Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes for the years ended December 31, 2023 and 2022, respectively, consisted of:

	Year Ended December 31,
	2023		2022
	(in thousands)
Current
Federal	$	8,987	$	6,291
State	1,776		863
	10,763		7,154
Deferred
Federal	(1,052)		(502)
State	93		24
	(959)		(478)
Provision for income taxes	$	9,804	$	6,676

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, 2023		December 31, 2022
	(in thousands)
Deferred tax assets:
State taxes	$	436	$	252
Reserves	503		825
Accruals and deferred expenses	794		66
Research and development credit	40		43
Inventory	1,012		1,042
Government grant	—		343
Stock based compensation	282		573
Capitalized research and development costs	1,741		1,043
Operating lease liabilities	9,140		8,452
Total deferred tax assets	13,948		12,639
Deferred tax liabilities:
Fixed assets – depreciation	(9,902)		(10,350)
Investment in Global Wells Investment Group	(234)		(172)
Operating ROU asset	(8,009)		(7,273)
Total deferred tax liabilities	(18,145)		(17,795)
Net deferred tax liability	$	(4,197)	$	(5,156)

Reconciliation of income taxes are as follows from statutory rate of 21% to the effective tax rate for the year ended December 31, 2023 and 2022, respectively:

	December 31, 2023		December 31, 2022
	(in thousands)
Income tax computed at the federal statutory rate	$	8,988	$	6,828
State taxes, net of federal tax benefits	1,609		1,101
Noncontrolling Interest - Income not subject to tax	(115)		(460)
Permanent items	42		31
Excess tax benefit from stock based compensation	(187)		(89)
Research and development credit	(417)		(455)
Others	(116)		(280)
Provision for income taxes	$	9,804	$	6,676

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. As of December 31, 2023 and 2022, the Company does not have any unrecognized tax benefit.

The Company remains subject to IRS examination for the 2020 through 2022 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 for the 2019 through 2022 tax years.

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, 2023, and 2022, based on the available evidence, the Company did not record any valuation allowance.

In August 2022, the Inflation Reduction Act of 2022 (the "Act") was signed into law. The Act, among other things, imposes a nondeductible 1% excise tax on the fair market value of certain stock that is "repurchased" during the taxable year by publicly traded U.S. corporations or acquired by certain of its subsidiaries. The taxable amount is reduced by the fair market value of certain issuances of stock throughout the year. The Act also imposes a 15% corporate minimum tax on the adjusted financial statement income of large corporations for taxable years beginning after December 31, 2022. We do not expect these tax law changes to have a material impact on our consolidated financial statements; however, we will continue to evaluate their impact.

In March 2023, the IRS announced the Winter Storm Relief that allowed for taxpayers in California affected by severe winter storms, flooding, landslides, and mudslides to have until November 15, 2023, to file various individual and business tax returns and make tax payments. The Company took advantage of this tax relief in the current year.