Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13 – Income Taxes

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Current provision:
Federal	$	—	$	—	$	—	$	—
States		39,000		30,000	$	73,000		59,000
Total current provision		39,000		30,000		73,000		59,000
Deferred provision:
Deferred income tax (benefit) provision		(27,359,839)		—		(27,359,839)		—
Total deferred (benefit) provision		(27,359,839)		—		(27,359,839)		—
Total income tax (benefit) provision	$	(27,320,839)	$	30,000	$	(27,286,839)	$	59,000

For the nine months ended September 30, 2022, the Company's effective income tax rate was a benefit of 35.9%, which differed from the federal statutory rate of 21.0% primarily due to the release of a portion of the Company’s valuation allowance as a result of the acquired deferred tax liability of Redbox.  In connection with the Redbox acquisition, the Company recorded a deferred tax liability of $40.2 million, which enabled the Company to release a portion of beginning of year’s valuation allowance of $27.4 million. For the nine months ended September 30, 2021, the Company’s effective income tax rate was a benefit of 0.0% primarily due to the release of a portion of the beginning of the year’s valuation allowance due to the Redbox acquisition.

The Company evaluates its deferred tax assets on a quarterly basis to determine if they can be realized and establishes a valuation allowance when it is more likely than not that all or a portion of the net deferred tax asset may not be realized. At September 30, 2022, the Company determined that a portion of its deferred tax assets are not more likely than not to be realized. The Company maintains a valuation allowance against the net operating loss carryovers of A Sharp and Pivot Share, since it was determined that it is more likely than not, based on available objective evidence, that these separate filing jurisdictions would have insufficient taxable income in the current or carryforward periods under the tax laws to realize the future tax benefits for this portion of its deferred tax assets.  

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022 with certain exclusions for (a) repurchased shares for withholding taxes on vested restricted stock units (“RSUs”) and (b) treasury shares reissued in the same tax year for settlement of stock option exercises or vesting of RSUs. While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate its impact as further information becomes available.