Income Taxes

3 Months Ended

Mar. 31, 2020

Income Taxes

Income Taxes

10. Income taxes

On March 27, 2020, the president signed the Coronavirus Aid, Relief and Economic Security (CARES) Act. The legislation provides several changes to corporation income taxes including:

● Deferral of employer payroll taxes for the remainder of 2020, with repayment of the deferred amounts in December 2021 and in December 2022.

● Modification of the rules applicable to the deductibility of net operation losses (NOLs) incurred in tax years beginning in 2018, 2019 and 2020.

● Acceleration of the corporate minimum tax credit.

The Company reviewed the new legislation and determined that certain provisions would provide income tax benefits:

● The Company qualifies for the deferral of payroll taxes and expects to benefit from this provision. No deferral was recorded for the period ended March 31, 2020, but the Company expects to defer its payroll tax liabilities for the remainder of 2020.

● The Company has NOL and income tax credit carryforwards which are subject to a valuation allowance, due to uncertainty about the ability to utilize such losses and credits in future periods. Accordingly, the Company does not expect the changes in the NOL provisions in the legislation to provide any benefit in the near-term.

● As of December 31, 2019, the Company had recorded a receivable of $0.8 million related to the corporate minimum tax credit. Under previous income tax provisions, one-half of the minimum tax credit would be received in 2020 and the remainder in subsequent years. As a result of the new legislation, the Company expects to receive a refund for the entire $0.8 million minimum tax credit in 2020.

There was no provision for income taxes for the three months ended March 31, 2020. The provision for income taxes of $0.9 million for the three months ended March 31, 2019 represents the interim period tax allocation of the state alternative minimum tax based on the Company’s projected year-end effective income tax rates which cannot be offset by the Company’s net operating loss carryforwards. The Company has a federal income tax receivable of $0.8 million at March 31, 2020 related to refundable alternative minimum tax credits and a state income tax receivable of $0.1 million related to overpayment of prior year taxes. As of March 31, 2020, the Company’s deferred income tax assets, consisting primarily of net operating loss and tax credit carryforwards, have been fully offset by a valuation allowance.