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INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | 8. INCOME TAXES The income tax expense attributable to the Company’s loss before income taxes consisted of the following:
(In Thousands) |  | Years Ended December 31,
|  | 2019 |  | 2018
Current Taxes |  |  |  |  |  |
Federal |  | $ | — |  | $ | —
State |  |  | — |  |  | —
|  |  | — |  |  | —
Deferred Taxes |  |  |  |  |  |
Federal |  |  | (1,016) |  |  | (587)
State |  |  | (743) |  |  | (651)
Increase in valuation allowance |  |  | 1,839 |  |  | 1,714
|  |  | 80 |  |  | 476
|  | $ | 80 |  | $ | 476
A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate is as follows:
(In Thousands) |  | Years Ended December 31,
|  | 2019 |  | 2018
Tax Rate Reconciliation |  | Percent |  | Amount |  | Percent |  | Amount
Federal income tax benefit at U.S. statutory rate |  | 21.0 | % | $ | (1,208) |  | 21.0 | % | $ | (817)
State taxes, net of federal benefit |  | 10.2 | % |  | (587) |  | 13.2 | % |  | (515)
Change in valuation allowance(1) |  | (32.0) | % |  | 1,839 |  | (44.0) | % |  | 1,714
Permanent differences |  | (3.7) | % |  | 215 |  | (6.3) | % |  | 247
Credits |  | 2.7 | % |  | (156) |  | 3.7 | % |  | (146)
Other |  | 0.4 | % |  | (23) |  | 0.2 | % |  | (7)
|  | (1.4) | % | $ | 80 |  | (12.2) | % | $ | 476
| (1) |  | For 2018, this change is presented with tax reform consideration.
The Company’s deferred tax assets (liabilities) consisted of the following:
(In Thousands) |  | December 31,
|  | 2019 |  | 2018
Deferred tax assets: |  |  |  |  |  |
Deferred compensation |  | $ | 591 |  | $ | 744
Intangible assets and amortization |  |  | 3,761 |  |  | 4,023
Net operating loss carry-forwards |  |  | 7,834 |  |  | 6,210
Accrued expenses |  |  | 853 |  |  | 975
Allowance for doubtful accounts |  |  | 32 |  |  | 22
Credits |  |  | 668 |  |  | 481
Common stock warrant liability |  |  | 402 |  |  | 69
Loan Fees |  |  | 129 |  |  | —
Interest valuation |  |  | 65 |  |  | 40
Interest limitation |  |  | 1,712 |  |  | 1,362
Lease liabilities |  |  | 4,345 |  |  | —
Charitable contribution carry-forward |  |  | 125 |  |  | 97
Valuation allowance |  |  | (10,964) |  |  | (9,125)
|  |  | 9,553 |  |  | 4,898
Deferred tax liabilities: |  |  |  |  |  |
Depreciation of fixed assets |  |  | (1,711) |  |  | (1,939)
Amortization of indefinite-lived intangibles |  |  | (2,803) |  |  | (2,232)
Prepaid expenses |  |  | (656) |  |  | (710)
Effect of state taxes on future federal returns |  |  | (785) |  |  | (629)
Right of use assets |  |  | (4,282) |  |  | —
Other |  |  | (28) |  |  | (20)
|  |  | (10,265) |  |  | (5,530)
|  | $ | (712) |  | $ | (632)
As of December 31, 2019, the Company had federal net operating loss carryforward totaling $22.1 million and state tax carryforwards of $56.2 million. Regarding the federal net operating loss carryforward, $14.0 million can be carried forward 20 years and will begin to expire in 2035; the remaining amount can be carried forward indefinitely. Regarding the state tax carryforwards, $55.9 million can be carried forward 20 years and will begin to expire in 2035; the remaining amount can be carried forward indefinitely. The Company also has general business credits of $0.7 million which begin to expire in 2035. In assessing the realizability of its deferred tax assets, the Company considered whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. 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. The Company considered the scheduled reversal of existing deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company evaluated both positive and negative evidence in determining the need for a valuation allowance. The Company continues to assess the realizability of deferred tax assets and concluded that it has not met the “more likely than not” threshold. As of December 31, 2019, the Company continues to provide a valuation allowance against its deferred tax assets that cannot be offset by existing deferred tax liabilities. In accordance with Accounting Standards Codification 740 (“ASC 740”), this assessment has taken into consideration the jurisdictions in which these deferred tax assets reside. The valuation allowance against deferred tax assets has no effect on the actual taxes paid or owed by the Company. As of December 31, 2019 and 2018, the Company had $0.7 million and $0.6 million, respectively, of deferred tax liabilities relating to goodwill and other indefinite-lived intangibles net of the maximum benefit allowed under the statute after netting with the indefinite-lived deferred tax assets. Subsequent to the Company’s filing of its annual report on Form 10-K for the period ended December 31, 2018, the Company corrected the impact of the 2017 Tax Act on deferred tax liabilities to reflect that indefinite-lived deferred tax liabilities of $1.6 million should be netted against certain deferred tax assets and net operating loss carryforwards for purposes of assessing the realizability of those assets. As a result, the Company has reduced the previously reported valuation allowance as of January 1, 2018, by $1.6 million with a resulting decrease in deferred tax liabilities and accumulated deficit at December 31, 2018 of $1.6 million. Management believes that the impact of this adjustment is immaterial to the previously issued Consolidated Financial Statements. The Company’s utilization of net operating loss (NOL) and the general business tax credit carryforwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986 (IRC), and similar state provisions’ due to ownership changes that may have occurred or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has completed an IRC Section 382/383 analysis to determine if there are any annual limitations on the utilization of NOLs and tax credit carryforwards, and has determined that it is more likely than not that there have not been any of such greater-than-50% ownership changes during the last five years that would prohibit the Company from utilizing all of its tax attributes. Management has made an annual analysis of its state and federal tax returns and concluded that the Company has no recordable liability, as of December 31, 2019 or 2018, for unrecognized tax benefits as a result of uncertain tax positions taken. As of December 31, 2019, the Company is subject to U.S. federal income tax examinations for the tax years 2016 through 2019. In addition, the Company is subject to state and local income tax examinations for various tax years in the taxing jurisdictions in which the Company operates.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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