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Income Taxes
 6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

10. INCOME TAXES

 

During the second quarter of 2022, the Company released the valuation allowance of the Company’s deferred tax asset recorded as of December 31, 2021. The Company had historical cumulative positive pre-tax income plus permanent differences. The realization of the deferred tax asset as of June 30, 2022 is more likely than not based on the refined and updated net income forecast of the Company for 2022, mainly considering the expansion of our loan portfolio with our bank partner and the sale of past due lease receivables that occurred in the second quarter of the year.

 

The release of the deferred tax asset valuation allowance resulted in a tax benefit of approximately $12.5 million in the three-month period ended June 30, 2022.

 

As of June 30, 2022, the Company had federal and state net operating loss carryforwards of $56,375,431 and $4,878,909, respectively. Our federal loss carryforwards do not expire. The Company’s net operating losses may be subject to annual Section 382 of the Internal Revenue Code limitations due to ownership changes that could impact future realization.

 

Effective income tax rates for interim periods are based on our estimate of the applicable annual income tax rate. The Company’s effective income tax rate varies based upon the estimate of our annual taxable earnings and the allocation of those taxable earnings across the various states in which we operate. Changes in the annual allocation of the Company’s activity among these jurisdictions results in changes to the effective tax rate utilized to measure the Company’s income tax provision and deferred tax assets and liabilities.

 

The Company’s effective income tax rate for the three and six months ended June 30, 2022 is different than the statutory rate of 21% primally due to the state income taxes, permanent differences and the release of the valuation allowance.