XML 29 R15.htm IDEA: XBRL DOCUMENT v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 9—INCOME TAXES

 

(a) Composition of loss before income taxes is as follows (in thousands):

 

 

  

Year ended

December 31,

 
   2022   2021 
Domestic  $(631)  $(13)

 

Income tax expense consists of the following (in thousands):

 

   

Year ended

December 31,

  
    2022     2021  
Current:            
Federal   $ —     $ —  
State and local     —       —  
Current income tax expense     —       —  
Deferred:                
Federal     —       —  
State and local     —       —  
Deferred income tax expense     —       —  
Total income tax expense   $ —     $ —  

 

 

(b) Effective Income Tax Rates

 

Set forth below is a reconciliation between the federal tax rate and the Company’s effective income tax rates with respect to continuing operations:

 

    Year ended December 31,  
    2022     2021  
Statutory Federal rates     21 %     21 %
Increase (decrease) in income tax rate resulting from:                
Other, net (primarily permanent differences)     (3 )%     (121 )%
Valuation allowance     (18 )%     100 %
Effective income tax rates     — %     (— )%

 

(c) Analysis of Deferred Tax Assets and (Liabilities) (in thousands):

 

   2022   2021 
   As of December 31, 
   2022   2021 
Deferred tax assets (liabilities) consist of the following:        
Employee benefits and deferred compensation  $49   $1,064 
Other temporary differences   378    630 

Section 174 Expenditures

   

205

    — 
Net operating loss and capital loss carryforwards   16,021    15,904 
Deferred tax assets, gross   16,653    17,598 
Valuation allowance   (16,653)   (17,598)
Net deferred tax assets  $—   $— 

 

Valuation allowances relate principally to net operating loss carryforwards related to the Company’s consolidated tax losses as well as state tax losses related the Company’s OmniMetrix subsidiary and book-tax differences related asset impairments and stock compensation expense of the Company. During the year ended December 31, 2022, the gross deferred tax asset and the valuation allowance decreased by $945,000.

 

(d) Summary of Tax Loss Carryforwards

 

As of December 31, 2022, the Company had various operating loss carryforwards expiring as follows (in thousands):

 

Expiration  Federal   Capital Loss   State 
2023  $—   $556   $— 
2025 – 2031*   2,580    —    — 
2032 – 2037   63,180    —    14,898 
Unlimited   5,176    —    1,896 
Total  $70,936   $556   $16,794 

 

*

The utilization of a portion of these net operating loss carryforwards is limited due to limits on utilizing net operating loss carryforwards under Internal Revenue Service regulations for separate return limitation years.

 

Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred. R&E activities are broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2022, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its R&E expenses. The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future.

 

 

As a holding company without other business activity in Delaware, the Company is exempt from Delaware state income tax. Thus, the Company’s statutory income tax rate on domestic earnings is the federal rate of 21%.