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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 14. Income Taxes 

 

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of tax benefits which are not expected to be realized.

 

 

IMPACT Biomedical, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

The components of income tax benefit for the years ended December 31, 2022, and 2021 are as follows:

 

Federal  $-   $- 
Income Tax Expense (Benefit)  Year Ended
December 31, 2022		  

Year Ended

December 31, 2021

 
Current tax payable          
Federal  $-   $- 
State   -    - 
Total current tax payable   -    - 
Deferred tax          
Federal   (1,619,000)   (456,000)
State   (165,000)   (1,068,000)
Total deferred tax  $(1,784,000)  $(1,524,000)
Less increase in valuation allowance   1,163,000    129,000 
Total income tax benefit  $(621,000)  $(1,395,000)

 

Individual components of deferred tax assets and liabilities are approximately as follows:

 

   -  - 
Deferred Tax Assets & Liabilities:        
Deferred Tax assets:          
Impairment of investment  $929,000   $- 
Research & development cost   250,000    - 
Net Operating loss   1,611,000    1,258,000 
Gross deferred tax assets   2,790,000    1,258,000 
           
Deferred tax liability:          
Intangible assets   (4,414,000)   (4,667,000)
Gross deferred tax liability   (4,414,000)   (4,667,000)
           
Less valuation allowance   (1,611,000)   (447,000)
Net deferred tax liability  $(3,235,000)  $(3,856,000)

 

 

   2022   2021 
Statutory United States federal rate   21.0%   21.0%
State income taxes net of federal benefit   1.7%   26.0%
Change in valuation allowance   (14.8)%   (4.0)%
           
Effective rate   7.9%   43%

 

As of December 31, 2022, and 2021, the Company has net operating loss carry forwards of approximately $7,109,000 and $5,551,000 respectively. The Company does not have other temporary differences associated with the amortization of intangible assets. As of December 31, 2022, and 2021, the total deferred tax assets carry-forward were $2,790,000 and $1,258,000, respectively. The deferred tax assets could be carried forward indefinitely. The full utilization of the deferred tax assets in the future is dependent upon the Company’s ability to generate taxable income. Considering the development stage of the Company, management believed that it was probable that the Company would not use tax assets in the near future. Accordingly, a valuation allowance of an equal amount has been established. During the years ended December 31, 2022 and December 31, 2021, the valuation allowance increased by $1,163,000 and decreased by $129,000, respectively.

 

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2022 and 2021 the Company recognized no interest and penalties.