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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Taxes [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:

 

   2023   2022 
Federal tax at statutory rate  $(1,096,920)  $(630,700)
State tax, net of federal tax   (91,893)   (736,962)
Tax impact on gain on bargain purchase   -    (3,036,868)
Permanent differences   168,215    123,933 
Change in statutory rate   30,789    7,862 
Change in valuation allowance   -    (12,525,690)
Other        163,374 
Benefit/ (expense) for income taxes  $(989,809)  $(16,635,051)

 

Tax affected components of deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 were as follows:

 

   2023   2022 
Deferred tax assets (liabilities):        
Equity based compensation  $677,514   $428,111 
Allowance for doubtful accounts   4,981,308    3,240,968 
Fixed assets   (4,715,210)   (8,479,349)
Lease impairment   151,328    989,120 
Lease Liability   391,076    439,758 
Right of use asset   (308,793)   (348,478)
Accrued expenses   (57,410)     
Change in fair value of loans receivable   (5,684,857)   (375,222)
Tax credit carryforward   -    32,394 
Sec 163(j) carryforward   3,269,003    - 
Federal loss carry-forwards   15,266,448    16,219,665 
State loss carry forward   4,111,334    4,567,883 
Intangible assets   (5,138,380)   (4,701,022)
Other   -    - 
Gross deferred tax   12,943,361    12,013,828 
Valuation allowance   -    - 
Net deferred tax assets/ liability  $12,943,361   $12,013,828 

 

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 December 31, 2023 is more likely than not based on the Company’s projected taxable income.

 

The release of the deferred tax asset valuation allowance resulted in a tax benefit of approximately $12.5 million in the year ended December 31, 2022.

 

As of December 31, 2023, the Company had federal and state net operating loss carryforwards of $72,697,376 and $21,800,909, respectively available to offset future income. 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.

 

The components of income tax benefits for the years ended December 31, 2023 and 2022 were as follows:

 

   2023   2022 
Current Income Tax:        
Federal  $205,910   $- 
State   (273,141)   754,505 
Deferred Income Tax:          
Federal   (1,168,681)   (13,439,360)
State   246,103    (3,950,196)
   $(989,809)  $(16,635,051)

 

The Company’s effective tax rate for the year ended December 31, 2023 and 2022 differs from the statutory rate of 21% primarily due to state income taxes, permanent differences and the release of the valuation allowance.

 

The Company files tax returns in the U.S. federal jurisdiction and various states.  At December 31, 2023, federal tax returns remained open for Internal Revenue Service review for tax years after 2018, while state tax returns remain open for review by state taxing authorities for tax years after 2019.  The IRS can examine net operating loss carryforwards from earlier years the extent utilized in years after 2019. During 2019, the Company was notified that its 2017 federal income tax return was selected for examination. In the second quarter of 2021, the IRS completed their review with no changes to the reported tax. There were no other federal or state income tax audits being conducted as of December 31, 2023.

 

The Company completed its analysis and review of all tax positions taken through December 31, 2023 and does not believe that there are any unrecognized tax benefits or liabilities related to tax positions taken on its income tax returns.