|9 Months Ended|
Sep. 30, 2022
|Income Taxes [Abstract]|
NOTE 15. 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 difference between the Company’s estimated effective tax rates of (3.1)% for the three months ended September 30, 2022, and the U.S. federal statutory tax rate of 21% was primarily due to the impact of discrete stock option windfall benefits in the third quarter of 2022. The difference between the Company’s estimated effective tax rates of 17.4% for the nine months ended September 30, 2022, and the U.S. federal statutory tax rate of 21% was primarily due to the impact of discrete stock option windfall benefits in the third quarter, partially offset by the impact of foreign earnings taxed at applicable statutory rates and permanent book to tax differences related to incentive stock options and officer compensation limitations.
As of December 31, 2021, the Company’s gross deferred tax asset was $38,184. The Company has recorded a valuation allowance of $4,378, resulting in a net deferred tax asset of $33,806, before deferred tax liabilities of $46,653. The Company has provided a valuation allowance against a portion of the deferred tax assets as of September 30, 2022 and December 31, 2021, 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.
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 September 30, 2022, the Company had NOLs and research and experimentation credit for U.S. federal income tax purposes of $58,376 and $2,259, respectively. The Company believes its U.S. Federal NOLs will substantially offset its future U.S. Federal income taxes until expiration.
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