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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
 
The following table reflects Net income (loss) before income taxes by source for the years ended December 31, 2022 and 2021 (in thousands):
 
Year ended December 31,
20222021
U.S.$30,734 $(574)
Outside the U.S.432 21 
Net income (loss) before income taxes$31,166 $(553)

The following table reflects (benefit) provision for income taxes for the years ended December 31, 2022 and 2021 (in thousands):
 
Year ended December 31,
20222021
Current:
Federal$1,023 $124 
State893 387 
Total current taxes$1,916 $511 
Deferred:  
Federal$(61,077)$— 
State(19,298)217 
Total deferred taxes(80,375)217 
Total (benefit) provision for income taxes$(78,459)$728 
 
The following table reflects a reconciliation of income taxes at the statutory federal income tax rate to the actual tax rate included in the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021 (in thousands): 
Year ended December 31,
 20222021
Tax at federal statutory rate$6,545 $(116)
State tax, net of federal benefit1,358 242 
Disallowed officers' compensation 829 207 
Stock based compensation1,998 1,083 
Change in valuation allowance(89,251)(2,131)
Uncertain tax provisions198 233 
Tax return benefit— (63)
Return to provision(171)1,247 
Other35 26 
Total tax (benefit) provision$(78,459)$728 
 
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes a new book-minimum tax on certain large corporations, an excise tax on stock buybacks, and tax incentives to address climate change mitigation and clean energy. The Company considered the income tax accounting implications of the IRA to the Company’s income tax provision calculation for the year ended December 31, 2022, and determined that the impact was not significant.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. The CARES ACT was a tax-and-spending package intended to provide additional economic relief to address the impact of the COVID-19
pandemic. The CARES Act, among other business tax provisions, included legislative changes and updates to net operating losses (“NOLs”), interest disallowance, and depreciation for qualified improvement property. The Company considered the income tax accounting implications from the CARES Act to the Company’s income tax provision calculation for the year ended December 31, 2022. Prior to the enactment of the CARES Act, federal NOLs generated after December 31, 2017 could not be carried back to prior tax years. Upon the enactment of the CARES Act, federal NOLs generated in tax years 2018, 2019, and 2020 can be carried back to the previous five tax years without taxable income limitation. During 2021, the Company filed a carryback claim for the 2020 federal taxable loss to the 2018 and 2019 tax years to offset taxable income (and federal taxes paid) for those two tax years. During 2022, the Company received the requested tax refund of $8.3 million for such carryback claim.

During the year ended December 31, 2022, the Company recorded an income tax benefit of $78.5 million, principally due to a reversal of previously recorded valuation allowances, offset by the state tax expense, stock-based compensation, and disallowed officer’s compensation.

During the year ended December 31,2021, the Company recorded an income tax expense of $0.7 million, principally due to the state tax expense, disallowed officer’s compensation, and interest accrued for uncertain tax position, offset by the changes in valuation allowance.

Utilization of the Company’s net operating loss and credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Deferred income taxes reflect the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table reflects significant components of the Company’s deferred income taxes as of December 31, 2022 and 2021 (in thousands): 
December 31,
 20222021
Deferred tax assets:  
Net operating losses$67,927 $78,085 
Tax credit carryforwards1,362 2,813 
Stock-based compensation1,529 2,770 
Operating lease liabilities 96 545 
Reserves and other accruals not currently deductible22,519 19,800 
Disallowed interest carryforward12,060 15,147 
Total deferred tax assets105,493 119,160 
Valuation allowance for deferred tax assets(12,524)(101,775)
 $92,969 $17,385 
Deferred tax liabilities:  
Intangible assets$(12,554)$(16,812)
Convertible debt— (228)
Fixed Assets(180)(349)
Operating lease right-of-use assets(33)(168)
Net deferred tax asset (liability)$80,202 $(172)

The valuation allowance decreased $89.3 million to $12.5 million during the year ended December 31, 2022. During the year ended December 31, 2022, the Company reversed a majority of its previously recorded valuation allowances against the net deferred tax asset. As part of its valuation assessment, the Company primarily relied on its projected availability of future taxable income from pre-tax income forecasts and reversing taxable temporary differences. The Company did retain $12.5 million of valuation allowance because realization of the future benefits for the associated deferred tax assets is not considered more-likely-than-not to occur. The Company continues to assess the realizability of its deferred tax assets on a quarterly basis and assess whether an additional reserve or a release of a valuation allowance is required in future periods.
As of December 31, 2022, the Company had federal NOLs of $254.9 million with no expiration, and $31.5 million expiring in 2036. NOL carryforwards for state income tax purposes are $143.6 million, which begin to expire in 2025. Utilization of the Company’s NOL and credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

The Company does not have any significant federal or state tax examinations in process as of December 31, 2022. The federal and state statute of limitations remains open primarily for the 2017 through 2021 tax years. The California statute of limitations is open for the 2007 through 2021 tax years.

The following table reflects activity related to the Company’s unrecognized tax benefits for the years ended December 31, 2022 and 2021 (in thousands):
 
Unrecognized tax benefits—December 31, 2020$4,101 
Increases related to current year tax positions— 
Changes in prior year tax positions— 
Decreases related to lapse of statutes— 
Unrecognized tax benefits—December 31, 2021$4,101 
Increases related to current year tax positions— 
Changes in prior year tax positions— 
Decreases related to lapse of statutes— 
Unrecognized tax benefits—December 31, 2022$4,101 
 
The total amount of unrecognized tax benefit that would affect the effective tax rate is $4.1 million as of December 31, 2022 and December 31, 2021.

The Company does not expect a significant change to its unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.