Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 15 — INCOME TAXES

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Additionally, the impact of changes in the tax rates and laws on deferred taxes, if any, is reflected in the financial statement in the period of enactment. The deferred tax liabilities and assets for the Company represent the difference between the financial statement and tax basis of the partnership interest in Alta Enterprises, LLC. The Company is using the single line-item approach for financial statement presentation of deferred tax assets and liabilities.

The income tax provision (benefit) for the years ended December 31, 2021 and 2020 consisted of the following:

	Year Ended December 31,
	2021		2020
Federal taxes-current	$	—	$	—
Federal taxes-deferred		2.8		(5.0	)
State taxes-current		—		—
State taxes-deferred		0.8		(1.6	)
	$	3.6	$	(6.6	)

For the years ended December 31, 2021 and 2020, the reconciliation between the income tax expense (benefit) computed by applying the statutory U.S. federal and state related income tax rate to the pre-tax loss before income taxes and total income tax expense (benefit) recognized in the financial statements was as follows:

	Year Ended December 31,
	2021			2020
Income tax benefit at statutory U.S. federal rate	$	(3.6	)	$	(4.3	)
Income tax benefit at statutory U.S. states rate, net		(0.6	)		(1.2	)
Permanent differences:
Officer's life insurance		—			(1.7	)
Valuation allowance		7.6			—
Other		0.2			0.6
Total income tax expense (benefit)	$	3.6		$	(6.6	)

The Company recorded an income tax expense of $3.6 million and a benefit of $6.6 million for the years ended December 31, 2021 and 2020, respectively. This was primarily driven by the level of pre-tax loss of $17.2 million in 2021 as compared to $20.7 million for the period from February 14, 2020 to December 31, 2020. As a result of the Company’s 2021 analysis of the realizability of its deferred tax asset, and after considering tax planning initiatives and other inputs, the Company determined that it was more likely than not that deferred tax asset would not be realized and has thus maintained a full valuation allowance against the deferred tax asset. In addition, the scheduling of deferred items highlighted the need to book a deferred tax liability in order to properly reflect the limitation of the use of net operating losses at 80% in any given year. The income tax benefit in 2020 covers the period starting with the reverse recapitalization on February 14, 2020 through the year ended December 31, 2020. The income tax results from the period January 1, 2020 through the day prior to the reverse recapitalization have been recognized by the predecessor. As a result of the reverse recapitalization, there was a step-up in the tax value of the Company.

The Company reviews the realizability of its deferred tax asset on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with any other positive or negative evidence. All of the factors that the Company considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involves significant judgment.

The effective income tax rate for the years December 31, 2021 and December 31, 2020 were (20.9)% and 31.9%, respectively. The effective income tax rate in 2021 was primarily due to the impact of the establishment of the valuation allowance and the resulting realization of a deferred tax liability. The effective income tax rate in 2020 was primarily due to the impact of expenses and resulting tax losses associated with the reverse capitalization.

The components of deferred tax assets and liabilities as of December 31, 2021 and 2020 were as follows:

	Year Ended December 31,
	2021			2020
Deferred Tax Assets
Net operating loss carryforwards	$	10.8		$	4.7
Deferred revenue		0.7			0.6
Accounts receivable and inventories		4.3			3.8
Goodwill & intangibles		1.0			6.0
Accrued liabilities		3.4			2.8
Deferred payroll taxes and other		3.0			2.0
Gross deferred tax assets		23.2			19.9
Deferred Tax Liabilities
Property and equipment		(21.3	)		(18.2	)
Prepaid expenses		(1.2	)		(1.2	)
Gross deferred tax liabilities		(22.5	)		(19.4	)
Valuation allowance		(7.6	)		—
Deferred tax (liabilities) assets, net	$	(6.9	)	$	0.5

As of December 31, 2021, and December 31, 2020, the Company has federal net operating tax loss carryforwards of approximately $10.8 million and $4.7 million, respectively, which may be carried forward indefinitely and are eligible to offset 80% of future taxable income.

 On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, includes various income and payroll tax provisions, modifications to federal net operating loss rules, business interest deduction limitations, and bonus depreciation eligibility for qualified improvement property.

The CARES Act did not materially impact our effective tax rate for the years ended December 31, 2021 and December 31, 2020, although it impacted the timing of cash payments for taxes. Under the CARES Act, as of December 31, 2021, we have deferred employer payroll taxes of $5.0 million as compared to $5.6 million as of December 31, 2020.