide for U.S. income taxes for any undistributed earnings of the Company’s foreign subsidiaries, as the Company considers these permanently reinvested in the operations of such subsidiaries and have a cumulative foreign loss.  At December 31, 2020 and 2019, these undistributed losses totaled $8.0 million, and $7.0 million, respectively. If any earnings were distributed, some countries may impose withholding taxes.  Following the passage of the 2017 U.S. Tax Cuts and Jobs Act, the U.S. imposed a transition tax on the accumulated earnings of the Company’s foreign subsidiaries through December 31, 2017.  Since the foreign subsidiaries have a cumulative loss, there was no U.S. federal tax impact related to the transition tax.  Not all future earnings of the foreign subsidiaries will be subject to U.S. income taxes as the U.S. has moved to a modified territorial system for tax years beginning after December 31, 2017.  Finally, due to the Company’s overall deficit in foreign cumulative earnings and its U.S. loss position, the Company does not believe a material net unrecognized U.S. deferred tax liability exists.

 

In 2018 and 2019, the U.S. imposed a tax on Global Intangible Low-Taxed Income “GILTI” which imposes a tax on foreign income in excess of a deemed return on tangible assets of a foreign corporation. The Company has evaluated this provision using period cost method and recognized an inclusion of $4.0 million and none of income for the years ended December 31, 2019 and 2020, respectively, in relation to GILTI. Due to the Company’s overall deficit in foreign cumulative earnings and its U.S. loss position, the Company does not believe a material net unrecognized U.S. deferred tax liability exists.

 

We assessed the 2020 Tax Acts, there is no material impact to the Company from these tax law changes.

 

ASC 740 Income Taxes provides that the tax effects from an uncertain tax position can be recognized in the Company’s financial statements only if the position is more-likely-than-not of being sustained on audit, based on the technical merits of the position. Tax positions that meet the recognition threshold are reported at the largest amount that is more-likely-than-not to be realized. This determination requires a high degree of judgment and estimation. The Company periodically analyzes and adjusts amounts recorded for the Company’s uncertain tax positions as events occur to warrant adjustment when the statutory period for assessing tax on a given tax return, period expire or if tax authorities provide administrative guidance or a decision is rendered in the courts. The Company does not reasonably expect the total amount of uncertain tax positions to significantly increase or decrease within the next 12 months. As of December 31, 2020, the Company’s uncertain tax positions were not significant.

 

We conduct business globally and, as a result, one or more of the Company’s subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as India, Mauritius, and the United States. The Company files a U.S. federal income tax return and tax returns in three U.S. states, as well as in two foreign jurisdictions. Penalties and interest are classified as general and administrative expenses.

 

The following describes the open tax years, by major tax jurisdiction, as of December 31, 2020:

 

United States — Federal   2007 – present  
United States — State   2008 – present  
India   2013 – present  
Mauritius   2006 – present  

 

As of December 31, 2020, the Company had U.S. federal NOL carryforwards of approximately $194.0 million and state NOL carryforwards of approximately $224.0 million. The Company also has approximately $1.5 million of alcohol and cellulosic biofuel credit carryforwards with 20 year carryforward period and they expire in 2031. The Company also has approximately $1.4 million of Carbon Oxide Sequestration Credit carryforwards with a 20 year carryforward period and they expire in 2040. As of December 31, 2020, the federal NOL’s of $194.0 million and the state NOL’s of $224.0 million expire on various dates between 2027 and 2040. Due to the 2017 U.S. Tax Reform, U.S. federal NOLs post 2017 in the amount of $5.4 million have no expiration date. Under the current tax law, net operating loss and credit carryforwards available to offset future income in any given year may be limited by U.S. or India statute regarding net operating loss carryforwards and timing of expirations or upon the occurrence of certain events, including significant changes in ownership interests. The Company’s India subsidiary has unabsorbed depreciation loss carryforwards as of December 31, 2020 of approximately $3.7 million in U.S. dollars, which do not expire.