INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 8 – INCOME TAXES

Prior to the Reorganization and IPO, EBS Intermediate was structured as a partnership and therefore, was subject to certain LLC entity-level taxes but generally not subject to U.S. federal and state income taxes. As part of the Reorganization Transactions described in Note 1, the Company created a C Corporation, and is now subject to U.S. federal and state taxes.

Significant components of income tax expense were as follows (in 000’s):

	Fiscal Year Ended December 31,
	2022		2021
Current
U.S. Federal	$	1,235	$	—
State and Local	1,014		121
Total current income tax expense	2,249		121
Deferred
U.S. Federal	1,109		243
State and Local	25		(35)
Total deferred income tax (benefit) expense	1,134		208
Total	$	3,383	$	329

A reconciliation of income taxes computed at the U.S. federal statutory income tax rate of 21% to the Company’s income tax (expense) was as follows:

	Fiscal Year Ended December 31,
	2022		2021
At U.S. Federal statutory tax rate	21.0	%	21.0	%
State income taxes	(7.3)	%	0.6	%
Pass-through income	—	%	(22.0)	%
Nondeductible Reorganization and IPO costs	—	%	0.6	%
Nondeductible officer compensation	(38.8)	%	—	%
Valuation allowance and other nondeductible expenses	(4.8)	%	2.8	%
Total	(29.9)	%	3.0	%

The effective tax rates for the fiscal years ended December 31, 2022 and 2021 were (29.9)% and 3.0%. The most significant items impacting the effective tax rate during fiscal years 2022 and 2021 are due to the Reorganization, non-deductible officer compensation expense, and the items below.

Pass-through income

Prior to the Reorganization, EBS Intermediate Parent, LLC was the reporting entity, which is treated as a flow-through entity for federal income tax purposes. The income or losses generated were not taxed at the LLC level. As required by U.S. tax law, income or loss generated by the LLC flows through to various partners of the LLC. The tax impact of the pre-tax book income attributable to EBS Intermediate Parent, LLC prior to the execution of the reorganization and IPO was $(2.4) million for the fiscal year ended December 31, 2021.

The Company’s deferred tax assets (liabilities) consisted of the following (in 000’s):

	December 31,
	2022		2021
Deferred tax assets
Accrued liabilities	$	272	$	278
Net operating loss	559		254
Operating lease liability	5,449		4,567
Equity-based compensation	1,231		964
State bonus depreciation	558		—
163(j) limitation	912		—
Other	7		—
Total deferred tax assets	8,988		6,063
Valuation allowance	(559)		(246)
Total deferred tax assets, net of valuation allowance	8,429		5,817
Deferred tax liabilities
Property, plant and equipment	(4,998)		(2,555)
Intangible assets	(2,993)		(2,117)
Right-of-use asset	(5,427)		(4,613)
Prepaid expenses and other current assets	(495)		(883)
Total deferred tax liabilities	(13,913)		(10,168)
Net deferred tax liabilities	$	(5,484)	$	(4,351)

As of December 31, 2022, we had foreign net operating loss carryforwards in the amount of $2.1 million. Of the total carryforwards, $1.7 million were generated by the Company’s Canadian based subsidiary and $0.4 million were generated by the Company's British subsidiary. The Canadian-based net operating losses begin to expire in 2039 and the British based net operating losses carry forward indefinitely.

The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. Valuation allowances have been established with regard to the tax benefits of our foreign net operating losses. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. After considering all of those factors, management recorded a $0.6 million and $0.2 million valuation allowance for the deferred tax assets related to the foreign net operating losses which are not more likely than not to be realized as of December 31, 2022 and 2021.

Uncertain Tax Positions

ASC 740 prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income tax benefits recognized in an enterprise’s financial statements.

As of December 31, 2022 and 2021, the Company had no uncertain tax positions.