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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes  
Income Taxes

6. Income Taxes:

 

Consolidated loss before income taxes includes losses from foreign operations of $37,000 and $136,000 in 2022 and 2021, respectively. 

 

The net deferred tax assets/liabilities in the December 31, 2022 and 2021 consolidated balance sheets include the following components:

 

(in thousands)

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

Loss carryovers

 

$11,652

 

 

$12,148

 

Investment in Mineral Property

 

 

1,669

 

 

 

1,669

 

Capitalized Exploration Costs

 

 

778

 

 

 

418

 

Stock option compensation expense

 

 

152

 

 

 

309

 

Unrealized loss on derivative securities

 

 

121

 

 

 

98

 

Other

 

 

65

 

 

 

91

 

Unrealized loss on short-term investments

 

 

20

 

 

 

-

 

Lease Liability

 

 

9

 

 

 

18

 

Valuation allowance

 

 

(14,309)

 

 

(14,561)

Total deferred tax assets

 

 

157

 

 

 

190

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Unrealized gains on marketable equity securities

 

 

149

 

 

 

173

 

Lease Asset

 

 

8

 

 

 

17

 

Total deferred tax liabilities

 

 

157

 

 

 

190

 

Net deferred tax liabilities

 

$-

 

 

$-

 

 

A reconciliation of expected federal income taxes on income (loss) from continuing operations at statutory rates, with the expense for income taxes is as follows:

 

(in thousands)

 

2022

 

 

2021

 

Expected income tax benefit

 

$(825)

 

$(497)

Equity based compensation

 

 

238

 

 

 

4

 

Foreign tax rate differences

 

 

(3)

 

 

(12)

State income tax

 

 

(166)

 

 

(98)

Expiration of Capital Loss and Foreign Tax Credit Carryovers

 

 

18

 

 

 

1,385

 

Adjustment to Deferred Taxes

 

 

11

 

 

 

(82)

Foreign currency exchange

 

 

968

 

 

 

(32)

Change in valuation allowance

 

 

(251)

 

 

(489)

Change in Tax Rates

 

 

13

 

 

 

(194)

Permanent differences and other

 

 

(3)

 

 

15

 

Income tax (benefit) expense

 

$-

 

 

$-

 

 

During 2022, the valuation allowance increased primarily due to the addition of deferred tax assets related to current year net operating losses. During 2021, the valuation allowance decreased primarily due to the expiration of capital loss carryovers.

 

At December 31, 2022, Solitario has unused US Federal net operating loss carryovers of $22,905,000 and unused US State net operating loss carryovers of $24,811,000 which begin expiring in 2027. As a result of the ownership change of Zazu Metals (Alaska) Corp, utilization of some of these federal and state losses will be limited due to the annual limitation provided by Section 382 of the Internal Revenue Code. Solitario has unused capital loss carryovers of $380,000 for US Federal and US State purposes which begin expiring in 2025. Solitario has Canadian loss carryforwards of $9,294,000 which begin expiring in 2027. Other foreign loss carryforwards for which Solitario has provided a full valuation allowance related to Solitario’s exploration activities in Peru. The Peru losses do not expire.

Solitario adopted ASC 740, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 requires that Solitario recognize in its consolidated financial statements only those tax positions that are “more-likely-than-not” of being sustained as of the adoption date, based on the technical merits of the position. As a result of the implementation of ASC 740, Solitario performed a comprehensive review of its material tax positions in accordance with recognition and measurement standards established by ASC 740. The provisions of ASC 740 had no effect on Solitario’s financial position, cash flows or results of operations at December 31, 2022 or December 31, 2021, or for the years then ended as Solitario had no unrecognized tax benefits.

 

Solitario and its subsidiaries are subject to the following material taxing jurisdictions: United States Federal, State of Colorado, State of Alaska, State of South Dakota, Canada and Peru. Solitario’s United States federal, Canada and State of Alaska returns for years 2019 and forward and Solitario’s Peru and State of Colorado returns for tax years 2018 and forward are subject to examination. Solitario’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. Solitario has no accrued interest or penalties related to uncertain tax positions as of December 31, 2022, or December 31, 2021 or for the years then ended.