|6 Months Ended|
Jun. 30, 2022
|Income Tax Disclosure [Abstract]|
13. INCOME TAXES
The income tax expense for the three months ended June 30, 2022 was approximately $25,000 comprised of a current tax expense of $34,000 and a deferred tax benefit of $9,000. The income tax expense for the six months ended June 30, 2022 was approximately $89,000 comprised of a current tax expense of $62,000 and a deferred tax expense of $27,000.
The income tax expense for the three months ended June 30, 2021 was approximately $213,000, comprised of a current tax expense of $51,000 and a deferred tax expense of $162,000. The income tax expense for the six months ended June 30, 2021 was approximately $212,000, comprised of a current tax expense of $86,000 and a deferred tax expense of $126,000.
During the quarter ended June 30, 2022, it was determined that for the states that follow the federal rules regarding indefinite life net operating losses, the offset to the state deferred tax liability was approximately $45,000. This amount was recorded during the current quarter as part of the deferred tax benefit.
The current income tax provision for the six months ended June 30, 2022 and 2021 primarily relates to state minimum taxes and foreign income taxes. The deferred tax provision (benefit) for the three and six months ended June 30, 2022 and 2021 relates to the book and tax difference of amortization on indefinite-lived intangibles, primarily goodwill. To the extent allowable, the federal deferred tax provision has been offset by the indefinite life net operating loss.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. Several new corporate tax provisions were included in the CARES Act, including, but not limited to, the following: increasing the limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general - from 39 years to 15 years), and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years. The Company has evaluated the income tax provisions of the CARES Act and determined the impact to be either immaterial or not applicable. Under the CARES Act, the Company took advantage of the payroll tax deferral provision. As of both June 30, 2022 and December 31, 2021, the Company has deferred approximately $934,000 of payroll taxes. This amount needs to be repaid by December 31, 2022.
The Company has incurred cumulative losses, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against the federal and state deferred tax assets as of June 30, 2022 and December 31, 2021.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef