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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes Provision (benefit) for (from) income taxes consists of the following: Current income tax expense, which represents the amount of federal tax and state and local tax currently payable, including interest and penalties and amounts accrued for unrecognized tax benefits, if any, and; Deferred income tax expense (benefit), which represents the net change in the deferred tax assets balance during the year, including any change in the valuation allowance for the deferred tax assets, if any. For the year ended December 31, 2019, there was no change in the valuation allowance for the deferred tax assets. For the year ended December 31, 2018, based on the more likely than not criteria, the Company reversed 100% of the valuation allowance on the deferred tax assets. The following table presents the components of provision (benefit) for (from) income taxes for the periods indicated:
|  | Year Ending December 31, |
|  | 2019 |  |  | 2018 |
Current income tax expense |  |  |  |  |  |
Federal |  | $ | 271,000 |  |  | $ | 948,000 |
State and local |  |  | 252,000 |  |  |  | 26,000 |
Total Current income tax expense |  |  | 523,000 |  |  |  | 974,000 |
Deferred income tax expense (benefit) |  |  |  |  |  |  |  |
Federal |  | $ | 312,000 |  |  | $ | (3,248,000 | )
State and local |  |  | 283,000 |  |  |  | (2,328,000 | )
Total Deferred income tax expense (benefit) |  |  | 595,000 |  |  |  | (5,576,000 | )
Total Provision (benefit) for (from) income taxes |  | $ | 1,118,000 |  |  | $ | (4,602,000 | )
Effective Income Tax Rate Reconciliation A reconciliation of the U.S. federal statutory income tax rate to the effective tax rate applicable to income before provision for income taxes is as follows for the periods indicated:
|  | Year Ending December 31, |
|  | 2019 |  |  | 2018 |
Federal statutory income tax rate |  |  | 21.0 | % |  |  | 21.0 | %
Net effect of |  |  |  |  |  |  |  |
Non-deductible expenses |  |  | 0.2 | % |  |  | 0.2 | %
Depreciation |  |  | — |  |  |  | (0.9 | %)
Tax amortization of intangible assets |  |  | (1.2 | %) |  |  | (3.8 | %)
Other temporary differences |  |  | — |  |  |  | (1.3 | %)
Net operating loss |  |  | — |  |  |  | (2.6 | %)
Increase due to state and local taxes, net of U.S. federal income tax effects |  |  | 4.0 | % |  |  | 0.6 | %
Lease liabilities |  |  | (0.3 | %) |  |  | — |
Total Current effective income tax rate |  |  | 23.7 | % |  |  | 13.2 | %
Reversal of deferred tax assets valuation allowance |  |  | — |  |  |  | (75.8 | %)
Total Effective income tax rate |  |  | 23.7 | % |  |  | (62.6 | %)
Tax Cuts and Jobs Act The statutory federal income tax rate in effect of 21% per the Tax Cuts and Jobs Act as of January 1, 2018 was utilized to calculate the income tax provision for the years ended December 31, 2019 and 2018 as well as the deferred tax assets as of December 31, 2019 and 2018. As such, the change in federal income tax rates affected the valuation of the gross deferred tax assets. Net Operating Losses The Company’s pre-tax federal and state and local NOLs for tax purposes as of December 31, 2019 were approximately $15.2 million and $23.6 million, respectively, which expire by 2036. The Company’s pre-tax federal and state and local NOLs for tax purposes as of December 31, 2018 were approximately $16.1 million and $27.1 million, respectively. The federal NOL carryforwards have been reduced by the impact of annual limitations of approximately $895,000 per year as described in the Internal Revenue Code Section 382 that arose as a result of an ownership change. Deferred tax assets are reported net of NOLs that have expired or are not expected to be utilized in the future. Income Tax Examinations The Company is subject to federal, state, and local tax examinations for a period typically between three and four years. The Company is currently under tax examination by the State of New York for tax years 2012 through 2014. As of December 31, 2019, the State of New York has not proposed any adjustment to the Company’s tax position. Except for the examination described above, the Company is not under any other tax examinations. Unrecognized Tax Benefits The Company applied the “more-likely-than not” recognition threshold to all tax positions taken or expected to be taken in a tax return which resulted in no unrecognized tax benefits reflected in the consolidated financial statements as of December 31, 2019 and 2018. The Company classifies interest and penalties that would accrue according to the provisions of relevant tax law as income taxes. Deferred Tax Assets The evaluation of the recoverability of the deferred tax assets and the need for a valuation allowance requires the Company to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. The Company’s framework for assessing the recoverability of the deferred tax assets requires a determination of whether or not there is sufficient taxable income of appropriate character within the carryback, carryforward period available under tax law. The Company considers of all available evidence, including:
• | Taxable income in carryback years if carryback is permitted
• | Future reversals of existing taxable temporary differences
• | Projected future taxable income exclusive of reversing temporary difference
In assessing projected future taxable income, the Company considers all evidence, including:
• | The nature, frequency, and amount of cumulative financial reporting income and losses in recent years
• | The sustainability of recent operating profitability of the Company
• | The predictability of future operating profitability of the character necessary to realize the net deferred tax assets
• | The carryforward period for the NOLs, including the effect of reversing taxable temporary differences
• | Prudent and feasible actions and tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax assets
In performing the assessment of the recoverability of the deferred tax assets under this framework, the Company also considers tax laws governing the utilization of the NOL in each applicable jurisdiction. For the year ended December 31, 2018, the Company achieved key financial milestones such as having three years of cumulative taxable income and generating four consecutive quarters of pre-tax profitability generally greater than $1 million which led to a re-evaluation of the deferred tax assets. As of December 31, 2018, the Company determined that sufficient positive evidence existed to conclude that it is more likely than not that deferred taxes of $5,576,000 were realizable, and therefore, a valuation allowance was not necessary for the deferred tax assets. As of December 31, 2019, the Company determined that sufficient positive evidence existed to conclude that it is more likely than not that its deferred tax assets were fully realizable, and therefore, a valuation allowance was not necessary. Below is a breakout of the deferred tax assets, net of valuation allowance as of the periods indicated.
|  | As of December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 5,322,000 |  |  | $ | 5,811,000 |
Total Deferred tax assets |  |  | 5,322,000 |  |  |  | 5,811,000 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Furniture, equipment and leasehold improvements |  | $ | (430,000 | ) |  | $ | (193,000 | )
Lease liabilities |  |  | 89,000 |  |  |  | — |
Contribution carryover |  |  | — |  |  |  | — |
Intangible assets |  |  | — |  |  |  | — |
Other reconciling items |  |  | — |  |  |  | (42,000 | )
Total Deferred tax liabilities |  |  | (341,000 | ) |  |  | (235,000 | )
Total Deferred tax assets |  | $ | 4,981,000 |  |  | $ | 5,576,000 |
Weeden Prime Prior to its acquisition by the Company effective December 1, 2019, Weeden Prime was a multi-member limited liability company, filed a U.S. Partnership return, and was not subject to Federal or state taxes. The Internal Revenue Code ("IRC") provides that any income or loss, for either a single member or multi-member limited liability company, is passed through to the members for Federal and state income tax purposes. Weeden Prime was subject to the New York City Unincorporated Business Tax ("UBT"). Effective upon the acquisition of Weeden Prime by the Company, Weeden Prime became aligned with the Company’s tax structure and was obligated to pay the Company for income taxes owed. The results of Weeden Prime’s operations for the 31-day period ending December 31, 2019 are included in the consolidated federal income tax return of the Company and the state and local income tax return of the Company, as appropriate. Federal income taxes are calculated as if the companies filed on a separate return basis, and the amount of current tax or benefit calculated is either remitted to or received from Company. The amount of current and deferred taxes payable or refundable is recognized as of the date of the consolidated financial statements, utilizing currently enacted tax laws and rates. During the 31-day period ending December 31, 2019, income before income taxes was $285,000 for Weeden Prime. As such, there was $82,000 of income tax expense, of which $57,000 was federal income tax and $25,000 was state and local income tax. The income tax amount was recorded by the Company as an income tax expense and corresponding liability of income taxes payable within the statement of income and statement of financial condition, respectively. Prior to the acquisition of Weeden Prime by the Company, Weeden Prime had net operating loss carryforwards which expired starting in 2033, and had a full valuation allowance on its deferred tax assets. As of December 31, 2019, due to the change of ownership, management determined that all prior NOLs will not be recovered by Weeden Prime after its acquisition by the Company.

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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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