Income Taxes

9 Months Ended

Sep. 30, 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				For the nine months ended
($ in thousands)	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
United States	$	760	$	(1,824)	$	(512)	$	(2,715)
International		—		—		—		—
Total	$	760	$	(1,824)	$	(512)	$	(2,715)

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

	For the three months ended				For the nine months ended
($ in thousands)	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Current:
Federal	$	—	$	(144)	$	—	$	(144)
State		—		(41)		—		(41)
Total Current Tax (Benefit) Expense	$	—	$	(185)	$	—	$	(185)
Deferred:
Federal		11		(6)		29		7
Total Tax (Benefit) Expense	$	11	$	(191)	$	29	$	(178)

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 September 30, 2024 and December 31, 2023 are as follows:

($ in thousands)	September 30, 2024		December 31, 2023
Deferred tax assets:
Net operating loss	$	2,193	$	1,996
Stock Compensation		14		5
Deferred Revenue		—		3
Charitable Contributions		4		4
Total deferred tax assets	$	2,211		2,008
Deferred tax liabilities:
Fixed assets	$	(13)	$	(15)
Intangible Assets		(244)		(181)
Total deferred tax liabilities	$	(257)	$	(196)
Valuation Allowance		(2,022)		(1,851)
Net deferred taxes	$	(68)	$	(39)

ASC 740, Income Taxes, 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 $0.2 million during the nine months ended September 30, 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 September 30, 2024 are as follows:

($ in thousands)	September 30, 2024		Expiration Year
Net operating losses, federal (Post-December 31, 2017)	$	8,412		Does not expire
Net operating losses, state	$	6,124		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 (Benefit) Expense
	For the three months ended						For the nine months ended
($ in thousands	2024			2023			2024			2023
Statutory Rate	$	159		$	(366)		$	(108)		$	(571)
State Tax		23			(350)			(66)			(371)
Valuation Allowance		(171)			525			203			764
	$	11		$	(191)		$	29		$	(178)
	Tax Rate						Tax Rate
	For the three months ended						For the nine months ended
	2024			2023			2024			2023
Statutory Rate		21.00	%		21.00	%		21.00	%		21.00	%
State Tax		3.03	%		19.19	%		12.89	%		13.68	%
Valuation Allowance		(22.58)	%		(29.78)	%		(39.55)	%		(28.14)	%
		1.45	%		10.41	%		(5.66)	%		6.54	%