Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

12. INCOME TAXES

The following is a geographical breakdown of income before the provision for (loss) income taxes as of December 31:

	2021			2020			2019
Pre-tax (loss) income:
Federal	$	(24,574	)	$	(58,140	)	$	(26,510	)
Foreign		958			1,042			(168	)
Total		(23,616	)		(57,098	)		(26,678	)

Income tax expense (benefit) for the years ended December 31, is comprised of the following:

	2021			2020			2019
Current:
Federal	$	(49	)	$	(38	)	$	4
State		271			1,152			289
Foreign		295			490			41
Total		517			1,604			334
Deferred:
Federal		448			(1,184	)		(2,323	)
State		744			553			(1,132	)
Foreign		—			(122	)		—
Total		1,192			(753	)		(3,455	)
Income tax expense (benefit)	$	1,709		$	851		$	(3,121	)

The Company’s deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities as of December 31, are as follows:

	2021			2020			2019
Deferred tax assets:
Net operating losses	$	16,180		$	7,353		$	3,850
Allowance for bad debts		1,250			1,231			331
Employee related		1,291			2,553			1,348
Contingent consideration		9,770			3,209			588
ROU assets		8,285			—			—
Other		1,711			170			318
Total deferred tax asset		38,487			14,516			6,435
Deferred tax liabilities:
Intangible assets		(2,467	)		(2,918	)		(4,825	)
Property and equipment		(4,860	)		(5,598	)		(4,589	)
Lease liabilities		(8,144	)		—			—
Other		(64	)		(604	)		(551	)
Total deferred tax liability		(15,535	)		(9,120	)		(9,965	)
Valuation allowance		(26,958	)		(8,211	)		—
Net deferred tax liability	$	(4,006	)	$	(2,815	)	$	(3,530	)

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, is as follows:

	2021				2020				2019
Tax completed at federal statutory rate		21.00		%		21.00		%		21.00		%
State tax net of federal benefit		15.41				1.32				2.51
Non- deductible expenses		(0.47	)			(1.05	)			(1.38	)
Equity compensation		31.95				(0.59	)			(2.41	)
Embedded derivatives and warrant options		(1.97	)			(7.43	)			(8.79	)
Foreign taxes		(0.06	)			(0.77	)			(0.15	)
Federal deferred tax adjustment		6.41				—				—
Change in valuation allowance		(80.26	)			(14.30	)			—
Other		0.67				0.34				0.92
Effective income tax rate		(7.32	)	%		(1.48	)	%		11.70		%

The Company elected to account for the global intangible low-taxed income inclusion as a period cost.

The Company recorded a valuation allowance against its US, Australia and Sweden net deferred tax assets as realization of such assets is not more likely than not.  The impact of indefinite lived deferred items was considered in recording such valuation allowance. The increase in the Company’s valuation allowance was $18.7 million during the year ended December 31, 2021.

The Company’s policy is to record any penalties or interest related to any unrecognized tax benefits as a component of the income tax provision. As of December 31, 2021, 2020, and 2019, the Company does not have any unrecognized tax benefits.

In December 2017 new federal tax reform legislation was enacted in the United States resulting in significant changes from previous tax law. As a result, the Company previously provided a provisional estimate of the effect of this legislation in its financial statements. In the fourth quarter of 2019, the Company completed its analysis to determine the effect of the legislation and recorded immaterial adjustments as of December 31, 2019.

As of December 31, 2021, federal and state net operating loss carryforwards of approximately $62.3 million and $57.3 million are available to offset future federal and state taxable income, respectively. 

Federal net operating loss carryforwards will begin to expire during 2035 while the Company’s state net operating loss carryforwards will begin to expire during various years, dependent on the jurisdiction. Federal net operating losses generated beginning in 2018 are carried forward indefinitely. Therefore, $53.6 million of Federal net operating loss carryforwards will not expire.     

The Company is subject to audit by federal and state tax authorities in the ordinary course of business. The Company’s federal income tax returns remain subject to examination for the 2016 through 2021 tax years. The Company files in multiple state jurisdictions which remain subject to examination for the 2015 through 2021 tax years.  The Company is also subject to audit by tax authorities in Canada, Australia, Germany, and Sweden for which returns are subject to examination for various years, dependent on the jurisdiction.    

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. The CARES Act includes several significant provisions for corporations, including those pertaining to net operating losses, interest deductions and payroll tax benefits. Under ASC 740, the effects of new legislation are recognized upon enactment. Accordingly, the effects of the CARES Act have been incorporated into the income tax provision computation for the year ended December 31, 2020. These provisions did not have a material impact on the income tax provision. The Company deferred the employer side social security payments for payroll paid for the portion of 2020 following enactment as permitted by the CARES Act.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (CAA 2021) which included a number of provisions including, but not limited to the extension of numerous employment tax credits, the extension of the Section 179D deduction, enhanced business meals deductions, and the deductibility of expenses paid with Paycheck Protection Program (PPP) loan funds that are forgiven. Accordingly, the effects of the CAA 2021 have been incorporated into the income tax provision for the year ended December 31, 2020.  These provisions did not have a material impact on the income tax provision.