|9 Months Ended|
Sep. 30, 2021
|Income Taxes [Abstract]|
NOTE 14. INCOME TAXES
The Company’s U.S. federal statutory tax rate of 21% and its foreign operations have statutory tax rates of approximately 25% in Austria, 28% in New Zealand, and 30% in Australia.
The differences between the Company’s estimated effective tax rates of (419.0)% and (104.7)% for the three and nine months ended September 30, 2021 and the U.S. federal statutory tax rate of 21% were due to a release of valuation allowance of net operating loss carryforwards (“NOLs”), which was partially offset by permanent book to tax differences related to incentive stock options and officer compensation limitations.
As of December 31, 2020, the Company’s gross deferred tax asset was $40,538. The Company has recorded a valuation allowance of $22,348, resulting in a net deferred tax asset of $18,190, before deferred tax liabilities of $8,304. The Company has provided a valuation allowance against a portion of the deferred tax assets as of September 30, 2021 and December 31, 2020, because the ultimate realization of those assets did not meet the more-likely-than-not criteria. The majority of the Company’s deferred tax assets consist of NOLs for federal tax purposes. If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended. During the three months ended September 30, 2021, the Company filed a change in accounting method which increased taxable income and the ability to utilize NOLs. As a result, an additional valuation allowance of $6,003 was released increasing the income tax benefit for the three and nine months ended September 30, 2021. This method change resulted in decreasing the NOLs available to offset taxable income as of December 31, 2020 by $10,317.
In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire. The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required in determining the Company’s future taxable income. The need for a valuation allowance is reassessed at each interim reporting period.
As of December 31, 2020, the Company had NOLs and research and experimentation credit for U.S. federal income tax purposes of $120,309 and $1,889, respectively. The Company believes its U.S. Federal NOLs will substantially offset its future U.S. Federal income taxes until expiration. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F income and will be offset with the NOLs.
NOLs available to offset taxable income, subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:
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