Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 were as follows, assuming a 21% federal effective tax rate. The Company also has a state tax rate for Oregon, of 6.6% for both December 31, 2021 and 2020.

The provision of income taxes for the years ended December 31, 2021 and 2020 were as follows:

(Dollars in thousands)	2021			2020
Expected federal income tax benefit	$	(431	)	$	(1,934	)
State income taxes after credits		(145	)		(651	)
Change in allowance		576			2,585
Total provision for income taxes	$	-		$	-

The components of the net deferred tax assets and liabilities as of December 31 consisted of the following:

(Dollars in thousands)	2021			2020
Deferred tax assets
Net operating loss carryforwards	$	16,642		$	15,731
Stock-based compensation		894			887
Total deferred tax assets		17,536			16,618
Deferred tax liability
Depreciation and amortization		(1,650	)		(1,431	)
Total deferred tax liability		(1,650	)		(1,431	)
Valuation Allowance		(15,886	)		(15,310	)
Net deferred tax assets	$	-		$	-

Eastside Distilling, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2021 and 2020

As of December 31, 2021, the Company has a cumulative net operating loss carryforward (“NOL”) of approximately $49.9 million, to offset against future income for federal and state tax purposes. These federal and state NOLs can be carried forward for 20 and 15 years, respectively. The federal NOLs begin to expire in 2034, and the state NOLs begin to expire in 2029. The utilization of the net operating loss carryforwards may be subject to substantial annual limitation due to ownership change provisions of the Internal Revenue Code of 1986 (as amended, the Internal Revenue Code) and similar state provisions. In general, if the Company experiences a greater than 50 percentage aggregate change in ownership of certain significant stockholders over a three-year period (a “Section 382 ownership change”), utilization of its pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code (and similar state laws). The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the realizability of the deferred tax assets, management has determined a full valuation allowance is appropriate.