Income Taxes

9 Months Ended

Sep. 30, 2022

Income Taxes

Income Taxes

9.    Income Taxes

The Company’s taxable income primarily consists of interest income on the Trust Account, less any franchise taxes. The Company’s formation costs are generally considered start-up costs and are not currently deductible.

We recorded an income tax provision of $151,441 for the nine months ended September 30, 2022. The effective income tax rate for the nine months ended September 30, 2022 was -25.79%. The -25.79% effective income tax rate differs from the federal statutory rate of 21% as a result of change in share-based compensation and the movement of the valuation allowance against our U.S. state and federal net deferred tax assets. For the nine months ended September 30, 2022, the Company had $0 of U.S. federal and state net operating loss carryovers available to offset future taxable income, respectively.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of deferred tax assets and therefore established a full valuation allowance of $506,581 as of September 30, 2022.

The Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. There were no unrecognized tax benefits for the nine months ended September 30, 2022. No amounts were accrued for the payment of interest and penalties for the nine months ended September 30, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.