Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 19 — Income Taxes

Income tax (benefit) expense for respective periods noted is as follows:

	Year Ended December 31,
	2022			2021
Current
Federal, State and Local	$	—		$	—
Deferred
Federal		(24,265	)		(9,528	)
State and Local		11,124			(9,409	)
Current and Deferred tax (benefit) expense		(13,141	)		(18,937	)
Less: Valuation allowance reserve		13,141			18,937
Income tax expense (benefit)	$	—		$	—

The reconciliation of the federal statutory income tax rate to the effective income tax rate for the respective period noted is as follows:

	Year Ended December 31,
	2022			2021
U.S. federal statutory rate		21.0	%		21.0	%
U.S. state and local income taxes, net of federal benefit		6.6	%		13.2	%
Permanent differences		(1.0	)%		(0.6	)%
Tax credits		1.3	%		—	%
Revaluation of state deferred taxes		(15.2)	%		0.1	%
Valuation allowance		(12.7	)%		(33.7	)%
Effective tax rate		—	%		—	%

The tax effects of temporary differences which give rise to the net deferred tax assets for the respective period noted is as follows:

	Year Ended December 31,
	2022			2021
Deferred Tax Assets
Net operating loss	$	37,032		$	35,989
Debt issue costs		922			—
Stock-based compensation expense		11,105			7,091
Lease liabilities		836			—
Research and development expenditures		6,193			—
Research and development tax credit carryforwards		1,719			428
Accrued expenses		311			897
Section 195 deferred start-up costs		15			16
Depreciation & amortization	$	221		$	—
Deferred tax assets	$	58,354		$	44,421
Deferred Tax Liabilities
Operating lease right-of-use assets		(850	)		—
Depreciation		—			(22	)
Patent licenses		—			(36	)
Deferred Tax Liabilities	$	(850	)	$	(58	)
Deferred tax assets, net of deferred tax liabilities		57,504			44,363
Less: valuation allowance		(57,504	)		(44,363	)
Deferred tax assets, net after valuation allowance	$	—		$	—

Note 19 — Income Taxes - continued

Deferred tax assets and deferred tax liabilities resulting from temporary differences 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 of the change in the tax rate is recognized as income or expense in the period the change in tax rate is enacted.

As required by FASB ASC Topic 740, Income Taxes, (“ASC 740), a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. Accordingly, the Company evaluated the positive and negative evidence bearing upon the estimated realizability of the net deferred tax assets, and based on the Company’s history of operating losses, concluded it is more-likely-than-not the deferred tax assets will not be realized, and therefore recognized a valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, the deferred tax asset valuation allowance increased by $13,141 and $18,937, respectively.

The Company has total estimated federal net operating loss (“NOL”) carryforward of approximately $158.4 million and $104.1 million as of December 31, 2022 and 2021, respectively, which is available to reduce future taxable income, of which approximately $13.8 million have statutory expiration dates commencing in 2037, and approximately $144.6 million which do not have a statutory expiration date. The Company has not yet conducted a formal analysis and the NOL carryforward may be subject-to limitation under U.S. Internal Revenue Code (“IRC”) Section 382 (provided there was a greater than 50% ownership change, as computed under such IRC Section 382). The State and Local NOL carryforwards of approximately $157.8 million have statutory expiration dates commencing in 2037. The Company has total estimated research and development (“R&D”) tax credit carryforward of approximately $1.7 million as of December 31, 2022 which are available to reduce future tax expense and have statutory expiration dates commencing in 2037.

The Company files income tax returns in the United States in federal and applicable state and local jurisdictions. The Company’s tax filings for the years 2017 and thereafter each remain subject to examination by taxing authorities. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has not recognized any penalties or interest related to its income tax provision.

In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact PAVmed’s effective tax rate. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s effective tax rate.