14. INCOME TAXES

The Company is subject to U.S. federal and various state income taxes.

During the year ended December 31, 2019 and into the first quarter of fiscal 2020, the Company brought itself into compliance with respect to all federal, state and local income and franchise tax filings through fiscal 2018. As part of the filings of the Company’s net operating loss carryforwards of were reduced by approximately $30 million.

The income tax provision (benefit) for the years ended December 31, 2020 and 2019 consists of the following:

No current tax provision has been recorded for the years ended December 31, 2020 and 2019 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 decrease in the deferred tax asset was offset by the decrease in 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 disaggregation of the Company’s domestic and foreign pre-tax loss for the years ended December 31, 2020 and 2019 is as follows:

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:

As of December 31, 2020, the Company had net operating loss carry forwards for federal and state income tax purposes of approximately $100.2 million, of which, $70.2 million may be used to offset future taxable income through 2038 and the remaining $30.0 million of net operating loss carry forwards incurred in 2020 and 2019 do not have an expiration date. The Company has approximately $563,000 in business credits expiring between 2030 and 2040.