Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate consists of the following:

	Year Ended December 31,
	2023		2022		2021
Statutory federal income tax benefit	21.00	%	21.00	%	21.00	%
Permanent items	26.18	%	0.56	%	(2.71)	%
State taxes, net of federal tax benefit	20.67	%	7.77	%	5.99	%
Effects of Rates Different from Statutory	(0.04)	%	0.17	%	(0.06)	%
Rate Change	0.04	%	0.01	%	—	%
Other	(29.54)	%	(3.64)	%	(0.71)	%
Change in valuation allowance	(1.91)	%	(54.94)	%	(20.98)	%
Income tax provision (benefit)	36.40	%	(29.07)	%	2.53	%

The components of income tax expense (benefit) are as follows:

	For the Years Ended December 31,
	2023		2022		2021
Current:
Federal	$	2,555,164	$	1,493,772	$	295,956
State and local	5,782,335		502,872		319,741
Foreign	-		-		-
	$	8,337,499	$	1,996,644	$	615,697
Deferred:
Federal	$	1,650,695	$	(7,683,475)	$	-
State and local	(3,256,914)		(2,649,791)		-
Foreign	(375,300)		375,301		-
	(1,981,519)		(9,957,965)		-
Total income tax expense (benefit)	$	6,355,980	$	(7,961,321)	$	615,697

Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows:

	For the Years Ended December 31,
	2023		2022
Deferred tax assets:
Allowance for doubtful accounts	$	1,683,119	$	893,328
Accrued expenses	799,295		382,649
Lease liability	4,674,177		2,359,566
Stock compensation	5,039,590		2,780,020
Research and development expense	865,800		303,446
Net operating loss	4,568,113		11,523,633
Other	(471,694)		(466,789)
Total deferred tax asset	$	17,158,400	$	17,775,853
Valuation allowance	(1,207,673)		(1,520,345)
Deferred income tax assets, net of allowance	$	15,950,727	$	16,255,508
Deferred tax liabilities:
Prepaid expenses	$	(780,767)	$	(994,644)
Depreciation	(3,819,069)		(2,798,988)
Right-of-use asset	(4,544,024)		(2,346,070)
Amortization	5,081,672		(157,839)
Total deferred tax liability	$	(4,062,188)	$	(6,297,541)
Deferred tax assets, net of allowance	$	11,888,539	$	9,957,967

The Company has determined, based upon available evidence, that it is more likely than not that all of the net deferred tax asset will not be realized and, accordingly, has provided a partial valuation allowance against its net deferred tax asset as of December 31, 2023 and 2022, respectively. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential and tax planning strategies in making these assessments.

As of December 31, 2023 ,2022 and 2021, the Company had federal net operating loss carryforwards of approximately $0, $35,289,184 and $53,573,046, respectively. As of December 31, 2023, 2022 and 2021, the Company had approximately $10,737,510, $1,520,345 and $202,965 of foreign net operating loss carryforwards, respectively. As of December 31, 2023, 2022 and 2021, the Company had state net operating loss carryforward of approximately $36,422,543, $2,592,560 and $67,229,895, respectively. The federal net operating loss carryforwards generated after December 31, 2017 of $35,298,184 carry forward infinitely. State and foreign net operating loss carryforwards generated in the tax years from 2017 to 2020 will begin to expire, if not utilized, by 2039. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and similar provisions.

The difference between the statutory income taxes on the Company’s pre-tax loss and the Company’s effective income tax rate during the years ended December 31, 2023 and 2022 is primarily due to a recorded valuation allowance. The valuation allowance for deferred tax assets as of December 31, 2023 and 2022 was $1,207,673 and $1,520,345, respectively. The net

change in the total valuation allowance for the years ended December 31, 2023, and 2022 was a decrease of $312,672 and $15,182,335, respectively.

In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future table income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company recognizes interest accrued to unrecognized tax benefits and penalties as income tax expense. The Company accrued no penalties or interest during the years ended December 31, 2023, 2022, and 2021.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2023, open years related to all jurisdictions are 2022, 2021 and 2020. The Company has no open tax audits with any taxing authority as of December 31, 2023.