XML 41 R26.htm IDEA: XBRL DOCUMENT v3.24.1.u1
Income Tax
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Tax

Note 20. Income Tax

 

Provision (benefit) for income taxes is as follows:

 

          
   December 31, 
   2023   2022 
Current:        
State  $4,380   $800 
Total current   4,380    800 
Deferred:          
Federal   59,440    (3,082,578)
State   28,883    (1,354,913)
Total Deferred   88,323    (4,437,491)
           
Net provision  $92,703   $(4,436,691)

 

The differences between the expected income tax provision (benefit) based on the statutory Federal United States income tax rates and the Company’s effective tax rates are summarized below:

 

          
   December 31,
2023		 
Tax Computed At The Federal Statutory Rate  $(2,235,644)   21.00%
State Tax, Net Of Fed Tax Benefit   (353,133)   3.32%
Nondeductible Expenses   1,008,500    -9.47%
Flowthrough Entity not Subject to Tax   (6,820)   0.06%
Foreign Corporation - Minority Interest   6,560    -0.06%
Non-controlling Interest   (20,272)   0.19%
Valuation Allowance   186,011   -1.75%
Rate Change   -    0.00%
R&D Credits   1,891    -0.02%
Other/Prior Year True-Up   1,505,609    -14.14%
Benefit from income taxes  $92,703    -0.87%

 

   December 31,
2022		 
Tax Computed At The Federal Statutory Rate  $(4,985,329)   21.00%
State Tax, Net Of Fed Tax Benefit   (1,312,478)   5.53%
Nondeductible Expenses   515,476    -2.17%
Flowthrough Entity not Subject to Tax   422,216    -1.78%
Foreign Corporation - Minority Interest   6,201    -0.03%
Other   92,854    -0.39%
Valuation Allowance   824,368    -3.47%
Benefit for income taxes  $(4,436,691)   18.69%

 

Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

     
   December 31,
2023		 
Deferred Tax Assets:     
Net Operating Losses  $4,574,080 
Stock Compensation   234,271 
Reserves   935,313 
Leases Liability   436,111 
Inventory   51,376 
Fixed Assets   392,902 
Accrued Liabilities   626,488 
Other   59,991 
Total Deferred Tax Assets   7,310,532 
      
Deferred Tax Liabilities:     
ROU Asset   (410,703)
Intangibles   (2,262,158)
Total Deferred Tax Liabilities   (2,672,862)
Less: Valuation Allowance   (4,725,993)
Net deferred tax liability:  $(88,323)

 

      
   December 31,
2022		 
Reserves  $572,650 
Fixed Assets   (1,747,971)
Leases   (3,312)
Intangibles   (2,302,728)
Net Operating Losses   4,253,740 
Impairment Losses   3,117,046 
Stock Options   (129,350)
Accruals   1,011,016 
Other   (231,111)
Net Deferred Asset   4,539,981 
Less: Valuation Allowance   (4,539,981)
Total deferred tax liability:  $- 

 

In determining the possible future realization of deferred tax assets, the Company has considered future taxable income from the following sources: (a) reversal of taxable temporary differences; and (b) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire.

 

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Based on our review of the deferred tax assets the Company has concluded that a valuation allowance is necessary on the net operating loss balance, as realization of this asset does not meet the more likely than not threshold.

 

As of December 31, 2023 and 2022, the Company had estimated net operating losses for federal and state purposes of $18.1 and $23.7 million, respectively. Federal net operating losses of $6.5 million will expire in 2037. State net operating loss carryovers of $8.5M will start to expire in 2037. Other federal and state net operating loss carryovers do not have an expiration date.

 

We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.

 

For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize potential interest and penalties related to unrecognized tax benefits in the general and administrative expense in the statement of operations of the Company.

 

The Company is in the process of filing back income tax returns from 2010 through the current year and subject to IRS examination for these years. The Company has booked a reserve for potential penalties associated with non-filing of certain foreign information reports related to its subsidiary in the Middle East. Penalties and interest have been reported in the general and administrative section of the statement of operations. The reserve balance at December 31, 2023 and 2022 was $658,167 and $517,000, respectively. The Company does not expect this reserve to reverse within the next 12 months, as they will apply for a penalty waiver when the tax returns are ultimately filed. Due to the non-filing of income tax returns, statutes of limitations on the potential examination of those income tax periods will continue to run until the returns are filed, at which time the statutes will begin. The Company expects to file all past due income tax returns within the next 12 months.