Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes Paid, Net [Abstract]

INCOME TAXES

17. INCOME TAXES

Income tax (benefit) provision were comprised of the following:

	Successor			Successor			Predecessor
	Year Ended December 31, 2022			September 30, 2021 through December 31, 2021			Period from January 1, 2021 through September 29, 2021
Current income tax provision
Federal	$	-		$	-		$	16,900
State		4,800			3,200			4,000
Foreign		(53,700	)		(500	)		50,000
		(48,900	)		2,700			70,900
Deferred income tax provision (benefits)
Federal	$	1,692,300			(2,027,100	)		(1,640,000	)
State		(283,800	)		(28,200	)		(103,800	)
Foreign		-			11,400			(1,700	)
Valuation allowance		(1,408,400	)		1,929,400			1,804,400
		-			(114,500	)		58,900
Income tax (benefits) provision	$	(48,900	)	$	(111,800	)	$	129,800

Total income tax (benefit) provision differs from the amount that would be provided by applying the statutory federal income tax rate to pretax earnings as illustrated below:

	Successor			Successor			Predecessor
	Year Ended December 31, 2022			September 30, 2021 through December 31, 2021			Period from January 1, 2021 through September 29, 2021
Income tax provision (benefit) at statutory federal income tax rate	$	(1,290,800	)	$	(880,300	)	$	1,711,500
State tax expense (benefit), net of federal benefit		4,800			(200	)		80,200
Foreign tax (benefit) expenses		(38,900	)		581,900			200,800
Non-deductible management and acquisition fees		-			-			593,500
Impairment of intangible assets		13,300			-			-
PPP loan forgiveness		-			(59,900	)		-
Non-taxable income		-			(4,037,200	)		(4,260,600	)
Other non-deductible expenses		(35,100	)		187,600			-
Valuation allowance		1,297,800			4,096,300			1,804,400
Income tax (benefits) provision	$	(48,900	)	$	(111,800	)	$	129,800

Temporary differences and carry-forwards that give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows: 

	Successor			Successor			Predecessor
	December 31,			December 31,			September 29,
	2022			2021			2021
Deferred tax assets:
Debt basis differences	$	-		$	8,560,700		$	8,560,700
Current and prior year tax losses		6,169,300			7,970,100			4,093,400
Deferred interest expense		3,991,300			4,110,900			4,136,200
Foreign tax credit		705,600			705,600			705,600
Accrued vacation and others		28,500			40,500			51,200
		10,894,700			21,387,800			17,547,100
Valuation allowance		(10,889,000	)		(12,409,500	)		(8,637,800	)
Deferred tax assets, net of valuation allowance	$	5,700		$	8,978,300		$	8,909,300
Deferred tax liabilities:
Accumulated depreciation on aircraft and aircraft engines	$	-		$	(6,556,600	)	$	(6,581,300	)
Deferred income		-			(2,421,700	)		(2,421,700	)
Unrealized foreign exchange gain		-			-			(20,800	)
Others		(5,700	)		-			-
Deferred tax liabilities		(5,700	)		(8,978,300	)		(9,023,800	)
Net deferred tax assets/(liabilities), net of valuation allowance and deferred tax liabilities	$	-		$	-		$	(114,500	)

Reported as:

	Successor			Successor			Predecessor
	December 31,			December 31,			September 29,
	2022			2021			2021
Deferred tax assets	$	10,894,700		$	12,409,500		$	8,523,300
Deferred tax liabilities		(5,700	)		-			-
Valuation allowance		(10,889,000	)		(12,409,500	)		(8,637,800	)
Net deferred tax assets/(liabilities)	$	-		$	-		$	(114,500	)

Consolidated deferred federal income taxes arise from temporary differences between the valuation of assets and liabilities as determined for financial reporting purposes and federal income tax purposes and are measured at enacted tax rates. The Company’s deferred tax items are measured at an effective tax rate (federal and state blended rate net of federal benefit) of 21.05% and 21.47% respectively as of December 31, 2022 and December 31, 2021.

The current year federal operating loss carryovers of approximately $4.7 million will be available to offset 80% of annual taxable income in future years. Approximately $3.2 million of federal net operating loss carryovers may be carried forward through 2037 and the remaining $25.0 million federal net operating loss carryovers may be carried forward indefinitely. The current year California operating loss carryovers of approximately $1.9 million will be available to offset taxable income in future years through 2042. As discussed below, the Company does not expect to utilize the net operating loss carryovers remaining at December 31, 2022 in future years.

During the year ended December 31, 2022, the Company had pre-tax loss from domestic sources of approximately $9.0 million   and pre-tax loss from foreign sources of approximately $0.4 million.  The Company had pre-tax loss from domestic sources of approximately $5.6 million and pre-tax loss from foreign sources of approximately $3.0 millions for the year ended December 31, 2021. The year-over-year decrease in profit before taxes is mostly driven by the reduction in Company’s restructuring costs and employee salaries. The Company’s foreign tax credit carryover will be available to offset federal tax expense in future years through 2030.

As of December 31, 2022, the Company has a full valuation allowance of approximately $10.9 million against its net deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences, for which realization cannot be considered more likely than not at this time. In assessing the need for a valuation allowance, the Company considered all positive and negative evidence, including taxable loss occurred in recent years, scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. Recent negative operating result has caused the Company to be in a cumulative loss position as of December 31, 2022.

As of December 31, 2021, the Company had a valuation allowance of approximately $12.4 million, which fully offsets its net deferred tax assets.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017. At December 31, 2022 and 2021, the Company had a balance of accrued tax, penalties and interest totaling $56,100 and $66,200 related to unrecognized tax benefits on its non-U.S. operations included in the Company’s accounts and taxes payable. The Company anticipates decreases of approximately $14,100 to the unrecognized tax benefits within twelve months of this reporting date. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	December 31,			December 31,
	2022			2021
Balance at January 1	$	66,200		$	74,000
Additions for prior years’ tax positions		2,700			800
Reductions from expiration of statute of limitations		(12,800	)		(8,600	)
Balance at December 31	$	56,100		$	66,200

The Company accounts for interest related to uncertain tax positions as interest expense, and for income tax penalties as tax expense