Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The significant components of our (provision for) benefit from income taxes attributable to current operations for the periods stated were as follows:

	For the Year Ended December 31,
(Dollars in thousands)	2021		2020		2019
Loss before income taxes	$	(27,332)	$	(21,770)	$	(13,423)
Current:
Federal tax	$	—	$	—	$	—
State tax	48		58		582
Foreign tax	283		(150)		13
Total current	331		(92)		595
Deferred:
Federal tax	(4,178)		20,594		(2,121)
State tax	(1,561)		1,910		(1,239)
Foreign tax	256		43		107
Total deferred	(5,483)		22,547		(3,253)
Benefit from (provision for) income taxes	$	(5,152)	$	22,455	$	(2,658)

Foreign income before income tax (benefit) expense is immaterial to consolidated income before income tax (benefit) expense. The following table summarizes the principal elements of the difference between the United States federal statutory rate of 21% and our effective tax rate for the years ended December 31, 2021, 2020 and 2019:

(Dollars in thousands)	2021				2020				2019
Loss before income taxes	$	(27,332)			$	(21,770)			$	(13,423)
Income taxes computed at the federal statutory rate	$	(5,740)	21.0	%	$	(4,572)	21.0	%	$	(2,819)	21.0	%
State income taxes, net of federal benefit	(1,513)		5.5	%	(703)		3.2	%	(567)		4.2	%
Goodwill impairment	—		—	%	6,341		(29.1)	%	2,243		(16.7)	%
Change in valuation allowance	2,070		(7.6)	%	22,108		(101.6)	%	—		—	%
Research and development and other tax credits	(808)		3.0	%	(1,316)		6.0	%	(1,790)		13.3	%
Excess executive compensation	272		(1.0)	%	266		(1.2)	%	322		(2.4)	%
Other	567		(2.1)	%	331		(1.5)	%	(47)		0.4	%
(Benefit from) provision for income taxes	$	(5,152)	18.8	%	$	22,455	(103.1)	%	$	(2,658)	19.8	%

The anticipated effective income tax rate is expected to continue to differ from the federal statutory rate primarily due to the effect of state income taxes, the benefit of the research and development tax credit, permanent differences between book and taxable income and certain discrete items. The earnings of non-U.S. subsidiaries are deemed to be indefinitely reinvested in non-U.S. operations.

The components of deferred income tax assets at December 31, 2021, and 2020 were as follows: 

	December 31,
(Dollars in thousands)	2021		2020
Capitalized research and development costs	$	13,436	$	13,367
Net operating loss carryforward	25,284		18,081
Property and equipment	5,139		5,353
Accrued liabilities, reserves and other expenses	4,726		5,063
Research and development credits	6,342		5,533
Tax credits	495		717
Stock based compensation	2,283		1,917
Other	289		132
Gross deferred income tax assets	57,994		50,163
Deferred income tax liabilities:
Intangible assets	(2,128)		(2,015)
Prepaid and other expenses	(35)		(214)
Gross deferred income tax liabilities	(2,163)		(2,229)
Net deferred income tax assets	55,831		47,934
Valuation allowance	(24,178)		(22,108)
Total deferred income tax assets	$	31,653	$	25,826

The Coronavirus Aid Relief and Economic Security ("CARES") Act was signed into law on March 27, 2020, to provide stimulus and relief in response to the COVID-19 pandemic and resulting economic collapse. While the CARES Act provides a number of potential benefits to companies, the Company has made use of the following provisions:

•Payroll Tax Deferral: Allows for the deferral of payment on the Company's share of the 6.2% Social Security tax on wages paid beginning on March 27, 2020, and ending on December 31, 2020. Deferred amounts are payable in two installments, with 50% of such taxes due on December 31, 2021, and the remainder due on December 31, 2022. This resulted in a total deferral of $2.1 million in payroll taxes under this provision for the year ended December 31, 2020.

•Employee Retention Credits: Allows for a refundable tax credit for the Company's share of the 6.2% Social Security tax on wages. This tax credit applies to the first $10,000 in qualified wages paid to each employee after March 12, 2020, and before January 1, 2021. To be eligible, the Company must (i) have had operations fully or partially suspended because of a shutdown order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019. Qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 pandemic. This resulted in a total claim of approximately $1.3 million in employee retention credits under this provision for the year ended December 31, 2020.

•Alternative Minimum Tax ("AMT") Credit: Allows for an immediate refund of all refundable AMT credits resulting from passage of the CARES Act of 2020. This resulted in accelerated collection of approximately $1.3 million of other current assets which was received during the third quarter of 2020.

Net Operating Losses

As of December 31, 2021, we had approximately $108.3 million of net operating losses available to offset future taxable income, of which approximately $70.6 million were federal net operating losses with expiration dates that begin expiring in 2026 and will fully expire in 2030. We have an immaterial amount of foreign tax credits available for future use.

Valuation Allowance

We assess the recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available positive and negative evidence and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax planning strategies. This assessment is required to determine whether based on all available evidence, it is "more likely than not" (meaning a probability of greater than 50%) that all or some portion of the deferred income tax assets will be realized in future periods.

The cumulative loss incurred by the Company over the three-year period ended December 31, 2020, constitutes a piece of objective negative evidence which limits our ability to consider other subjective evidence. In addition, the uncertainty created by COVID-19, has meaningfully limited our ability to consider our projections for future profitability and growth in our assessment of the recoverability of our deferred income tax assets. We traditionally perform this evaluation in the fourth quarter of each year, utilizing our annual long-range planning and forecasting updates. As of December 31, 2021, and 2020, our deferred tax assets were net of valuation allowances of $24.2 million and $22.1 million, respectively. COVID-19 has significantly limited our ability to consider projections for future profitability as objectively verifiable positive evidence to support the realizability of deferred tax assets. As a result, we continue to maintain a valuation allowance against deferred tax assets associated with net operating losses and credits with set expiration dates.

Those deferred income tax assets which are not currently covered by a valuation allowance are those that are indefinite-lived, or whose temporary differences would reverse in the future and may result in the creation of an indefinite-lived deferred income tax asset, which we consider to be realized through future taxable income despite near term uncertainties. The amount of deferred income tax assets considered realizable, however, could be adjusted in the future if objective negative evidence in the form of cumulative losses is no longer present, additional weight is given to subjective evidence such as our projections for future profitability and growth, or other relevant factors arise. We did not record a valuation allowance in 2019.

Income Tax Audits

The 2019, 2020 and 2021 federal and state income tax returns are within the statute of limitations (“SOL”) and are currently not under examination by any Federal or state tax authority.

We operate in all states and the District of Columbia and are subject to various state income and franchise tax audits. The states’ SOL varies from three to four years from the later of the due date of the return or the date filed. We usually file our federal and all state and local income tax returns on or before September 15 of the following year; therefore, the SOL for those states with a three-year SOL is open for calendar years ending 2018 through 2021, and for the four-year SOL states, the SOL is open for years ending from 2017 through 2021.