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INCOME TAXES
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES

 

11. INCOME TAXES
   

Income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for future tax consequences attributable to the temporary differences between the consolidated financial statements carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense.

 

The provision for income tax for the nine months ended September 30, 2023 and 2022 was $503,850 and $11,250, respectively. The provision for income tax for the three months ended September 30, 2023 and 2022 was $205,804 and $3,750, respectively. The increase in the year-over-year provision for income tax is the result of the Company’s valuation allowance on its deferred tax asset being partially released at December 31, 2022, resulting in the periodic change in the deferred asset for the periods subsequent to December 31, 2022 being recorded through the Company’s statement of operations during such periods. For the three and nine months ending September 30, 2022 the company’s deferred tax assets were fully offset by the valuation allowance, therefore there was only minimum state tax income expense recorded to the Company’s statement of operations during those periods.

 

The effective income tax rate for the nine months ended September 30, 2023 is 17.1%. The difference between the effective income tax rate for the nine months ended September 30, 2023 and the statutory income tax rate of 21.0% for the nine months ended September 30, 2023 is due primarily to the estimated R&D credit, the partial release of approximately $122,500 of the Company’s valuation allowance on its deferred tax asset recorded during the nine months ending September 30, 2023, state income taxes and permanent tax differences.