INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

13. INCOME TAXES

The components of income (loss) before the provision for income taxes are as follows:

$ in thousands	Year Ended December 31, 2021
Domestic	$	(44,526	)
Foreign		454
Total	$	(44,072	)

The components of the provision (benefit) for income taxes consist of the following:

$ in thousands	Year Ended December 31, 2021
Current tax provision:
Federal	$	-
State		2,344
Foreign		137
Total current tax provision		2,481
Deferred tax provision:
Federal		203
State		(2,276	)
Foreign		-
Total deferred tax provision (benefit)		(2,073	)
Total provision for income taxes	$	408

A reconciliation of the amounts at U.S. federal statutory tax rate to the Company’s effective tax rate is as follows:

$ in thousands	Year Ended December 31, 2021
Provision at federal statutory rate	$	(9,255	)
State income taxes, net of federal tax benefits		54
Goodwill impairment		8,885
Other, net		724
Provision for income taxes	$	408

The Company’s effective tax rate of (0.9)% for the year ended December 31, 2021 was lower than the U.S. federal statutory income tax rate primarily due to the impact of the recognition of an impairment of goodwill associated with Support.com, limits to the deductibility of transaction costs, and other permanent book-tax differences.

Deferred income taxes are provided for the tax effect of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. Significant components of the Company’s deferred tax assets (liabilities) are as follows:

$ in thousands	Year Ended December 31, 2021
Deferred tax assets:
Net operating loss carryforwards	$	21,716
Intangibles		268
Stock-based compensation		456
Capitalized costs		9,327
Other		469
Gross deferred tax assets		32,236
Less: valuation allowance		(6,993	)
Deferred tax assets, net		25,243
Deferred tax liabilities:
Investment in partnership		(8,891	)
Property and equipment		(659	)
Other		(635	)
Deferred tax liabilities		(10,185	)
Total net deferred tax assets	$	15,058

As of December 31, 2021, the Company had net operating loss carryforwards (“NOL”) of approximately $69.7 million for U.S. federal income purposes, of which $1.2 million begins to expire in 2023. The Company also had net operating loss carryforwards for state income tax purposes of approximately $92.3 million, which begin to expire in 2023. As of December 31, 2021, the Company had foreign net loss carryforwards of $6.1 million which will expire in 2029. These net operating losses were acquired with Support.com

in 2021. U.S. Federal NOLs incurred in or after 2018 have an indefinite carryforward period, which can be offset by 80% of future taxable income in any given year.

Utilization of the Company's net operating loss and tax credit carryforwards can become subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and 383 of the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. The Company has performed an analysis of its changes in ownership under Section 382 of the Internal Revenue Code. Management currently believes that the Section 382 limitation will limit utilization of certain acquired net operating loss and tax credit carryforwards of Support.com and may defer the realization of the tax benefit associated with the acquired tax attributes from Support.com.

In assessing the need for a valuation allowance, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company evaluated its ability to realize the tax benefits associated with deferred tax assets by analyzing the relative impact of all the available positive and negative evidence regarding the Company’s forecasted taxable income, the reversal of existing deferred tax liabilities, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. To the extent the Company does not consider it is more likely than not that a deferred tax asset will be recovered, valuation allowance is established.

On the basis of this evaluation, as of December 31, 2021, the Company recorded a partial valuation allowance of approximately $7.0 million on deferred tax assets associated primarily with the state NOL carryfowards and foreign NOL carryforwards acquired with the Support.com. Management believes that it is more likely than not that these deferred tax assets will not be realizable.

The Company files U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The federal statute of limitation is three years and the state and foreign statutes of limitations are three to four years. Due to net operating loss carryforwards, the Company’s income tax returns remain open and subject to examination for tax years 2004 and thereafter by federal and state tax authorities. The 2019 through 2021 tax years generally remain open and subject to audit by foreign tax authorities.

As of December 31, 2021, the Company has not recorded any amounts for unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. The Company’s management does not expect that total amount of unrecognized tax benefits will materially change over the next twelve months