|12 Months Ended|
Dec. 31, 2018
|Income Tax Disclosure [Abstract]|
13. INCOME TAXES
The Company is subject to U.S. federal and various state income taxes.
The income tax provision (benefit) for the years ended December 31, 2018 and 2017 consists of the following:
No current tax provision has been recorded for the years ended December 31, 2018 and 2017 because the Company had net operating losses for federal and state tax purposes. The net operating loss carryovers may be subject to annual limitations under Internal Revenue Code Section 382, and similar state provisions, should there be a greater than 50% ownership change as determined under the applicable income tax regulations. The amount of the limitation would be determined based on the value of the company immediately prior to the ownership change and subsequent ownership changes could further impact the amount of the annual limitation. An ownership change pursuant to Section 382 may have occurred in the past or could happen in the future, such that the NOLs available for utilization could be significantly limited. The Company will perform a Section 382 analysis in the future. The related increase in the deferred tax asset was offset by the valuation allowance.
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
The Company has determined that a valuation allowance for the entire net deferred tax asset is required. A valuation allowance is required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance is necessary to reduce the deferred tax asset to zero, the amount that will more likely not be realized.
The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:
At December 31, 2018 and 2017, the Company had net operating loss carry forwards for federal and state income tax purposes of approximately $100.3 million and $70.6 million, respectively, of which, $70.6 million may be used to offset future taxable income through 2037, The remaining $29.7 million of net operating loss carry forwards incurred in 2018 does not have an expiration date, subject to the Company filing delinquent tax returns as described herein. As described in Note 16 - Commitments and Contingencies - Taxes, the Company has not filed its federal and state corporate income tax returns for the years ended December 31, 2014 through 2018. Accordingly, approximately $53.7 million of the federal and state NOLs described herein will not be available to offset future taxable income until the outstanding tax returns are filed with the respective federal and state tax authorities.
The Tax Cuts and Jobs Act (the “Act”) was enacted in December 2017. Among other things, the primary provision of Tax Reform impacting the Company is the reduction to the U.S. corporate income tax rate from 35% to 21%, eliminating certain deductions and imposing a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries. The change in tax law required the Company to remeasure existing net deferred tax assets using the lower rate in the period of enactment resulting in an income tax expense of approximately $12.6 million which is fully offset by a corresponding tax benefit of $12.6 million which related to the corresponding reduction in the valuation allowance for the year ended December 31, 2017. The Company has completed its analysis of the tax act of 2018. There were no specific impacts of Tax Reform that could not be reasonably estimated which the Company accounted for under prior tax law.
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://fasb.org/us-gaap/role/ref/legacyRef