Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes for the year ended December 31, 2021 and 2020, respectively, consisted of:

	Year Ended December 31,
	2021		2020
	(in thousands)
Current
Federal	$	4,504	$	109
State	1,068		1,212
	5,572		1,321
Deferred
Federal	(576)		4,172
State	93		(234)
	(483)		3,938
Provision for income taxes	$	5,089	$	5,259

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

The Company’s deferred tax assets (liabilities), calculated using effective tax rates is as follows:

	December 31, 2021		December 31, 2020
	(in thousands)
Deferred tax assets:
State taxes	$	257	$	237
Reserves	537		590
Accruals & deferred expenses	188		132
Tenant improvement allowance	1,216		1,336
R&D credit	44		45
Section 263A	1,196		993
Government grant	311		235
Stock based compensation	267		—
Total deferred tax assets	4,016		3,568
Deferred tax liabilities:
Fixed assets – depreciation	(9,518)		(9,613)
Investment in Global Wells Investment Group	(132)		(72)
Total deferred tax liabilities	(9,650)		(9,685)
Net deferred tax liability	$	(5,634)	$	(6,117)

Reconciliation of income taxes are as follows from statutory rate of 21% to the effective tax rate for the year ended December 31, 2021 and 2020, respectively:

	Year Ended December 31,
	2021		2020
	(in thousands)
Income tax computed at the federal statutory rate	$	5,780	$	4,608
State taxes, net of federal tax benefits	1,055		939
Noncontrolling Interest -Income not subject to tax	(349)		178
Government forgiveness of debt	(1,050)		—
Permanent items	201		100
R&D Credit	(239)		(295)
Excess tax benefit from stock based compensation	(237)		—
Other	(72)		(271)
Provision for income taxes	$	5,089	$	5,259

The Company applies the provision of ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of these assets is more-likely-than-not. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Based upon the level of historical taxable income, at this time, the Company determined that sufficient positive evidence existed to conclude that it is more likely than not there will be full utilization of the deferred tax assets in each jurisdiction. As such, as of December 31, 2021, the Company did not record any valuation allowance.

The Company may be audited by the Internal Revenue Service and various state tax authorities. Disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations. The Company evaluates its exposures associated with the tax filing positions and, while it believes its positions comply with applicable laws, may record liabilities based upon estimates of the ultimate outcome of these matters and the guidance provided in ASC 740.

The Company remains subject to IRS examination for the 2016 through 2020 tax years, and has received notice in February 2019 that it is under examination for years 2016 and 2017. Additionally, the Company files multiple state and local income tax returns and remains subject to examination in various of these jurisdictions, including California for the 2016 through 2020 tax years and South Carolina for the 2017 through 2020 tax years.

The Company accounts for uncertainties in income tax in accordance with ASC 740-10 — Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of income. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet. As of December 31, 2021, and 2020, the Company did not have any unrecognized tax benefit.

On March 27,2020, the CARES Act was signed into law by the President. The CARES act provides several favorable tax provisions. The Company evaluated the impacts of CARES Act and determined it has no material impact to the income tax provision.

The Taxpayer Certainty and Disaster Relief Act of 2020, enacted on December 27, 2020, added a temporary exception to the 50% limit (TCJA) on the amount that businesses may deduct for food or beverages. Beginning January 1, 2021, through December 31, 2022, the temporary exception allows a 100% deduction for food or beverages from restaurants. The Company evaluated the impacts and incorporated such impacts into its income tax provision.

On March 10, 2021, the American Rescue Plan Act of 2021 was signed into law by the president. The American Rescue Plan Act of 2021 provides several tax provisions. The Company evaluated the impacts of the American Rescue Plan Act of 2021 and determined it has no material impact to the income tax provision.