Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

At June 30, 2020 and December 31, 2019, the Company had no unrecognized tax benefits, no accrued interest and penalties, and no significant uncertain tax positions.  No interest and penalties were recognized during the six months ended June 30, 2020 and 2019.

At June 30, 2020 and December 31, 2019, the Company had unused net operating loss (“NOL”) carryforwards of $1,133,600 and $3,600,298, respectively, which will begin to expire in 2038, if unused.  The Company’s remaining unused NOLs that were generated prior to the conversions and merger in 2019 are subject to limitations under Section 382 of the Internal Revenue Code and are limited in the amount that can be utilized in any one year. The Company’s NOL balance at June 30, 2020 primarily consists of taxable losses that were generated by the holding company in 2020.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law.  The CARES Act includes certain income tax-related law changes that have a material effect on the Company’s deferred income taxes.  The most significant effect on the Company’s deferred income taxes is due to changes in the federal net operating loss carryback provisions which allow the Company to carryback NOLs originating in 2018 and 2019 to prior tax years with corporate income tax rates of 34% (as opposed to forward to future tax years with corporate income tax rates of 21%).  As a result of this legislation, during the first six months of 2020, the Company significantly reduced its NOL balance by $2,969,550, or $623,606 tax-effected, and recorded additional federal income tax refunds of $1,205,964.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all the Company’s deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), tax planning strategies, and projected future taxable income in making this assessment.  At June 30, 2020 and December 31, 2019, management determined that it was more likely than not that all of the deferred tax assets will be realized by the Company in future years.  Accordingly, the Company did not record a valuation allowance against its deferred tax assets at June 30, 2020 and December 31, 2019.