Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes

Income Taxes

4. Income Taxes. For the three months ended March 31, 2023, the Company recorded income tax expense of $3,000, or 0.2% of income before taxes. For the three months ended March 31, 2022, the Company recorded income tax expense of $8,000, or 11.4% of income before taxes. The income tax expense for the three months ended March 31, 2023 and 2022 is comprised of federal and state taxes. The Company reassesses its effective rate each reporting period and adjusts the annual effective rate if deemed necessary, based on projected annual taxable income (loss). The actual tax expense attributable to income before taxes differs from the expected tax expense computed by applying the U.S. federal corporate income tax rate of 21.0% as follows:

Three months ended March 31,	2023			2022
Federal statutory rate		21.0	%		21.0	%
Stock-based awards		(2.5	)		(0.7	)
State taxes		3.6			3.5
Impact of uncertain tax positions		0.1			11.7
Valuation allowance		(22.6	)		(24.8	)
Other		0.6			0.7
Effective federal income tax rate		0.2	%		11.4	%

Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of enacted tax laws. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which it operates, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustment to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria.

As of March 31, 2023, and December 31, 2022, the Company had unrecognized tax benefits totaling $54,000 and $53,000, respectively, including interest, which relates to state nexus issues. The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $54,000.

At December 31, 2022, the Company had Federal net operating loss (NOL) to carry forward of approximately $2,900,000. As of March 31, 2023, the Company estimates remaining Federal NOL carryforwards to be approximately $1,200,000. Federal NOL utilization is limited to 80% of estimated taxable income. The estimated NOL carry forward will be adjusted at year end for actual results.