Note 6 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6.

     

Income Taxes

The provision for income tax (benefit) expense consists of (in thousands):

	20 20			2019
Current:
Federal	$	(247	)	$	-
State		-			(84	)
Total current		(247	)		(84	)
Deferred:
Federal		247			-
State		-			-
Total deferred		247			-
Income tax (benefit) expense from continuing operations	$	-		$	(84	)

A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:

	2020			2019
Federal statutory rate		21.0	%		21.0	%
State tax, net of federal benefit		(0.1	)		3.8
Deferred correction – State NOLs		(359.7	)		(122.7	)
Permanent differences		2.3			-
Valuation allowance increase		360.4			(3.9	)
Other, net		(24.0	)		4.3
Effective income tax rate		-	%		(97.6	)%

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at

December 31

follow (in thousands):

	2020			2019
Noncurrent deferred tax assets:
Equity method investment	$	195		$	99
Other accrued expenses		33			32
Notes receivable fair value adjustment		319			578
Employee benefits		50			65
Capital loss carryforward		11			-
AMT credit		-			247
Net operating loss		7,861			7,726
Gross non-current deferred tax assets		8,469			8,747
Noncurrent deferred tax liabilities:
Property, tax, and equipment	$	(1	)	$	(1	)
Non-taxable dividends		(193	)		-
Valuation allowance		(8,275	)		(8,499	)
Gross non-current deferred tax liabilities		(8,469	)		(8,500	)
Net noncurrent deferred tax assets	$	-		$	247

We have U.S. federal net operating loss carryforwards of approximately

$35.3

million which are available to reduce future taxable income. The federal net operating loss will begin expiring in

2033.

We have combined state net operating loss carryforwards of

$22.5

million that will expire at various times beginning in

2027.

During

2020,

we recorded a non-cash credit to our valuation allowance of approximately

$226,000

against our

December 31, 2020

deferred tax assets.  The primary assets which are covered by this valuation allowance are employee benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The valuation allowance was calculated in accordance with the provisions of ASC

740,

Income Taxes

, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance.  Our results over the most recent

four

-year period were heavily affected by our business restructuring activities. Our cumulative loss represented sufficient negative evidence to require a valuation allowance.  We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in

no

deferred tax asset balance being recognized.  Should we determine that we will

not

be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made. 

The unrecognized tax benefits activity for the year ended

December 31

follows (in thousands):

	20 20		20 19
Unrecognized tax benefits balance at January 1	$	157	$	241
Gross decrease in tax positions of prior years		-		(84	)
Unrecognized tax benefits balance at December 31	$	157	$	157

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is

$157,000

at

December 31, 2020

and

2019.

The

2013

through

2019

tax years remain open to examination by major taxing jurisdictions.