Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 13 – Income Taxes

The Company’s current and deferred income tax provision are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Current provision:
States	$	30,000	$	26,000	$	59,000	$	93,000
Total current provision	$	30,000	$	26,000	$	59,000	$	93,000

Deferred income taxes reflect the temporary differences between the financial statement carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, adjusted by the relevant tax rate. The components of deferred tax assets and liabilities are as follows:

	September 30,		December 31,
	2021		2020
Deferred tax assets:
Net operating loss carry-forwards	$	13,362,000	$	10,428,000
Acquisition-related costs		550,000		723,000
Film library and other intangibles		15,302,000		11,968,000
Other		128,000		39,000
Less: valuation allowance		(27,195,000)		(20,003,000)
Total deferred tax assets		2,147,000		3,155,000
Deferred tax liabilities:
Programming costs		1,747,000		2,715,000
Other assets		400,000		440,000
Total deferred tax liabilities		2,147,000		3,155,000
Net deferred tax asset	$	—	$	—

The Company and its subsidiaries have combined net operating losses of approximately $49,627,000, $10,843,000 of which were incurred before 2018 and expire between 2031 and 2037 with the balance of $38,784,000 having no expiration under changes made by the Tax Cuts and Jobs Act but may only be utilized generally to offset only 80 percent of taxable income. The ultimate realization of the tax benefit from net operating losses is dependent upon future taxable income, if any, of the Company.

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased by more than 50 percentage points. Additionally the separate-return-limitation-year (SRLY) rules that apply to consolidated returns may limit the utilization of losses in a given year when consolidated tax returns are filed. Management has determined that because of a recent history of recurring losses, the ultimate realization of the net operating loss carryovers is not assured and has recorded a full valuation allowance. Public trading of company stock poses a risk of an ownership change beyond the control of the Company that could trigger a limitation of the use of the loss carryover.

The deferred tax asset valuation allowance increased by $3,307,000 and $2,920,000 during the three months ended September 30, 2021 and 2020, respectively. The deferred tax asset valuation allowance increased by $7,192,000 and $7,323,000 during the nine months ended September 30, 2021 and 2020, respectively.