PROVISIONS FOR INCOME TAXES

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

PROVISIONS FOR INCOME TAXES

PROVISIONS FOR INCOME TAXESThe provision for income taxes for the three months ended March 31, 2022 was zero, resulting in an effective income tax rate of zero. The provisions for income taxes for the twelve months ended December 31, 2021 and three months ended March 31, 2021 were also zero, resulting in effective income tax rates of zero. The difference between the statutory income tax rate of 21% and the Company’s effective tax rate for the three months ended March 31, 2022 is primarily due to pre-tax loss attributable to the non-controlling interest and due to maintaining a valuation allowance against the Company’s deferred tax assets. The difference between the statutory income tax rate of 21% and the Company’s effective tax rate for the twelve months ended December 31, 2021 was primarily due to pre-tax losses attributable to the non-controlling interest and to the period prior to the Reorganization (i.e., prior to the incorporation of Stronghold Inc.), and due to maintaining a valuation allowance against the Company’s deferred tax assets. Prior to the Reorganization, Scrubgrass and Stronghold

Power were pass-through or disregarded entities for income tax purposes such that any taxable income or loss was included in the income tax returns of their owners. Accordingly, no income tax provision was recorded in the Company’s financial statements for the three months ended March 31, 2021.

The determination to record a valuation allowance was based on management’s assessment of all available evidence, both positive and negative, supporting realizability of the Company’s net operating losses and other deferred tax assets, as required by applicable accounting standards (ASC Topic 740, Income Taxes (“ASC 740”)). In light of the criteria under ASC 740 for recognizing the tax benefit of deferred tax assets, the Company maintained a valuation allowance against its federal and state deferred tax assets as of December 31, 2021 and through March 31, 2022.