INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

11.  INCOME TAXES

The provision (benefit) for income taxes consists of the following:

	For the Years Ended December 31,
	2021		2020		2019
Current tax provision (benefit)
Federal	$	20,041,644	$	4,431,590	$	—
State		8,079,555		2,049,850		7,875
Total current provision (benefit)		28,121,199		6,481,440		7,875
Deferred tax provision (benefit)
Federal		(6,719,211)		(3,428,399)		—
State		(2,515,418)		(1,202,807)		—
Total deferred tax provision (benefit)		(9,234,629)		(4,631,206)		—
Total income tax provision (benefit)	$	18,886,570	$	1,850,234	$	7,875

The Company has state net operating losses of $2.0 million as of December 31, 2021 which will begin to expire in 2030. The Company fully utilized its $23.3 million in tax benefits attributable to federal net operating losses as of December 31, 2020.  

Utilization of the state net operating loss carry forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by state rules that are similar to the Internal Revenue Code of 1986, as amended.

Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes.  The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	December 31,
	2021		2020
Deferred tax assets
Net operating loss carry forwards	$	130,643	$	198,675
Accrued expenses and reserves		1,298,083		824,920
Employee stock option expense		958,530		15,188
Nonemployee stock option expense		8,887		8,515
Inventories		118,201		98,748
Deferred income – TIA contract		18,199,768		5,675,617
Deferred tax assets		20,714,112		6,821,663
Deferred tax liabilities
Unrealized gains/losses		(665,960)		(508,197)
Property, plant, and equipment		(6,182,318)		(1,682,260)
Deferred tax liabilities		(6,848,278)		(2,190,457)
Net deferred tax assets	$	13,865,834	$	4,631,206

Deferred income tax calculations reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss carry forwards, and are stated at the U.S. tax rate of 21%. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years.

Deferred tax assets are periodically reviewed for realizability.  In prior periods, the Company established a valuation allowance for its net deferred tax asset as future taxable income which could not be reasonably assured.  The Company determined that no valuation allowance is needed for the years ended December 21, 2021 and 2020.  The valuation allowance of $5.0 million was fully released during the year ended December 31, 2020.

Under the Tax Cuts and Jobs Act, net operating losses incurred after December 31, 2017 can only offset 80% of taxable income.  However, these net operating losses may be carried forward indefinitely instead of limited to twenty years under previous tax law. Carryback of these losses is no longer permitted.

The CARES Act temporarily removed the 80% of taxable income limitation to allow NOL carryforwards to fully offset income.  For tax years beginning before 2021, the Company can take an NOL deduction equal to 100% of taxable income.  For tax years beginning after 2021, the Company can take: (1) a 100% deduction of NOLs arising in tax years prior to 2018, and (2) a deduction limited to 80% of modified taxable income for NOLs arising in tax years after 2017.

A reconciliation of income taxes based on the federal statutory rate and the effective income tax rate is summarized as follows:

	December 31,
	2021		2020		2019
U.S. statutory federal tax rate	21.0	%	21.0	%	21.0	%
State tax, net of federal tax	6.4		4.2		2.0
Change in valuation allowance	—		(19.2)		(35.6)
Valuation Allowance	—		(0.6)		—
Stock options	(0.1)		—		—
PPP loan	(0.4)		—		—
Return-to-provision and other	(1.7)		1.7		12.9
Effective tax rate	25.2	%	7.1	%	0.3	%

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions.  The Company’s federal income tax returns for all tax years ended on or after December 31, 2019, remain subject to examination by the Internal Revenue Service.  The Company’s state and local income tax returns are subject to

examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing.