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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
(a)CIT

Ideanomics, Inc., and its US subsidiaries are subject to U.S. federal and state income tax.
Taxes that are based on gross revenue, rather than net income, are not CIT. In the year ended December 31, 2021, Timios incurred $0.1 million of such taxes that are included in selling, general and administrative expense in the statement of operations.
CB Cayman was incorporated in the Cayman Islands as an exempted company and is not subject to income tax under the current laws of the Cayman Islands.
Mobile Energy Operation Group Limited, M.Y. Products Global Limited and M.Y. Products Global Holdings Limited were incorporated in the British Virgin Islands (BVI) and are not subject to income tax under the current laws of the British Virgin Islands.
Medici Operation Limited and MEG Technology Services Group Limited were incorporated in HK SAR their activities relate to support and ownership of businesses outside of Hong Kong, and consequently their expenses do not create operating loss carryovers.
Tree Technologies is subject to Malaysian federal income tax. At the acquisition of Tree Technologies at the end of 2019, the Company recognized approximately $8.2 million of deferred tax liabilities related to land-use rights and a distribution and marketing agreement with carrying values well in excess of their tax basis. During the year ended December 31, 2020, Tree Technologies recorded a $3.3 million income tax benefit. This resulted principally from a $3.1 million benefit from amortization and eventual impairment, of the distribution and marketing agreement which resulted in the reversal of the deferred tax liabilities related to the agreement. The remaining $0.2 million benefit resulted from the operating losses creating carryovers that could offset part of the remaining deferred tax liabilities.
During the year ended December 31, 2021, Tree Technologies recorded a $0.4 million deferred tax benefit. This benefit resulted from a net operating loss carryover for the period, part of which was able to offset previously recorded deferred tax liabilities and part of which were offset by a valuation allowance.

With the exception of the two HK SAR companies, the three BVI companies, SSE, incorporated in Singapore, and M.Y. Products LLC, all subsidiaries of Ideanomics China are PRC entities. The income tax provision of these entities is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in the PRC.
In accordance with the CIT Law, effective beginning on January 1, 2008, enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC territory are considered PRC resident enterprises and subject to the PRC income tax at the rate of 25.0% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, and among other items, overall management and control over the production and business, personnel, accounting, and properties of an enterprise. If the Company’s non-PRC incorporated entities are deemed PRC tax residents, such entities would be subject to PRC tax under the CIT Law. Since our non-PRC entities have accumulated losses, the application of this tax rule will not result in any PRC tax liability, if our non-PRC incorporated entities are deemed PRC tax residents.
The CIT Law imposes a 10.0% withholding income tax, subject to reduction based on tax treaty where applicable, for dividends distributed by a FIE to its immediate holding company outside China. Under the PRC-HK tax treaty, the withholding tax on dividends is 5.0% provided that a HK holding company qualifies as a HK tax resident as defined in the tax treaty. No provision was made for the withholding income tax liability as the Company’s foreign subsidiaries were in accumulated loss.
Loss before tax (after impairment of an equity in loss of equity method investees) and the provision for income tax benefit consists of the following components (in thousands):
202120202019
Loss before tax, after impairment of and equity in loss of equity method investees
United States$(256,851)$(82,999)$(88,688)
PRC/Hong Kong/Singapore/Malaysia(11,660)(31,890)(7,724)
$(268,511)$(114,889)$(96,412)
Deferred tax expense (benefit) of net operating loss
United States - Federal$— $— $— 
United States - State— — — 
PRC/Hong Kong/Singapore/Malaysia(371)(241)(176)
(371)(241)(176)
Deferred tax (benefit) of a decrease in the beginning of the year
Valuation allowance as a result of a change in circumstances— — — 
United States - Federal(8,873)— — 
United States - State(1,261)— — 
PRC/Hong Kong/Singapore/Malaysia— — — 
(10,134)— — 
Deferred tax expense (benefit) other than the above two categories
United States - Federal(89)— — 
United States - State(1,359)— (514)
PRC/Hong Kong/Singapore/Malaysia(58)(3,067)— 
Total deferred income tax (expense) benefit(1,506)(3,067)(514)
Current tax expense (benefit) other than benefit of net operating loss
United States - Federal— — — 
United States - State225 — — 
PRC/Hong Kong/Singapore/Malaysia— — 1,107 
Total current income tax (expense) benefit225 — 1,107 
Total income tax expense (benefit)$(11,786)$(3,308)$417 

At the acquisition of each of Timios, WAVE, US Hybrid and Solectrac in 2021, the companies immediately became includable in the consolidated federal tax return of Ideanomics. WAVE will be included in the state tax returns of Ideanomics. In the case of each acquisition, intangible assets were recognized for financial reporting purposes that were not recognized for income tax purposes. This, in combination with some smaller temporary differences of the four acquired businesses, resulted in the recognition of $12.2 million deferred tax liabilities. The federal deferred tax liabilities, and the WAVE state deferred tax liabilities created, resulted in the valuation allowance on Ideanomics’ deferred tax assets being reduced. by a similar amount. Ideanomics’ net deferred tax assets that had previously been judged to be more likely that not to be unable to reduce the Company’s income tax liability. As a result, the net deferred tax assets were completely offset by a valuation allowance. Once the acquisitions of four acquired businesses occurred, a portion of Ideanomics’ deferred tax assets could be utilized in offsetting the newly acquired deferred tax liabilities, this resulted in a one-time income tax benefit of $10.1 million.

The current CIT for 2021 all relates to Timios, which had taxable income since its acquisition in January 2021 resulting from the non-deductibility of amortization and impairment charges.
A reconciliation of the expected income tax derived by the application of the U.S. CIT rate to the Company’s loss before income tax benefit is as follows:
202120202019
U. S. statutory income tax rate21.0 %21.0 %21.0 %
Non-deductible expenses:
Non-deductible stock awards(0.6)(0.6)(1.9)
Non-deductible impairment or disposal of goodwill(10.5)(3.7)— 
Non-deductible acquisition costs(0.7)— — 
Non-deductible officers’ compensation


(0.6)— — 
Non-deductible interest expenses(0.2)(2.0)(1.2)
Additional tax cost basis on disposal of subsidiary0.4 — — 
Expiration of and disposal of subsidiary NOL carryovers(0.5)— — 
Change in state tax rates due to change in state apportionment1.1 1.3 — 
Increase in valuation allowance(10.3)(15.7)(16.4)
Tax rate differential(state and foreign)5.0 1.3 (0.5)
Non-taxable gain Non-deductible (loss) on contingent consideration0.9 1.1 (1.1)
Others(0.6)0.2 (0.3)
Effective income tax rate4.4 %2.9 %(0.4)%
The Company’s acquisition of WAVE in 2021, which will be included with Ideanomics in all state income tax filings, is expected to have a significant effect on the states to which Ideanomics’ income and loss is apportioned. This results in a higher income tax rate at which many of Ideanomics deductible temporary differences are expected to reverse. The increase in the expected rate consequently resulted in a significant increase in the relate deferred tax assets, which were then offset with a valuation allowance.
Deferred income taxes are recognized for future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows (in thousands):
December 31,
2021		December 31,
2020
U.S. NOL$46,693 $23,585 
Foreign NOL6,554 5,967 
U.S. capital loss carryover873 4,371 
U. S. Section 1231 carryover2,360 
Accrued payroll and expense1,012 — 
Nonqualified options2,999 1,927 
Convertible notes— 827 
Inventory reserve563 — 
Bad debt allowance281 281 
Impaired assets10,728 7,996 
Other126 
Equity investment loss and others5,081 3,596 
Total deferred tax assets77,270 48,550 
Less: valuation allowance(74,972)(46,732)
Property and equipment(357)(81)
Intangible assets(5,954)(6,782)
Outside basis in domestic subsidiary and other (1,060)— 
Total deferred tax liabilities(7,371)(6,863)
Net deferred tax assets (liabilities)$(5,073)$(5,045)

As of December 31, 2021, 2020 and 2019, the Company had U.S. domestic cumulative tax loss carryforwards of $191.4 million, $99.3 million and $83.1 million, respectively, and foreign cumulative tax loss carryforwards of $26.9 million, $24.0 million and $28.3 million, respectively, which may be available to reduce future income tax liabilities in certain jurisdictions. $28.2 million of the U.S. carryforwards expire in the years 2027 through 2037. The remaining U.S. tax loss is not subject to expiration. PRC tax loss carryforwards of $23.0 million will expire beginning year 2022 to year 2026. Malaysian tax loss carryforwards of $3.3 million will expire in the years 2030 and 2031. At December 31, 2021, The Company also has U.S. capital loss and section 1231 loss carryovers of $3.4 million and $9.1 million respectively. The capital loss carryover expires in 2027, while the 1231 loss carryover does not expire. Utilization of NOLs may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code and similar state and foreign provisions. This annual limitation may result in the expiration of NOLs before utilization. Management has however, excluded from the carryforward totals amounts shown on the tax returns but for which management has assessed cannot be used before expiration because of the annual limitations.

Realization of the Company’s net deferred tax assets is largely dependent upon the Company’s ability to generate future taxable income in the respective tax jurisdictions to obtain benefit from the reversal of temporary differences and NOL carryforwards. It is, however, reasonably possible that the Company could record an income tax benefit in 2022 or later years from the reduction of the valuation allowance resulting from acquisitions in which deferred tax liabilities are recorded. In such a case, as occurred in 2021, deferred tax assets could be utilized to offset the acquired deferred tax liabilities. The valuation allowance
increased by $28.2 million, $16.5 million and $14.8 million in the years ended December 31, 2021, 2020 and 2019, respectively.

The following table reflects the changes in the valuation allowance (in thousands):

Valuation allowance - January 1, 2019$15,468 
Increase - year ended December 31, 201914,807 
Valuation allowance - December 31, 201930,275 
Increase - year ended December 31, 202016,457 
Valuation allowance - December 31, 202046,732 
Increase - year ended December 31, 202128,240 
Valuation allowance - December 31, 2021$74,972 
(b)Uncertain Tax Positions

Accounting guidance for recognizing and measuring uncertain tax positions prescribes a threshold condition that a tax position must meet for any of the benefit of uncertain tax position to be recognized in the financial statements. The deferred tax assets listed above as of December 31, 2021, do not include $0.3 million of potential deferred tax assets, arising in the current year, not recognized because they do not meet the threshold for recognition. If these assets were to be recognized they would be fully offset by a valuation allowance. There were no identified uncertain tax positions December 31, 2020 and 2019.

The following table reflects changes in the gross unrecognized tax positions (in thousands):

Unrecognized tax benefits at beginning of year - January 1, 2019$— 
Gross changes - year ended December 31, 2019— 
Unrecognized tax benefits at end of year - December 31, 2019— 
Gross changes - year ended December 31, 2020— 
Unrecognized tax benefits at end of year - December 31, 2020— 
Gross increases - current year tax positions256 
Unrecognized tax benefits at end of year - December 31, 2020$256 
As of December 31, 2021, 2020 and 2019, the Company did not accrue any material interest and penalties. The Company’s United States federal and state income tax returns are generally subject to examination for potential assessment for 2018 and later years. The use of U.S. net operating loss carryovers from earlier years are subject to challenge in any future year utilized. Due to the uncertainty regarding the filing of tax returns for years before 2007, it is possible that the Company is subject to examination by the IRS for earlier years. All of the PRC tax returns for the PRC operating companies are subject to examination by the PRC tax authorities for all periods from the companies’ inceptions in 2009 through 2021 as applicable. All of Tree Technologies’ tax returns since inception in 2018 are subject to examination by the Malaysian tax authorities. All of Tree Technologies’ tax returns since inception in 2018 are subject to examination by the Malaysian tax authorities.