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Note 11 - Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 11. Income Taxes Tax Reform act of 2017 On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law and introduced significant changes to U.S. tax law. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118 ) which addresses income tax accounting implications of the Tax Act. The purpose of SAB 118 was to address any uncertainty or diversity of view in applying ASC Topic 740, Income Taxes in the reporting period in which the Tax Act was enacted. SAB 118 addresses situations where the accounting is incomplete for certain income tax effects of the Tax Act upon issuance of a company's financial statements for the reporting period which includes the enactment date. SAB 118 allows for a provisional amount to be recorded if it is a reasonable estimate of the impact of the Tax Act. Additionally, SAB 118 allows for a measurement period to finalize the impacts of the Tax Act, not to extend beyond one year form the date of enactment. The Company reflected the impacts of changes in tax law to the financial statements including the federal income tax rate reduction from 35% to 21%; the new limitations on the tax deductibility of interest expense; the acceleration of business asset expensing; the repeal of the alternative minimum tax ("AMT"); the limitation on the use of net operating losses generated in future years; and the Global Intangible Low Taxed Income regime. ASU 2019 - 12 ASU 2019 - 12 intends to simplify various aspects related to accounting for income taxes. ASU 2019 - 12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein, and early adoption is permitted. The Company is reviewing the impacts of this to the financial statements but does not anticipate the adoption of ASU 2019 - 12 will have a material effect on the Company's financial statements. CARES Act On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID- 19 pandemic. The CARES Act permits NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes; increases the limitation on allowable business interest expense; allows for the refund of AMT credits not previously refunded among other things. The Company anticipates a cash tax benefit from the carryback of federal NOLs. Due to an ownership change in the first quarter of 2020, the future utilization of certain post-change income tax attributes of Yunghong CTI Ltd , including net operating loss carryovers, are anticipated to be limited for U.S. income tax purposes. The provision (benefit) for income taxes consists of the following:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (410,069 | ) |  | $ | (845 | )
State |  |  | - |  |  |  | - |
Foreign |  |  | 1,824 |  |  |  | 11,264 |
Total Current |  |  | (408,245 | ) |  |  | 10,420 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | - |  |  | $ | 71,007 |
State |  |  | - |  |  |  | 32,659 |
Foreign |  |  | - |  |  |  | 31,517 |
Total Deferred |  |  | - |  |  |  | 135,183 |
Provision (Benefit) for income taxes |  |  | (408,245 | ) |  |  | 145,602 |
Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
U.S. Federal provision (benefit) |  |  |  |  |  |  |  |
At Statutory Rate |  | $ | (598,492 | ) |  | $ | (1,503,581 | )
State Taxes |  |  | (285,914 | ) |  |  | (412,909 | )
Change in Valuation Allowance |  |  | 936,808 |  |  |  | 2,473,248 |
NOL Carryback Claim (CARES Act) |  |  | (201,654 | ) |  |  |  |
Nondeductible Expenses |  |  | (367,848 | ) |  |  | 216,790 |
Foreign Taxes |  |  | (69,969 | ) |  |  | (48,304 | )
Deconsolidation & Impairment |  |  | 134,115 |  |  |  | (373,448 | )
Other |  |  | 44,710 |  |  |  | (206,193 | )
Rounding |  |  | (1 | ) |  |  | (1 | )
Total |  | $ | (408,245 | ) |  | $ | 145,602 |
Deferred Tax Assets and Liabilities Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets for federal and state income taxes are as follows):
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Federal & State NOL Carryforward |  |  | 1,669,717 |  |  |  | 531,864 |
Foreign Tax Credit & Other Credits |  |  | 581,479 |  |  |  | 463,451 |
Reserves and Accruals |  |  | 216,591 |  |  |  | 320,961 |
Unicap 263A Adjustment |  |  | 63,006 |  |  |  | 72,294 |
Other DTA |  |  | (36,776 | ) |  |  | 65,215 |
Foreign NOL Carryforward |  |  | 1,049,887 |  |  |  | 802,907 |
Deferred Interest Expense |  |  | 1,383,772 |  |  |  | 1,030,634 |
Deconsolidation & Impairment |  |  | 1,388,551 |  |  |  | 1,028,249 |
Total Gross DTA |  |  | 6,316,227 |  |  |  | 4,319,575 |
Less: Val. Allowance |  |  | (6,397,605 | ) |  |  | (4,315,957 | )
Total Deferred Tax Assets |  |  | (81,378 | ) |  |  | 3,618 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Fixed Assets & Intangibles |  |  | 81,378 |  |  |  | (3,618 | )
Deferred State Income Tax |  |  | - |  |  |  | - |
Total Gross DTL |  |  | 81,378 |  |  |  | (3,618 | )
Net Deferred Tax Assets |  |  | - |  |  |  | - |
Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Due to the lack of earnings history, a valuation allowance has been recorded to reduce the deferred tax assets to its net realizable value. The valuation allowance increased by $2,081,649 and increased by $2,473,248 during the years ended December 31, 2020 and December 31, 2019, respectively. Net Operating Loss and Tax Credit Carryforwards As of December 31, 2020, we had a net operating loss carryforward for federal income tax purposes of approximately $4.2 million, which will begin to expire in 2024. We had a total state net operating loss carryforward of approximately $ 8.2 million, which will begin to expire in 2021. Approximately $0.8 million expired in 2020. We have foreign net operating loss carryforwards of approximately $3.5 million. Utilization of the federal net operating loss carryforwards may be subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986. The annual limitation is anticipated to affect the timing of utilization. We have federal credits of approximately $ 600 thousand, which will begin to expire in 2021. No federal credits expired during 2020.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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