Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

G. Income Taxes

As of August 5, 2020, the operations of Morgan Group Holdings Co. were included in the consolidated U.S. federal and certain state and local income tax returns of AC. The Company’s federal and certain state and local income taxes are calculated as if the Company filed on a separate return basis, and the amount of current tax or benefit is either remitted to or received from AC using a benefit for loss approach such that the net operating loss (or other tax attribute) is characterized as realized by the Company when those tax attributes are utilized in the consolidated tax return of AC. This is the case even if the Company would not otherwise have realized those tax attributes.

On August 5, 2020, Associated Capital Group, Inc. distributed all its shares of Morgan Group Holdings, Co. (“Morgan”).  Management concluded that the spin-off of the Morgan Group Holdings, Co. group represented a strategic shift pursuant to Accounting Standards Update No. 2014-08.  For Federal income tax purposes, the transaction was considered a tax-free spin-off under IRC Section 355 and Morgan Group Holdings, Co. files standalone Federal and State tax returns from the date of the spin-off.

Any tax attributes generated by the Company will not be immediately realized after August 5, 2020 but will instead be deferred and classified as net operating losses and/or other tax attribute carryforwards. 

Income tax benefit for the years ending December 31 consisted of:

	2021		2020
Federal:
Current	$	-	$	(186,217	)
Deferred		-		2,572
State and local:
Current		723		(20,159	)
Deferred		-		361
Total	$	723	$	(203,443	)

A reconciliation of the federal statutory rate to the effective tax rate for the years ended December 31 is set forth below:

	2021			2020
Statutory Federal income tax rate		21.0	%		21.0	%
State income tax, net of Federal benefit		5.10	%		3.12	%
State Valuation Allowance		-5.14	%		-2.17	%
Federal Valuation Allowance		-21.20	%		-8.29	%
Other		0.19	%		-1.23	%
Effective income tax rate		-0.05	%		12.43	%

Significant components of our deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows:

	2021			2020
Deferred tax assets:
Federal and State NOL Carryforward	$	779,104		$	337,606
Stock-based Compensation Expense		-			-
Compensation		-			-
Other		13,640			29,650
Total Gross DTA		792,744			367,256
Less: Valuation Allowance		(789,809	)		(354,833	)
Total Deferred Tax Assets	$	2,935		$	12,423
Deferred tax liabilities:
Stock Based Compensation	$	(2,935	)	$	(9,468	)
Deferred State Income Tax		-			(2,955	)
		(2,935	)		(12,423	)
Net deferred tax assets	$	-		$	-

In accordance with IRC Section 382 corporations are generally required to limit the amount of its income in future years that can be offset by historic losses, i.e., net operating loss (NOL) carryforwards and certain built-in losses, after a corporation has undergone an ownership change. As a result of the Company’s equity financings in recent years, the Company underwent changes in ownership pursuant to the provisions of the IRC Section 382, therefore, annual use of any of the Company’s net operating loss carry forwards may be limited if cumulative changes in ownership of more than 50% occur during any three-year period.

At December 31, 2021 and 2020, for Federal and for certain states in which the Company files separate tax returns, the Company recorded deferred tax assets of approximately $789,809 and $354,833 respectively, relating to net operating losses. The Company concluded that it is not more likely than not that the benefit from federal net operating loss and the state net operating loss carryforwards will be realized and has provided a valuation allowance for the full amount of the related deferred tax assets.

Taxes receivable and payable of $275,285 and $48,350, respectively, represent a net balance due from AC for the Company’s losses utilized by AC through the date of the spin-off, August 5, 2020.

As of December 31, 2021, the Company is not aware of any potentially material uncertain tax positions that were not included in the Company’s financial statements. The Company, which includes G. research, LLC and was part of the AC’s unitary filing group through August 5, 2020, is not under any tax examination as of December 31, 2021. The Company has filed its 2020 corporate income tax returns in states where they have determined a filing obligation exists. The Company believes there are no uncertain tax positions (“UTPs”) as it relates to their federal and state filings, and as such has not recorded any tax expense related to UTPs.

As of December 31, 2021 and 2020, management has not identified any potential subsequent events that could have a significant impact on unrecognized tax benefits within the next twelve months. The Company remains subject to income tax examination by the IRS for years after 2017 and state examinations for years after 2016.