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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Note 13 – Income Taxes

Income from operations before income taxes consisted of the following:
Year Ended December 31,
(in thousands)20222021
United States$910 $(6,548)
Foreign12,027 1,809 
Total$12,937 $(4,739)
Provision (benefit) for income taxes from operations consisted of the following:
Year Ended December 31,
(in thousands)20222021
Current income tax expense:
U.S. federal$4,011 $3,106 
U.S. state869 806 
Foreign3,057 400 
Total$7,937 $4,312 
Deferred income tax expense (benefit):
U.S. federal$(947)$(3,324)
U.S. state(73)(529)
Foreign(1,386)(146)
Total$(2,406)$(3,999)
Total income tax expense (benefit):
U.S. federal$3,063 $(218)
U.S. state796 277 
Foreign1,672 254 
Total$5,531 $313 

The reconciliation between the effective income tax rates and the statutory federal rates for operations are as follows:
Year Ended December 31,
20222021
Statutory Federal rate21.0 %21.0 %
Increase (decrease) resulting from:
Change in valuation allowance - current period activity1.3 (5.5)
Foreign rate differential4.0 3.8 
Stock compensation(0.5)— 
State and local taxes, net4.5 (4.6)
Meals & entertainment1.4 (0.7)
Change in uncertain tax positions(2.9)— 
GILTI, Section 78, FDII, and Section 2503.2 (3.3)
Transaction costs8.3 (16.1)
Earn Out Revaluation0.8 — 
Other items, net1.7 (1.2)
Provision for income taxes42.8 %(6.6)%

The effective tax rate for the year ended December 31, 2022 was 42.8% compared to a (6.6)% effective tax rate for the year ended December 31, 2021. The change in the year over year effective tax rate was primarily due to changes in the valuation allowance and merger costs incurred during 2022, and the creation of a consolidated group for federal income tax purposes as a result of the completion of the Mergers referenced in Note 3 – Business Acquisitions. Relative to the U.S. statutory rate, the effective tax rate for the year ended December 31, 2022 was impacted by state taxes, foreign operations and liabilities and transaction expenses related to the Mergers.

At December 31, 2022, the Company had $24.2 million of U.S. federal net operating loss carryforwards which are subject to expiration beginning in 2026 and $28.7 million of various state net operating loss carryforwards which expire at varying dates between 2023 and 2034.
Deferred income tax assets and liabilities contain the following temporary differences:
December 31,
(in thousands)20222021
Deferred tax assets:
Federal & state NOL carryforward$8,218 $8,646 
Research & other credits— 281 
Inventory reserve6,990 4,059 
Transaction costs1,620 1,179 
Reserves and accruals— 464 
Stock based compensation2,531 510 
Accrued benefits & bonuses7,074 1,218 
Bad debt reserve496 726 
Section 163(j) limitation carryforward7,692 5,232 
ROU liabilities11,947 5,410 
Deferred state income tax745 93 
Deferred revenue86 124 
Other2,822 81 
Total deferred tax assets50,221 28,023 
Deferred tax liabilities:
Intangible assets and goodwill45,951 16,006 
ROU asset11,295 5,117 
Fixed assets15,617 6,685 
Deferred state income tax— 119 
Other188 — 
Total deferred liabilities73,051 27,927 
Net deferred tax liabilities before valuation allowance(22,830)96 
Valuation allowance(815)(638)
Net deferred tax liabilities$(23,645)$(542)

Earnings from the Company's foreign subsidiaries are considered to be indefinitely reinvested. A distribution of these non-U.S. earnings in the form of dividends or otherwise would subject the company to foreign withholding taxes and may subject the Company to U.S. federal and state taxes. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not feasible primarily due the Company's legal entity structure and the complexity of U.S. tax laws.

Global Intangible Low Taxed Income (GILTI) is a deemed amount of income derived from controlled foreign corporations (CFCs) in which a U.S. person is a 10% direct or indirect shareholder. The Company owns numerous CFCs, which are subject to GILTI inclusion. However, because several of the CFCs operate in countries with a high tax rate, notably Canada, Denmark and Mexico, it was determined that a Section 954 High Tax Exception to GILTI inclusions is appropriate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
(in thousands)20222021
Balance at beginning of year$— $— 
Additions for tax positions of current year191 — 
Additions for tax positions of prior years3,741 — 
Reductions for tax positions of prior year(238)— 
Lapse of statute of limitations(667)— 
Balance at end of year$3,027 $— 
The recognition of the unrecognized tax benefits would have a favorable effect on the effective tax rate. The unrecognized tax benefits as of December 31, 2022 include $2.4 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. It is reasonably possible that an additional reduction of up to $0.8 million of unrecognized tax benefits may occur within the next twelve months, a portion of which would impact our effective tax rate. The actual amount could vary due to the uncertainty of both timing and resolution of income tax examinations. The unrecognized tax benefits are recorded as a component of Other liabilities in the Consolidated Balance Sheets. Interest and penalties related to unrecognized tax benefits are recorded as a component of Income tax expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). Including the impact of interest and the impact of net operating losses, the unrecognized tax benefit was $3.0 million and $0.0 million as of December 31, 2022 and December 31, 2021, respectively, which is recorded in Other liabilities on the Consolidated Balance Sheets. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. As of December 31, 2022, the Company was subject to U.S. federal income tax examinations for the years 2019 through 2021 and income tax examinations from various other jurisdictions for the years 2015 through 2021.