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INCOME TAX
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAX INCOME TAX
Pretax income (loss) resulting from domestic and foreign operations is as follows (in thousands):
20232022
United States$(30,393)$(2,569)
Foreign(11,779)(2,707)
Other Foreign Jurisdictions4,882 1,582 
Total pretax book loss$(37,290)$(3,694)
The components of income tax expense at December 31, 2023 and December 31, 2022, are as follows (in thousands):
20232022
Current:  
Federal$855 $1,491 
State93 138 
Foreign1,589 1,399 
Total Current$2,537 $3,028 
Deferred:  
Federal$81 $(85)
State— — 
Foreign(752)(2,894)
Total Deferred$(671)$(2,979)
Total$1,866 $49 
The reconciliation of the provision for income taxes at the United States Federal statutory rate compared to the Company’s income tax expense (benefit) as reported is as follows (in thousands):
20232022
Loss before income taxes$(37,290)$(3,694)
Income tax benefit computed at the statutory rate(7,831)(776)
State income taxes-net of federal tax benefit74 73 
Foreign tax rate differential(273)(19)
Section 162(m) compensation 61 61 
Foreign currency adjustment(90)— 
GILTI inclusion693 160 
Meals75 39 
Stock compensation141 83 
Amortization4,845 11 
Tax credits and government assistance(623)(179)
Non-deductible expenses28 186 
Other permanent differences(270)— 
Adjustments to prior periods – temporary differences1,000 197 
Rate changes and differentials(53)(651)
Change in valuation allowance4,089 864 
Income tax expense$1,866 $49 
Tax effects of temporary differences at December 31, 2023 and December 31, 2022 are as follows (in thousands):
Deferred tax assets:20232022
Fixed assets$15 $— 
Allowance for bad debts926 507 
Inventory432 294 
R&D amortization1,172 413 
Deferred revenue6,143 5,600 
Stock compensation291 1,209 
Right of use liability501 1 
Other— 203 
Interest expense limitation6,051 3,751 
Net operating loss carry-forwards6,635 7,282 
Deferred tax assets$22,166 $19,260 
Valuation allowance(18,173)(14,084)
Deferred tax assets, net$3,993 $5,176 
Deferred tax liabilities:20232022
Fixed assets$— $(24)
Intangible assets(6,671)(8,603)
Accrued expenses(982)(752)
Prepaid expenses(48)(169)
Right of use asset(492)— 
Other(116)(308)
Deferred tax liabilities$(8,309)$(9,856)
Deferred tax liabilities, net$(4,316)$(4,680)
The Company operates in the United States, United Kingdom and other jurisdictions. Income taxes have been provided based upon the tax laws and rates of the countries in which operations are conducted and income is earned. The cumulative U.S. Federal net operating losses carryforward on tax basis income was approximately $20.4 million and $23.5 million at December 31, 2023 and 2022, respectively, of which $10.6 million will expire between December 31, 2029 and December 31, 2037 and $9.8 million will carryforward indefinitely. The cumulative U.S. state net operating losses carryforward was approximately $41.7 million and $45.8 million at December 31, 2023 and 2022, respectively. The cumulative foreign net operating losses carryforward was $2.1 million and $1.8 million at December 31, 2023 and 2022, respectively.
The legacy Boxlight entities are in a net deferred tax asset position in the United States, the United Kingdom, and other jurisdictions are primarily driven by the aforementioned net operating losses. The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction to which the carryforward applies. It also depends on specific tax provisions in each jurisdiction that could impact utilization. For example, in the United States, a change in ownership, under section 382 as defined by federal income tax regulations, could significantly limit the Company's ability to utilize our U.S. net operating loss carryforwards. The Company has evaluated both positive and negative evidence as to the ability of its legacy entities in each jurisdiction to generate future taxable income. Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on the net deferred tax asset of its legacy Boxlight entities at December 31, 2023 and 2022. The change in its valuation allowance during 2023 is approximately $4.1 million.
The Company has determined that it likely underwent IRC Sec 382 ownership changes in prior years. The Company is in the process of evaluating the Section 382 impact to determine what portion of its NOLs will be utilizable in the future. It is expected that the ownership change caused a limitation on the net operating losses generated before 2020.
Additionally, because U.S. tax laws limit the time during which the net operating losses generated prior to 2018 may be applied against future taxes, if the Company fails to generate U.S. taxable income prior to the expiration dates the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes.
The Sahara entities have recorded a net deferred tax liability, which is primarily driven by the net deferred tax liability on the intangibles for which it does not have tax basis. The Company does not qualify for any consolidated filing positions in any of these countries, so there is no ability to net the deferred tax liabilities of the Sahara companies against the deferred tax assets of the legacy Boxlight companies. Therefore, the net deferred tax liability of $4.3 million at December 31, 2023 is primarily based on the Sahara acquired entities.
The tax years from 2009 to 2023 remain open to examination in the U.S. federal jurisdictions. The tax years from 2022 to 2023 remain open to examination in the U.K. Statues of limitations vary in other immaterial jurisdictions. The company has not identified any material uncertain tax positions at this time.
Effective January 1, 2022, for U.S. tax purposes research and development costs, including software development costs, are required to be capitalized and will be deductible over five years for costs incurred domestically and over fifteen years for costs incurred in a foreign country. Additionally, the first year of amortization requires that amortization begin with the midpoint of the taxable year. As of December 31, 2023, the Company has recorded a deferred tax asset of $1.2 million related to capitalized research and development costs.