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Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

10. INCOME TAXES:

Reconciliation of the benefit for income taxes from continuing operations recorded in the consolidated statements of operations with the amounts computed at the statutory federal tax rates for each year:

		2019				2018

Federal tax expense (benefit) at statutory rate		$	167,000			$	(2,080,000	)
State tax expense (benefit), net of federal tax			65,000				(207,000	)
Permanent differences			92,000				66,000
Change in statutory rate			(197,000	)			7,000
Change in valuation allowance			(10,000	)			2,545,000
Other			99,000				(331,000
Expense for income taxes		$	216,000			$	-

Tax affected components of deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018 were as follows:

		2019				2018
Deferred tax assets (liabilities):
Equity based compensation		$	240,000			$	177,000
Allowance for doubtful accounts			2,478,000				870,000
Fixed assets			(6,476,000	)			(7,034,000	)
Lease impairment			553,000				507,000
Deferred rent			-				1,000
Lease Liability			520,000				-
Right of use asset			(466,000	)
Accrued expenses			-				12,000
Interest expense carryforward			-				88,000
Tax credit carryforward			32,000				32,000
Federal loss carry-forwards			14,047,000				15,823,000
State loss carry forward			353,000				816,000

Gross deferred tax assets			11,281,000				11,292,000
Valuation allowance			(11,281,000	)			(11,292,000	)
Net deferred tax assets		$	-			$	-

Based on consideration of the available evidence including historical losses a valuation allowance has been recognized to offset certain deferred tax assets, as management was unable to conclude that realization of deferred tax assets were more likely than not.

As of December 31, 2019, the Company has federal net operating loss carryforwards of approximately $66,900,000 and state net operating loss carryforwards of approximately $6,000,000 available to offset future taxable income. Federal loss carryforwards incurred prior to January 1, 2018, expire from 2024 to 2037. Federal loss carryforwards incurred after January 1, 2018 do not expire. State loss carryforwards expire from 2024 to 2039. Federal and state loss carryforwards are subject to an annual limitation on utilization under Section 382 of the Internal Revenue Code.

Section 382 of the Internal Revenue Code imposes a limitation on a corporation's ability to utilize net operating loss carryforwards ("NOLs") if it experiences an "ownership change." In general, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. If such a change were to occur, certain NOLs available to be used could be disallowed and an annual limitation on utilization of other NOLs would occur.

The components of income tax expense (benefits) for the years ended December 31, 2019 and 2018 were as follows:

		2019				2018
Current Income Tax:
Federal		$	-				-
State			216,400				-
Deferred Income Tax:
Federal			-				-
Sate			-				-
		$	216,400			$	-

The Company's effective tax rate for the year ended December 31, 2019 and 2018 differs from the statutory rate of 21% primarily due to a valuation allowance applied against the company's net deferred tax assets. State taxes and permanent differences also impacted the effective tax rate. The Company accrued a $216,400 current state income tax expense for the year ended December 31, 2019 for certain states in which taxable income exceeded available net operating loss carryforwards.

The Company files tax returns in the U.S. federal jurisdiction and various states. At December 31, 2019, federal tax returns remained open for Internal Revenue Service review for tax years after 2016, while state tax returns remain open for review by state taxing authorities for tax years after 2015. The IRS completed an examination of the Company's 2016 tax return during 2018, resulting in a reduction to the net operating loss carryforward of approximately $50,000. During 2019, the Company was notified that its 2017 federal income tax return was selected for examination, and that exam remains open as of December 31, 2019. There were no other federal or state income tax audits being conducted as of December 31, 2019.

The Company completed its analysis and review of all tax positions taken through December 31, 2019 and does not believe that there are any unrecognized tax benefits related to tax positions taken on its income tax returns.