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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
INCOME TAXES |
INCOME TAXES | 8. INCOME TAXES The income tax (benefit) expense attributable to the Company’s income (loss) before income taxes consisted of the following:
(In Thousands) |  | Years Ended December 31,
|  | 2020 |  | 2019
Current Taxes |  |  |  |  |  |
Federal |  | $ | — |  | $ | —
State |  |  | — |  |  | —
|  |  | — |  |  | —
Deferred Taxes |  |  |  |  |  |
Federal |  |  | 157 |  |  | (1,014)
State |  |  | (395) |  |  | (743)
Increase in valuation allowance |  |  | 146 |  |  | 1,837
|  |  | (92) |  |  | 80
|  | $ | (92) |  | $ | 80
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,
|  | 2020 |  | 2019
Tax Rate Reconciliation |  | Percent |  | Amount |  | Percent |  | Amount
Federal income tax expense (benefit) at U.S. statutory rate |  | 21.0 | % | $ | 12 |  | 21.0 | % | $ | (1,206)
State taxes, net of federal benefit |  | (567.3) | % |  | (312) |  | 10.2 | % |  | (587)
Change in valuation allowance |  | 265.5 | % |  | 146 |  | (32.0) | % |  | 1,836
Permanent differences |  | 221.8 | % |  | 122 |  | (3.7) | % |  | 215
Credits |  | (118.2) | % |  | (65) |  | 2.7 | % |  | (156)
Other |  | 9.9 | % |  | 5 |  | 0.4 | % |  | (22)
|  | (167.3) | % | $ | (92) |  | (1.4) | % | $ | 80
The Company’s deferred tax assets (liabilities) consisted of the following:
(In Thousands) |  | December 31,
|  | 2020 |  | 2019
Deferred tax assets: |  |  |  |  |  |
Deferred compensation |  | $ | 637 |  | $ | 591
Intangible assets and amortization |  |  | 3,293 |  |  | 3,761
Net operating loss carry-forwards |  |  | 7,486 |  |  | 7,834
Accrued expenses |  |  | 984 |  |  | 853
Allowance for doubtful accounts |  |  | 40 |  |  | 32
Credits |  |  | 733 |  |  | 668
Common stock warrant liability |  |  | 558 |  |  | 402
Loan Fees |  |  | 157 |  |  | 129
Interest valuation |  |  | 64 |  |  | 65
Interest limitation |  |  | — |  |  | 1,712
Lease liabilities |  |  | 4,045 |  |  | 4,345
Charitable contribution carry-forward |  |  | 137 |  |  | 125
Deferred revenues |  |  | 1,408 |  |  | —
Accrued Social Security |  |  | 291 |  |  | —
Valuation allowance |  |  | (11,108) |  |  | (10,962)
|  |  | 8,725 |  |  | 9,555
Deferred tax liabilities: |  |  |  |  |  |
Depreciation of fixed assets |  |  | (1,054) |  |  | (1,711)
Amortization of indefinite-lived intangibles |  |  | (3,022) |  |  | (2,803)
Prepaid expenses |  |  | (571) |  |  | (656)
Effect of state taxes on future federal returns |  |  | (868) |  |  | (785)
Right of use assets |  |  | (3,856) |  |  | (4,282)
Other |  |  | 26 |  |  | (30)
|  |  | (9,345) |  |  | (10,267)
|  | $ | (620) |  | $ | (712)
As of December 31, 2020, the Company had federal net operating loss carryforwards totaling $20.6 million and state tax carryforwards of $62.1 million. Regarding the federal net operating loss carryforward, $6.9 million can be carried forward 20 years and will begin to expire in 2037; the remaining amount can be carried forward indefinitely. Regarding the state tax carryforwards, $60.4 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. On March 27, 2020 Congress enacted into law, the Coronavirus Aid, Relief, and Economic Security Act, also known as the “CARES Act.” As part of the Company’s analysis, it has reviewed all material pieces of the new legislation in order to determine applicability to them. Based on the Company’s review, the law changes related to the increase of the 163(j) limitation have been considered in the calculation of the net tax benefit, and other items were determined to not be material to the Company. 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, 2020, 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, 2020 and 2019, the Company had $0.6 million and $0.7 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. 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 a preliminary Section 382 analysis as of the date of this report and determined it is more likely than not that there have not been any of such greater-than-50% ownership changes within a three-year period 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, 2020 or 2019, for unrecognized tax benefits as a result of uncertain tax positions taken. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is generally not subject to examination for periods prior to December 31, 2017. However, as the Company utilizes its net operating losses, prior periods can be subject to examination.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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