Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11. Income Taxes

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

	2021			2020
Current:
Federal	$	(102	)	$	(247	)
State		-			-
Total current		(102	)		(247	)
Deferred:
Federal		-			247
State		-			-
Total deferred		-			247
Income tax (benefit) expense from continuing operations	$	(102	)	$	-

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

	2021			2020
Federal statutory rate		21.0	%		21.0	%
State tax, net of federal benefit		-			(0.1	)
Deferred correction – State NOLs		-			(359.7	)
FIN 48 unrecognized tax benefits		(4.9	)
State tax credits true-up		(4.7	)		-
Permanent differences		(4.3	)		2.3
Valuation allowance increase		(16.2	)		360.4
Other, net		5.3			(24.0	)
Effective income tax rate		(3.8	)%		-	%

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at December 31 follow (in thousands):

	2021			2020
Noncurrent deferred tax assets:
Equity method investment	$	300		$	195
Goodwill		490			-
Other accrued expenses		27			33
Notes receivable fair value adjustment		480			319
Employee benefits		48			50
Capital loss carryforward		11			11
AMT credit		-			-
Net operating loss		7,662			7,861
Gross non-current deferred tax assets		9,017			8,469
Noncurrent deferred tax liabilities:
Property, tax, and equipment	$	(5	)	$	(1	)
Non-taxable dividends		(429	)		(193	)
Gain on remeasurement of Acquisition		(843	)		-
Valuation allowance		(7,740	)		(8,275	)
Gross non-current deferred tax liabilities		(9,017	)		(8,469	)
Net noncurrent deferred tax assets	$	-		$	-

We have U.S. federal net operating loss carryforwards of approximately $36.4 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 $23.7 million that will expire at various times beginning in 2027.

During 2021, we recorded a non-cash credit to our valuation allowance of approximately $275,000 against our December 31, 2021 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 during that period 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):

	2021			2020
Unrecognized tax benefits balance at January 1	$	157		$	157
Gross decrease in tax positions of prior years		(126	)		-
Unrecognized tax benefits balance at December 31	$	31		$	157

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $31,000 and $157,000 at December 31, 2021 and 2020, respectively. The 2014 through 2020 tax years remain open to examination by major taxing jurisdictions.