Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

The provision (benefit) for income taxes attributable to income from operations includes the following (in thousands):

	For the Years Ended December 31,
	2020			2019			2018
Current (benefit) provision
Federal	$	—		$	25		$	(29	)
State		(77	)		68			(17	)
Total current		(77	)		93			(46	)

Deferred provision (benefit)
Federal		27			88			15
State		4			(285	)		62
Total deferred		31			(197	)		77
Total (benefit) provision	$	(46	)	$	(104	)	$	31

Reconciliation of Effective Tax Rate

The provision for income taxes related to operations varies from the amount determined by applying the federal income tax statutory rate to the income or loss before income taxes. The reconciliation of these differences is as follows:

	For the Years Ended December 31,
	2020			2019			2018
Computed expected income tax provision		21.0	%		21.0	%		21.0	%
State income taxes, net of federal income tax benefit		1.0			(0.7	)		19.0
Change in valuation allowance for deferred tax assets		17.0			(24.7	)		(43.5	)
Cumulative deferred adjustments		0.7			(1.1	)		--
Provision to return adjustments		0.5			1.3			(1.7	)
Other permanent differences		1.0			(3.8	)		6.1
Dividend and accretion on preferred stock		10.5			(35.8	)		45.4
Gain on redemption of preferred stock		(43.3	)		—			—
Section 162(m) limitation - covered employees		14.6			(6.9	)		5.1
Capitalization of IPO transaction costs		4.4			—			—
FIN 48 liability		0.2			(3.7	)		4.2
R&D credit		(12.4	)		19.0			(25.2	)
Non-controlling interest		(15.9	)		40.0			(40.1	)
Impact of Tax Act		—			—			11.4
		(0.7	)%		4.6	%		1.7	%

Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019 are as follows (in thousands):

	December 31,
	2020			2019
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	78		$	185
Allowance for inventory obsolescence and amortization		398			316
Accrued liabilities not currently deductible		2,204			1,649
Accrued compensation		1,161			1,655
Deferred rent		4,387			4,808
Section 163(j) interest limitation		306			804
Goodwill		41,534			—
Net operating loss carryforwards - federal		3,814			2,583
Net operating loss carryforwards - state		1,002			796
Federal tax credit		1,986			1,326
Total gross deferred tax assets		56,870			14,122
Less valuation allowance		(52,198	)		(7,206	)
Total deferred tax assets, net of valuation allowance		4,672			6,916
Deferred tax liabilities:
Amortization and depreciation		(4,471	)		(2,623	)
Unbilled accounts receivable, deferred for tax purposes		(853	)		(1,611	)
Goodwill basis adjustment and amortization		—			(2,886	)
Telos ID basis difference		—			(417	)
Total deferred tax liabilities		(5,324	)		(7,537	)
Net deferred tax liabilities	$	(652	)	$	(621	)

Components of Valuation Allowance

The components of the valuation allowance are as follows (in thousands):

	Balance Beginning of Period		Additions		Recoveries			Balance End of Period

December 31, 2020	$	7,206	$	44,992	$	--		$	52,198
December 31, 2019	$	6,652	$	554	$	--		$	7,206
December 31, 2018	$	7,219	$	--	$	(567	)	$	6,652

Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

	2020			2019			2018
Unrecognized tax benefits, beginning of period	$	714		$	649		$	585
(Decrease) increase in prior year tax positions		(104	)		1			3
Increase related to current year tax positions		213			101			92
Decrease related to lapse of statutes		(60	)		(37	)		(31	)
Unrecognized tax benefits, end of period	$	763		$	714		$	649