Quarterly report pursuant to Section 13 or 15(d)

Note 13 - Income Taxes

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Note 13 - Income Taxes
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
1
3
.
Income Taxes
 
Income taxes are accounted for under the asset and liability method in accordance with Accounting Standards Codification
740,
Income Taxes
. Deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. DTAs and DTLs are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on DTAs and DTLs of a change in tax rates is recognized in income in the period that includes the enactment date.
 
Current accounting standards require a valuation allowance against DTAs if, based on the weight of available evidence, it is more likely than
not
that some or all of the DTAs
may
not
be realized. Due to the uncertainty surrounding the realization of these DTAs in future tax returns, all of the DTAs have been fully offset by a valuation allowance at
March 31, 2020
and
December 31, 2019,
except the alternative minimum tax (“AMT”) credit carryforward amount described below.
 
In assessing the realizability of DTAs, management considers whether it is more likely than
not
that some portion or all of the DTAs will
not
be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods) and projected future taxable income in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than
not
that the Company will
not
realize the benefits of these deductible differences or tax carryforwards as of
March 31, 2020,
except for the AMT credit carryforward.
 
The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on
December 22, 2017.
The Tax Act repealed the AMT for corporations, and permits any existing AMT credit carryforwards to be used to reduce the regular tax obligation in
2018,
2019
and
2020.
Under the Tax Act, companies
may
continue using AMT credits to offset any regular income tax liability in years
2018
through
2020,
with
50%
of remaining AMT credits refunded in each of the
2018,
2019
and
2020
tax years, and all remaining credits refunded in tax year
2021.
This results in full realization of an existing AMT credit carryforward irrespective of future taxable income. Accordingly, the Company recorded AMT credit carryforwards of
$621,000
as of
December 31, 2019,
50%
of which was included in prepaid expenses and other current assets, and
50%
of which was included in other noncurrent assets as of
December 31, 2019.
 
The CARES Act was signed into law on
March 27, 2020.
Under the CARES Act, corporate AMT credits are now
100%
refundable as early as the
2018
tax year. Accordingly, the Company has filed for the refund of all
$621,000
of AMT credit carryforwards, and they are included in prepaid expenses and other current assets as of
March 31, 2020.
 
Current accounting standards include guidance on the accounting for uncertainty in income taxes recognized in the financial statements. Such standards also prescribe a recognition threshold and measurement model for the financial statement recognition of a tax position taken, or expected to be taken, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company believes that the ultimate deductibility of all tax positions is highly certain, although there is uncertainty about the timing of such deductibility. As a result,
no
liability for uncertain tax positions was recorded as of
March 
31,
2020
or
December 
31,
2019
and we do
not
expect any significant changes in the next
twelve
months. Should we need to accrue interest or penalties on uncertain tax positions, we would recognize the interest as interest expense and the penalties as a selling, general and administrative expense. As of
March 
31,
2020,
tax years
2016
-
2019
remained subject to examination by federal and state tax authorities.
 
As of
March 31, 2020,
we had approximately
$142.2
million of federal and
$20.1
million of state net operating loss carryforwards, as well as approximately
$8.8
million of federal R&D credit carryforwards.