Income Taxes

3 Months Ended

Mar. 31, 2024

Income Taxes

Income Taxes

Note 11—Income Taxes

The TRS income/(loss) before provision for income taxes consisted of the following:

	For the three months ended
($ in thousands)	March 31, 2024		March 31, 2023
United States	$	(972)	$	84
International		—		—
Total	$	(972)	$	84

The federal and state income tax provision (benefit) is summarized as follows:

	For the three months ended
($ in thousands)	March 31, 2024		March 31, 2023
Current:
Federal	$	—	$	1
State		—		1
Total Current Tax (Benefit) Expense	$	—	$	2
Deferred:
Federal		19		7
Total Tax Expense	$	19	$	9

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. The tax effects of significant items comprising the TRS’s deferred taxes as of March 31, 2024 and December 31, 2023 are as follows:

($ in thousands)	March 31, 2024		December 31, 2023
Deferred tax assets:
Net operating loss	$	2,214	$	1,996
Stock Compensation		8		5
Deferred Revenue		79		3
Charitable Contributions		4		4
Total deferred tax assets	$	2,305		2,008
Deferred tax liabilities:
Fixed assets	$	(21)	$	(15)
Intangible Assets		(203)		(181)
Total deferred tax liabilities	$	(224)	$	(196)
Valuation Allowance		(2,140)		(1,851)
Net deferred taxes	$	(59)	$	(39)

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the TRS’s ability to generate sufficient taxable income within the carryforward period.  Because of the TRS’s recent history of operating losses, and management’s inability to accurately project future taxable income, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $0.3 million during the three months ended March 31, 2024. The amount of the valuation allowance for deferred tax assets associated with excess tax deduction from stock-based incentive arrangements that is allocated to contributed capital if the future tax benefits are subsequently recognized is $0.0 million.

Net operating losses and tax credit carryforwards as of March 31, 2024 are as follows:

($ in thousands)	March 31, 2024		Expiration Year
Net operating losses, federal (Post-December 31, 2017)	$	8,490		Does not expire
Net operating losses, state	$	6,189		Various

The effective tax rate of the TRS’s provision (benefit) for income taxes differs from the federal statutory rate as follows:

	Tax (Benefit) Expense				Tax Rate
	For the three months ended March 31,				For the three months ended March 31,
($ in thousands	2024		2023		2024		2023
Statutory Rate	$	(204)	$	18	21.00	%	21.00	%
State Tax		(68)		5	7.00	%	6.03	%
Valuation Allowance		291		(14)	(29.95)	%	(16.12)	%
	$	19	$	9	(1.95)	%	10.91	%