Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.23.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

7. INCOME TAXES

Income Tax (Expense) Benefit

A reconciliation of the U.S. federal statutory tax rate to our income tax (expense) benefit from continuing operations for 2022 and 2021, is as follows (in thousands):

 

 

 

Years Ended December 31,

 

 

 

2022

 

 

2021

 

U.S. statutory rate

 

 

21.0

%

 

 

21.0

%

Increase (decrease) resulting from:

 

 

 

 

 

 

Permanent differences

 

 

(5.1

)%

 

 

(3.1

)%

State income taxes

 

 

5.7

%

 

 

0.5

%

Other

 

 

—

 

 

 

(0.1

)%

Discrete items

 

 

 

 

 

 

Vesting of common stock

 

 

(1.0

)%

 

 

(1.4

)%

Change in valuation allowance

 

 

(23.1

)%

 

 

(44.3

)%

PPP Loan forgiveness

 

 

—

 

 

 

39.5

%

Return to provision and other

 

 

1.8

%

 

 

(11.6

)%

Income tax (expense) benefit

 

 

(0.7

)%

 

 

0.5

%

Significant components of our income tax (expense) benefit from continuing operations for 2022 and 2021, were as follows (in thousands):

 

 

 

Years Ended December 31,

 

 

 

2022

 

 

2021

 

Current

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

State

 

 

—

 

 

 

—

 

Total current

 

 

—

 

 

 

—

 

Deferred

 

 

 

 

 

 

Federal

 

 

556

 

 

 

2,185

 

State

 

 

166

 

 

 

(20

)

Valuation allowance

 

 

(745

)

 

 

(2,141

)

Total deferred

 

 

(23

)

 

 

24

 

Income tax (expense) benefit

 

$

(23

)

 

$

24

 

 

Deferred Taxes

Significant components of our deferred tax assets and liabilities at December 31, 2022 and 2021, were as follows (in thousands):

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Deferred tax assets

 

 

 

 

 

 

Leases

 

$

221

 

 

$

233

 

Employee benefits

 

 

1,465

 

 

 

1,208

 

Accrued losses on uncompleted contracts

 

 

2,076

 

 

 

2,572

 

Stock based compensation expense

 

 

351

 

 

 

247

 

Federal net operating losses

 

 

22,444

 

 

 

21,724

 

State net operating losses

 

 

3,493

 

 

 

3,299

 

R&D and other tax credits

 

 

1,013

 

 

 

938

 

Other

 

 

481

 

 

 

545

 

Total deferred tax assets

 

 

31,544

 

 

 

30,766

 

Deferred tax liabilities

 

 

 

 

 

 

Property, plant and equipment

 

 

(1,051

)

 

 

(1,285

)

Prepaid insurance

 

 

(497

)

 

 

(231

)

Total deferred tax liabilities

 

 

(1,548

)

 

 

(1,516

)

Net deferred tax assets

 

 

29,996

 

 

 

29,250

 

Valuation allowance

 

 

(30,100

)

 

 

(29,331

)

Net deferred taxes (1)

 

$

(104

)

 

$

(81

)

 

(1) Amounts are included in other noncurrent liabilities on our Balance Sheet.

At December 31, 2022 and 2021, we had total DTAs of $31.5 million and $30.8 million, respectively (including U.S. federal net operating losses (“NOL(s)”) DTAs of $22.4 million and $21.7 million, respectively). On a periodic and ongoing basis, we evaluate our DTAs (including our NOL DTAs) and assess the appropriateness of our valuation allowance(s) (“VA(s)”). In assessing the need for a VA, we consider both positive and negative evidence related to the likelihood of realizing our DTAs. If, based upon the available evidence, our assessment indicates that it is more likely than not that some or all of the DTAs will not be realized, we record a VA. Our assessments include, among other things, the amount of taxable temporary differences that will result in future taxable income, the value and quality of our backlog, evaluations of existing and anticipated market conditions, analysis of recent and historical operating results (including cumulative losses over multiple periods) and projections of future results and strategic plans, as well as asset expiration dates. As a result of our assessment and due to cumulative losses for the three years ended December 31, 2022, we believe the negative evidence outweighs the positive evidence with respect to our ability to realize our DTAs, and accordingly, at December 31, 2022 and 2021, we had VAs of $30.1 million and $29.3 million, respectively, offsetting our total DTAs.

At December 31, 2022, we had gross U.S. federal NOL carryforwards (excluding VAs) of $106.9 million, of which $62.7 million will expire in from 2035 through 2037 with the remaining U.S. federal NOL carryforwards eligible to be carried forward indefinitely, subject to an 80% limitation on taxable income in each year. At December 31, 2022, we had gross state NOL carryforwards (excluding VAs) of $46.3 million, which will expire from 2035 through 2041.

Uncertain Tax Positions

Reserves for uncertain tax positions are recognized when we consider it more likely than not that additional tax will be due in excess of amounts reflected in our income tax returns, irrespective of whether or not we have received tax assessments. Interest and penalties on uncertain tax positions are recorded within income tax expense. At December 31, 2022 and 2021, we had no material reserves for uncertain tax positions. Tax returns subject to examination by the U.S. Internal Revenue Service are open for years after 2018.