Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 16 – INCOME TAXES

Following the consummation of the Atlas Business Combination, we are organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which our only direct assets consist of common units of Holdings. We are the sole manager of Holdings in accordance with the terms of the Holdings LLC Agreement entered into in connection with the consummation of the Atlas Business Combination.

Previously, Atlas Intermediate was treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the partners and members. As such, no recognition of federal or state income taxes have been provided for in the accompanying consolidated financial statements with the exception of income taxes relating to the C-Corp subsidiaries directly owned by Atlas Intermediate and the State of Texas Margin tax.

Subsequent to the Atlas Business Combination, income taxes relating to the C-Corps owned directly by Atlas Intermediate and the State of Texas Margin tax are considered within the provision of non-controlling interest as it is generated through the results of Atlas Intermediate and its subsidiaries.

(Loss) income before income taxes was follows:

	Year Ended December 31,
	2020			2019
United States	$	(26,929	)	$	9,518

Income tax expense consisted of the following:

	Year Ended December 31,
	2020			2019
Current:
Federal	$	(424	)	$	350
State		283			2,017
Total current income tax expense		(141	)		2,367
Deferred:
Federal		1,731			-
State		(872	)		-
Total deferred income tax expense		859			-
Total income tax expense	$	718		$	2,367

Temporary differences comprising the net deferred income tax asset shown on the accompanying consolidated balance sheets were as follows:

	December 31, 2020			December 31, 2019
Deferred Tax Assets:
Basis difference in flow-through entity	$	14,057		$	-
Accruals and reserves		166			320
Loss carryforwards		2,542			-
Valuation allowance		(15,539	)		-
Total deferred tax assets		1,226			320
Deferred Tax Liabilities:
Basis difference in flow-through entity		(2,704	)		(939	)
Total deferred tax liabilities		(2,704	)		(939	)
Net deferred tax assets	$	(1,478	)	$	(619	)

Our effective tax rate from continuing operations was (2.7%) and 14.1% for the periods ending December 31, 2020 and 2019, respectively. Reconciliation between the amount determined by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations and income tax expense is attributable to changes in our mix of pre-tax losses/earnings, the effect of non-controlling interest in income of consolidated subsidiaries, non-deductible transaction costs and changes in our valuation allowance.

The Company provides a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, as of December 31, 2020, a valuation allowance of approximately $15.5 million has been recorded to reduce net deferred tax assets to an amount that management believes is more than likely not to be realized.

The Company had no unrecognized tax benefits as of December 31, 2020 or December 31, 2019. Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. There are no accruals for interest and penalties on December 31, 2020.

The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2019, 2018 and 2017 are open to audit by federal and state taxing authorities.

At December 31, 2020, the Company had federal net operating loss carry-forwards (“NOLs”) of approximately $8.9 million. The net operating loss carryforward will begin to expire in 2026. Those arising in tax years after 2017 will never expire.