INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Provision

The domestic and foreign components of loss from continuing operations before provision for income taxes is as follows:


	Year ended December 31,
	2020		2019
Domestic	$	(3,446)	$	(3,131)
Foreign	2,738		1,749
Loss before provision for income taxes	$	(708)	$	(1,382)

The components of the provision for (benefit from) income taxes from continuing operations are as follows:


	Year ended December 31,
	2020		2019
Current tax provision (benefit):
U.S. Federal	$	—	$	—
State and local	5		(495)
Foreign	699		165
Total current provision for (benefit from) income taxes	704		(330)
Deferred tax provision (benefit):
U.S. Federal	—		—
State and local	—		—
Foreign	(169)		(210)
Total deferred benefit from income taxes	(169)		(210)
Total provision for (benefit from) provision for income taxes	$	535	$	(540)

Tax Rate Reconciliation

The effective tax rates for the years ended December 31, 2020 and 2019 were negative 75.5% and 39.1% respectively. The change in effective tax rate in 2020 is primarily related to the mix of income and losses in different jurisdictions taxed at different rates, as well as changes in valuations allowances in the U.S. and in our foreign subsidiaries. The change in the effective tax rate in 2019 was primarily due to the reduction and effective lapsing of statutes for certain historic uncertain tax positions and state income tax benefits, offset by additional tax expense for GILTI, foreign income taxes at different rates, and changes in valuation allowances in the U.S. and certain foreign jurisdictions. The effects of other federal and state deferred tax adjustments in 2020 and 2019 were offset by changes in valuation allowances and have no net impact on effective tax rates.

The following is a reconciliation of the effective tax rate from continuing operations for the years ended December 31, 2020 and 2019 to the U.S. federal statutory rate of 21% :


	Year ended December 31,
	2020		2019
Benefit at federal statutory rates	$	(149)	$	(290)
State income taxes, net of federal benefit	(212)		(147)
Change in valuation allowance	227		(12,005)
Taxes related to foreign income	195		295
Non-deductible expenses	(271)		58
Other federal deferred tax adjustments	(23)		6,907
Other state deferred tax adjustments	738		5,624
Uncertain tax positions	30		(982)
Provision for (benefit from) income taxes	$	535	$	(540)

Deferred Taxes Assets (Liabilities)

Deferred income taxes are provided for the tax effect of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. Net deferred tax assets have been reported as non-current in the accompanying Consolidated Balance Sheets. Significant temporary differences at December 31, 2020 and 2019 are as follows:


	As of December 31,
	2020		2019
Deferred tax assets (liabilities):
Allowance for doubtful accounts	$	23	$	47
Property and equipment	2		(64)
Goodwill and intangibles	204		200
Accrued compensation	1,818		1,511
Accrued liabilities and other	106		255
Loss carryforwards	186,606		186,325
Deferred tax assets before valuation allowance	188,759		188,274
Valuation allowance	(187,722)		(187,481)
Deferred tax assets, net of valuation allowance	$	1,037	$	793

As a result of the enactment of the Tax Act, the Company has provided tax on GILTI, and therefore, future repatriations of previously unremitted foreign earnings are expected to either be exempt from U.S. taxation or offset by NOLs. The Company has provided $0 and $48 of withholding tax with respect to unremitted foreign earnings, respectively, at December 31, 2020 and December 31, 2019.

Net Operating Losses (“NOLs”), Capital Losses, and Valuation Allowance

At December 31, 2020, the Company had losses for U.S. Federal tax purposes of approximately $696,760 in total, made up of net U.S. Federal NOLs incurred through December 31, 2020 of $318,097 and U.S. Federal capital losses of $378,663 as a result of the Sales Transaction. The NOLs include approximately $13,144 of tax losses that were not absorbed by Monster Worldwide, Inc. (“Monster”) on its consolidated U.S. Federal tax returns through the spin-off of the Company on April 1, 2003. U.S. Federal NOLs incurred through December 31, 2017 expire at various dates through 2037 with $0 scheduled to expire during 2021. U.S. Federal NOLs incurred in or after 2018 have an indefinite carryforward period, which can be offset by 80% of future taxable income in any given year. U.S. Federal capital losses incurred in 2018 will expire after five years during 2023.

The Company’s utilization of U.S. NOLs is subject to an annual limitation imposed by Section 382 of the Internal Revenue Code (“IRC”), which may limit our ability to utilize all the existing NOLs before the expiration dates. Based upon IRC Section 382 studies prepared by the Company, Section 382 ownership changes have occurred that will result in $224,124 of the Company’s Federal NOLs generated through September 2006 and recognized built-in losses during the five year period after September 2006 being subject to IRC Section 382 limitations. As a result of IRC Section 382 limitations, $27,848 of the $224,124 NOLs that are limited are expected to expire prior to utilization specifically as a result of the IRC Section 382 cumulative annual limitations. Accordingly, the U.S. Federal NOLs of $318,097 above excluded the $27,848 of tax losses expected to expire prior to utilization due to IRC Section 382 cumulative annual limitations and the deferred tax asset for loss carryforwards of $183,732 also excluded $7,492 of related tax benefits.

As of December 31, 2020, certain international subsidiaries had NOLs for local tax purposes of $12,802. With the exception of $6,103 of NOLs with an indefinite carry forward period as of December 31, 2020, these losses will expire at various dates through 2039, with $0 scheduled to expire during 2021. The deferred tax recognized for NOLs are presented net of unrecognized tax benefits, where applicable.

ASC 740-10-30-5 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In making this assessment, management considers the level of historical taxable income, scheduled reversals of deferred tax liabilities, tax planning strategies, and projected future taxable income. During 2020, the Company released its valuation allowance in net deferred tax assets in U.K as management determined that it is more likely than not that such deferred taxes are realizable. As of December 31, 2020, $186,564 of the valuation allowance relates to the deferred tax asset for NOLs, $183,732 of which is U.S. Federal and state and $2,832 of which is foreign, that management has determined will more likely than not expire prior to realization. The remaining valuation allowance of $1,158 relates to deferred tax assets on U.S. and foreign temporary differences that management estimates will not be realized due to the Company’s U.S. and foreign tax losses.

Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties is as follows:


	2020		2019
Balance, beginning of year	$	663	$	1,574
Additions for tax positions of current years	—		—
Additions for tax positions of prior years	6		15
Reductions for tax positions of prior years	—		(303)

Expiration of applicable statutes of limitations	—		(623)

Balance, end of year	$	669	$	663

The total amount of state and local and foreign unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2020 and December 31, 2019 was $669 and $663, respectively, exclusive of interest and penalties.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. As of December 31, 2020 and December 31, 2019, the Company had $594 and $551, respectively, of accrued interest and penalties associated with unrecognized tax benefits.

Based on information available as of December 31, 2020, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $200 over the next 12 months as a result of projected resolutions of global tax examinations and controversies and potential lapses of the applicable statutes of limitations.

In many cases, the Company’s unrecognized tax benefits are related to tax years that remain subject to examination by the relevant tax authorities. Tax years with NOLs remain open until such losses expire or the statutes of limitations for those years when the NOLs are used or expire. As of December 31, 2020, the Company’s open tax years remain subject to examination by the relevant tax authorities and currently under income tax examination were principally as follows:


						Year
Earliest tax years remain subject to examination by the relevant tax authorities:
U.S. Federal						2017
Majority of U.S. state and local jurisdictions						2016
Australia						2018
Belgium						2017
Canada						2016
Netherlands						2013
Switzerland						2015
United Kingdom						2018
Jurisdictions in Asia						2018

The Company believes that its unrecognized tax benefits as of December 31, 2020 are appropriately recorded for all years subject to examination above.