Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 15 – Income Taxes

The provision for income taxes consists of the following for the years ended December 31, 2023, and 2022:

	December 31
	2023			2022
Federal income taxes:
Current	$	-		$	-
Deferred		(860	)		315
Total federal income taxes		(860	)		315
State income taxes:
Current		29,735			2,062
Deferred		(1,089	)		496
Total state income taxes		28,646			2,558
Total income taxes	$	27,786		$	2,872

The effective income tax rate is lower than the U.S. federal and state statutory rates primarily because of the valuation allowance and, to a lesser extent, permanent items. A reconciliation of the 2023 and 2022 federal statutory rate as compared to the effective income tax rate is as follows:

	December 31
	2023					2022
Pre-Tax Book Income at Statutory Rate	$	(1,519,297	)	21.00	%	$	(2,202,718	)	21.00	%
State Tax Expense, net		23,719		-0.33	%		1,629		-0.02	%
Permanent Items		226,420		-3.13	%		348,768		-3.33	%
Hanging Credit		-		0.00	%		811		-0.01
True-Ups		(1,949	)	0.03	%		(36,554	)	0.35	%
Change in Federal Valuation Allowance		1,298,892		-17.95	%		1,890,936		-18.03	%
Total Expense	$	27,786		-0.38	%	$	2,872		-0.03	%

Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax. Significant components of the deferred tax assets and liabilities as of December 31, 2023 and 2022, are as follows:

	December 31
	2023			2022
Deferred tax assets:
Accrued Compensation	$	195,584		$	243,056
Amortization of Discount Notes Payable		154,349			-
Lease (ASC 842)		1,210,592			342,254
Charitable Contributions		2,771			2,771
Stock Option Expense		140,699			117,099
Restricted Stock Unit		265,038			62,090
Net Operating Losses		10,255,137			8,395,160
Org Costs		81,255			81,255
-IRC Sec. 174 Expense		204,864			275,519
Investment in HRCFG INVO, LLC		(272,459	)		123,217
Equity in earnings - Positib		(24,054	)		19,950
Gross deferred tax assets		12,213,777			9,662,371
Deferred tax liabilities:
Fixed Assets		(18,733	)		(21,560	)
ROU Lease (ASC 842)		(1,177,701	)		(327,946	)
Trademark Amortization		(5,858	)		(5,858	)
Deferred Revenue		(47	)		(47	)
Tax Amortization of Org Cost		(24,912	)		(7,222	)
Gain/Loss on sale of assets		(2,561	)		(2,561	)
Gross deferred tax liability		(1,114,418	)		(365,194	)
Less: valuation allowance		(11,099,358	)		(9,299,126	)
Net deferred tax liability	$	-		$	(1,949	)

The Company recorded a full valuation allowance against its net deferred tax asset at December 31, 2023 and 2022 totaling $11.1 million and $9.3 million, respectively. A naked credit resulting from indefinite lived intangibles was valued at December 31, 2023, and 2022 totaling $0 and ($1,949), respectively.

As of December 31, 2023, the Company has federal net operating loss carryforwards of approximately $32.9 million. Of that amount, $10.2 million will expire, if not utilized, in various years beginning in 2028 and which are also subject to the limitations of IRC §382. The remaining carryforward amount of $22.7 million, has no expiration period and can be applied to 80% of taxable income per year in future periods. State net operating loss carryforwards total $21.9 million. Of that amount, $3.5 million will begin to expire in 2033 and are subject to the limitations of IRC §382. The remaining $18.4 million of state net operating loss carryforwards are similar to the federal net operating loss in that it has no expiration period and can be applied to 100% of state taxable income per year.