Income Taxes

3 Months Ended

Apr. 01, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 14 – INCOME TAXES

Following the consummation of the Atlas Business Combination, we are organized as an umbrella partnership C-Corporation structure also known as 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 except for 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 Atlas Technical Consulting, Inc, the C-Corps owned directly by Atlas Intermediate, the State of Texas Margin tax, and the State of Washington Business and Occupation tax are considered within the provision of non-controlling interest as it is generated through the results of Atlas Intermediate and its subsidiaries.

Our effective tax rate from continuing operations was (3.4%) and (0.2%) for the quarters ending April 2, 2022 and April 2, 2021, 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 and the effect of non-controlling interest in income of consolidated subsidiaries..

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, a valuation allowance 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 April 1, 2022 or December 31, 2021. Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. There are no accruals for interest and penalties as of April 1, 2022 or December 31, 2021.