Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

INCOME TAXES

16. INCOME TAXES

Our income tax expense (benefit) aggregated $9,165 and ($10,136) (amounting to 13% and (1%) of our loss before income taxes) during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had federal net operating loss carryforwards of $14,734,684 of which $13,022,777 do not expire and of which $1,711,907 expire in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $1,440,707 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $557,795 that expire in 2027 through 2042 (if not utilized before then) and state tax credit carryforwards of $775,473 that expire in 2022 through 2042 (if not utilized before then).

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates, or we adjust these estimates in future periods, we may need to adjust our valuation allowance. Adjustments related to the termination of our interest rate swap agreements were recorded during the first quarter of 2020. No subsequent adjustments were recorded.

Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined.

We file income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying audited financial statements.

The income tax provision consisted of the following:

	During the Years Ended December 31,
	2021			2020
Current
Federal	$	—		$	—
State		9,165			4,496
Current subtotal		9,165			4,496
Deferred
Federal		(63,097	)		(418,295	)
State		(14,990	)		(24,337	)
Deferred subtotal, gross		(78,087	)		(442,632	)
Valuation allowance		78,087			428,000
Deferred subtotal, net		—			(14,632	)
Income tax expense (benefit)	$	9,165		$	(10,136	)

The actual income tax expense differs from the expected tax computed by applying the U.S. federal corporate tax rate of 21% to the loss before income taxes during the years ended December 31, 2021 and 2020 respectively, as follows:

	During the Years Ended December 31,
	2021						2020
	$			%			$			%
Computed expected income tax expense rate	$	(14,517	)		(21.00	)%	$	(216,773	)		(21.00	)%
State income taxes, net of federal expense		7,522			10.88			(15,674	)		(1.52	)
Share-based compensation		13,716			19.84			30,121			2.92
Tax credits		(79,901	)		(115.58	)		(55,180	)		(5.35	)
Valuation allowance		78,087			112.96			428,000			41.46
Paycheck Protection Program loan forgiveness		—			—			(196,917	)		(19.08	)
Other		4,258			6.16			16,287			1.59
Income tax expense (benefit)/rate	$	9,165			13.26	%	$	(10,136	)		(0.98	)%

The significant components of our deferred tax assets, net, consisted of the following:

	As of December 31,
	2021			2020
Product rights	$	—		$	444
Property, plant and equipment		(2,483,145	)		(2,482,237	)
Federal general business tax credits		557,795			490,018
Federal net operating loss carryforwards		3,094,283			3,074,882
State tax credits carryover		809,618			826,091
Prepaid expenses and other		(6,289	)		(8,814	)
UNICAP		14,178			11,791
Incentive compensation		57,001			53,179
Valuation allowance		(2,043,441	)		(1,965,354	)
Deferred tax assets, net	$	—		$	—