As of December 31, 2020 and 2019 the Company recorded an income tax benefit of $1,737,000 and income tax expense of $128,000, respectively. The decrease in the Company’s provision for income taxes as of December 31, 2020 is due to a loss on the write down of impaired assets.


	YEARS ENDED DECEMBER 31,
	2020		2019
Current:
Federal	$	209,000	$	443,000
State	88,000		207,000
Foreign	117,000		130,000
Total current	414,000		780,000

Deferred:
Federal	(1,909,000)		(311,000)
State	(266,000)		(251,000)
Foreign	24,000		(90,000)
Total deferred	(2,151,000)		(652,000)

	$	(1,737,000)	$	128,000


	DECEMBER 31,
	2020		2019
Deferred tax liabilities:
Property and equipment	$	(564,000)	$	(3,112,000)

Total deferred tax liabilities	(564,000)		(3,112,000)

Deferred tax assets:
Net operating loss carryforwards	99,000		117,000
Accruals and allowances	43,000		248,000
Tax credits	5,000		4,000
Other – net	50,000		229,000
Capital loss carryover	627,000		921,000

Total deferred tax assets	824,000		1,519,000

Valuation allowance	(678,000)		(921,000)

Deferred tax assets net of valuation allowance	146,000		598,000

Net deferred tax liabilities	$	(418,000)	$	(2,514,000)

The (benefit) provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (21% in 2020 and 2019) to income before taxes as follows:


	YEARS ENDED DECEMBER 31,
	2020		2019
Computed expected federal income tax	$	(1,844,000)	$	167,000
State income taxes, net of federal benefit	(199,000)		(80,000)
Non-deductible expenses	6,000		29,000

Return to Provision True-up	22,000		39,000
Uncertain Tax Positions	16,000		80,000
Capital loss carryforward expiration	246,000		—
Change in valuation allowance	(243,000)		(175,000)
Other deferred tax adjustments	259,000		68,000

	$	(1,737,000)	$	128,000

At December 31, 2020, the Company exhausted the remainder of its net operating loss carryforward for federal income tax return purposes. The Company has net operating loss carryforwards for state income tax purposes of approximately $2,219,000 that begin to expire in 2029. The Company has net operating loss carryforwards for its international subsidiaries of approximately $32,000.

Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions. Any annual limitation may result in the expiration of net operating losses and credits before utilization.

At December 31, 2020, the Company has a capital loss carryforward for federal income tax return purposes of approximately $2,586,000 which starts to expire in 2021. The Company has capital loss carryforwards for state income tax purposes of approximately $129,000 which starts to expire in 2021.

Due to uncertainty surrounding the realization of impairment losses, capital losses and foreign operating losses in future years, the Company has placed a valuation allowance against a portion of its net domestic and foreign deferred tax assets. The net valuation allowance decreased by $243,000 and $175,000 for the tax years ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2019, the Company released the valuation allowance related to GKPeru deferred tax assets, which resulted in an income tax benefit of $104,000. The Company concluded, based upon the preponderance of positive evidence (i.e. cumulative profit before tax adjusted for permanent items over the previous twelve quarters, a history of taxable income in recent periods, and the current forecast of income before taxes for GKPeru going forward) over negative evidence and the anticipated ability to use the deferred tax assets, that it was more likely than not that the deferred tax assets will be realized. If there are unfavorable changes to actual operating results or to projections of future income, the Company may determine that it is more likely than not such deferred tax assets may not be realizable.

The tax return years 2016 through 2019 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. In 2019, the Company settled a New York State examination for tax years 2015 through 2017 with no material adjustments. Net operating losses generated on a tax return basis by the Company for calendar years 1999 through 2004, 2009, 2010, 2012, 2014, 2015, 2016, 2017 and 2018 remain open to examination by the major domestic taxing jurisdictions.

The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company's income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Additionally, these accounting standards specify that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. The Company has made no reclassifications between current taxes payable and long term taxes payable under this guidance.

As of December 31, 2020, the unrecognized tax benefit was $275,000 which, if recognized, will not affect the annual effective tax rate as these unrecognized tax benefits would increase deferred tax assets which would be subject to a full valuation allowance. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:


	YEARS ENDED DECEMBER 31,
	2020		2019
Balance at beginning of year	$	259,000	$	87,000

Additions based on tax positions of prior years	16,000		172,000

Balance at end of year	$	275,000	$	259,000

The Company's policy for deducting interest and penalties is to treat interest as interest expense and penalties as taxes. As of December 31, 2020, the Company had $15,000 accrued for the payment of penalties and zero interest related to unrecognized tax benefits. The Company does not expect any material changes to our uncertain tax positions within the next 12 months.