XML 25 R14.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
9 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

 

Income tax expense for the three and nine months ended September 30, 2021 and 2020 varies from the amount that would result by applying the applicable statutory federal income tax rate to income before income taxes as summarized in the following table:

 

                 
($ in thousands) 

Three months ended

September 30,

  

Nine months ended

September 30,

 
   2021   2020   2021   2020 
Income tax expense (benefit) at statutory income tax rate of 21%  $(923)  $(2,014)  $(854)  $(4,436)
Valuation allowance for deferred tax assets deemed unrealizable   1,041    1,510    1,081    3,514 
Rate differential due to CARES Act               (214)
Non-deductible expenses associated with the Share Repurchase Transaction       516        516 
State income tax (net of federal tax benefit)           (114)    
Noncontrolling interests   (119)        (259)    
Other   1    (12)   1    (45)
Income tax expense (benefit)  $   $    (145)  $(665)
                     
Income tax benefit – from continuing operations  $   $   $   $(665)
Income tax benefit – from discontinuing operations  $   $   $(145)  $ 

 

Due to the sale of all of the issued and outstanding equity of Maison, MMI and Claimcor on December 2, 2019, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. For the quarter ended March 31, 2021, we recognized a gain from the sale of the Maison Business of approximately $145,000. This was related to a final true-up and settlement in the current quarter, for income taxes due to the Company under the sale agreement.

 

 

FG FINANCIAL GROUP, INC.

Notes to Consolidated Financial Statements

 

As a result of the passage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company recorded a credit of $214,000 against its income tax expense for the quarter ended March 31, 2020, due to a provision in the CARES Act which allows for the five-year carryback of net operating losses. Prior to the passage of the CARES Act, these net operating losses were only available to offset future taxable income generated by the Company.

 

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes as compared to the amounts used for income tax purposes. As of September 30, 2021, the Company has gross net deferred tax assets of approximately $5.3 million; however the Company has recorded a valuation allowance against all of its net deferred tax assets due to the uncertain nature surrounding our ability to realize these tax benefits in the future, resulting in a net deferred income tax asset of $0 as of September 30, 2021. Significant components of the Company’s net deferred tax assets are as follows:

 Schedule of Deferred Income Taxes

  

September 30,

2021

  

December 31,

2020

 
Deferred income tax assets:           
Net operating loss carryforward  $ 2,824   $1,143 
Share-based compensation    221    216 
Investments    2,085    2,570 
Unearned premium reserves    151     
Other    21    5 
Deferred income tax assets    5,302    3,934 
Less: Valuation allowance    (5,015)   (3,934)
Deferred income tax assets net of valuation allowance  $ 287   $ 
            
Deferred income tax liabilities:           
Deferred policy acquisition costs  $ 214   $ 
Other    73     
Deferred income tax liabilities  $ 287   $ 
            
Net deferred income tax asset (liability)  $    $ 

 

As of September 30, 2021, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $13.4 million, which may be available to offset future taxable income. The Company’s NOLs expire as follows: $0.5 million in 2039, $0.1 million in 2040, and $1.2 million in 2041. The remaining $11.6 million in NOLs do not expire under current tax law.

 

As of September 30, 2021, the Company had no unrecognized tax benefits. The Company analyzed its tax positions in accordance with the provisions of Accounting Standards Codification Topic 740, Income Taxes, and has determined that there are currently no uncertain tax positions. The Company generally recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.