INCOME TAXES

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

During the year ended December 31, 2022, the Company reversed a majority of its previously recorded valuation allowances against the net deferred tax asset (“DTA”). The valuation allowance is determined in accordance with the provisions of ASC 740, Income Taxes, which require an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The exact timing and amount of the valuation allowance releases are subject to change based on the level of profitability achieved in future periods. The Company continues to assess the realizability of its deferred tax assets on a quarterly basis. As part of its valuation allowance assessment, the Company primarily relied on its projected availability of future taxable income from pre-tax income forecasts and reversing taxable temporary differences. As of March 31, 2023, the Company estimates to retain $11.1 million of valuation allowance for the year ending December 31, 2023, because realization of the future benefits for the associated deferred tax assets is uncertain.

For the three months ended March 31, 2023, the Company recorded an income tax benefit of $2.1 million. The difference between the income tax benefit of $2.1 million and the tax at the federal statutory rate of 21.0% to date on current year operations is principally due to state taxes, disallowed officer’s compensation, and capital expenses, offset by a partial reversal of previously recorded valuation allowance.

The Company files income tax returns in the United States federal jurisdiction and in various states, and the tax returns filed for the years 2007 through 2021 and the applicable statutes of limitation have not expired with respect to those returns. Because of NOLs and unutilized R&D credits, substantially all of the Company’s tax years remain open to examination. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense by the Company. As of March 31, 2023, the Company did not have significant accrued interest and penalties associated with unrecognized tax benefits.