XML 29 R17.htm IDEA: XBRL DOCUMENT v3.22.1
Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2021
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.  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.

 

On March 27, 2020, the CARES Act was enacted into law and introduced changes to U.S. tax law including revised limitations on the tax deductibility of interest expense and the limitation on the use of net operating losses.  The Company is reviewing the implications of these statutes to its 2020 financial statements. 

 

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,

 
  

2021

  

2020

 

Current:

        

Federal

 $-

 

 $(410,069

)

State

  -   - 

Foreign

  -   6,995 

Total Current

  -   (403,074

)

         

Deferred:

        

Federal

 $-  $- 

State

  -   - 

Foreign

  -   - 

Total Deferred

  -   - 

Provision (Benefit) for income taxes

  -   (403,074

)

 

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 (in thousands):

 

  

Year Ended December 31,

 
  

2021

  

2020

 

U.S. Federal provision (benefit)

        

At Statutory Rate

 $(743,197

)

 $(598,492

)

State Taxes

  (769,662

)

  (285,914

)

Change in Valuation Allowance

  1,791,462   936,808 

NOL Carryback Claim (CARES Act)

  -   (201,654

)

Nondeductible Expenses

  -   (362,677

)

Foreign Taxes

  -

 

  (69,969

)

Deconsolidation & Impairment

  (622,744

)

  134,115 

Other

  344,141

 

  44,710 

Rounding

  -

 

  (1

)

Total

 $-  $(403,074

)

 

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,

 
  

2021

  

2020

 

Deferred Tax Assets:

        

Federal & State NOL Carryforward

  2,696,423   1,669,717 

Foreign Tax Credit & Other Credits

  307,549   581,479 

Reserves and Accruals

  205,469   216,591 

Capital Loss Carryforward

  2,359,582   - 

Unicap 263A Adjustment

  282,351   63,006 

Other DTA

  (89,624

)

  (36,776

)

Foreign NOL Carryforward

  2,383   1,049,887 

Deferred Interest Expense

  1,577,566   1,383,772 

ERC Wage Disallowance

  312,731   - 

Deconsolidation & Impairment

  414,579   1,388,551 

Total Gross DTA

  8,069,009   6,316,227 

Less: Val. Allowance

  (8,114,651

)

  (6,397,605

)

Total Deferred Tax Assets

  (45,642

)

  (81,378

)

         

Deferred Tax Liabilities:

        

Fixed Assets & Intangibles

  158,193   81,378 

Other DTL

  89    

Section 481(a) Adjustment

  (112,640

)

   

Total Gross DTL

  45,642   81,378 

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 and in light of management’s comments regarding going concern for most of 2019 through September 30, 2021, a valuation allowance has been recorded to reduce the deferred tax assets to its net realizable value. The valuation allowance increased by $1.7 million and increased by $2.1 million during the years ended December 31, 2021 and December 31, 2020, respectively.

 

Net Operating Loss and Tax Credit Carryforwards

 

As of December 31, 2021, we had a net operating loss carryforward for federal income tax purposes of approximately $7.8 million, which will begin to expire in 2024. We had a total state net operating loss carryforward of approximately $11.1 million, which will begin to expire in 2022.