Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

NOTE 11 - INCOME TAXES

Income before income taxes includes the following:

(Dollars in thousands)	2023		2022		2021
United States	$	(29,986)	$	(40,087)	$	(35,835)
Foreign		(1,065)		3,975		76,335
Income (loss) before income taxes and equity earnings of unconsolidated joint ventures	$	(31,051)	$	(36,112)	$	40,500
Equity earnings of unconsolidated joint ventures:
United States		—		—		—
Foreign		456		271		258
Income (loss) before income taxes	$	(30,595)	$	(35,841)	$	40,758

Significant components of the provision for income taxes are as follows:

(Dollars in thousands)	2023		2022		2021
Current income tax expense (benefit)
Federal	$	(800)	$	(97)	$	(5,727)
State		49		19		(6,426)
Foreign		927		(487)		17,217
Total		176		(565)		5,064
Deferred income tax expense (benefit)
Federal		2		2		(119)
State		(2)		2		(32)
Foreign		414		1,380		1,031
Total		414		1,384		880
Total income tax expense (benefit)	$	590	$	819	$	5,944

Deferred income taxes reflect the “temporary differences” between the financial statement carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, adjusted by the relevant tax rate. The components of the deferred tax assets and liabilities are as follows:

	December 31,
(Dollars in thousands)	2023		2022
Deferred Tax Assets:
Net operating loss carry-forwards	$	31,820	$	26,237
Foreign Tax Credit		3,743		3,743
Compensation and employee benefits		2,972		3,252
Deferred revenue		2,912		2,713
Accrued expenses		18,221		12,206
Lease obligations		47,666		56,119
Land and property		2,412		1,620
Total Deferred Tax Assets		109,746		105,890
Deferred Tax Liabilities:
Lease liabilities		(48,927)		(52,747)
Accrued taxes		(632)		(532)
Intangibles		(442)		(444)
Other		(359)		(942)
Total Deferred Tax Liabilities		(50,360)		(54,665)
Net deferred tax assets before valuation allowance		59,386		51,225
Valuation allowance		(59,087)		(50,778)
Net deferred tax asset	$	299	$	447

We record net deferred tax assets to the extent we believe these assets will more-likely-than-not be realized. In making such determination, we considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. As of December 31, 2023, based on all available evidence, we believe the U.S. and state deferred tax assets do not support a conclusion of being more-likely-than-not to be realized. Accordingly, we recorded an increase to valuation allowance of $8.3 million. We reassess the valuation allowance quarterly and a tax benefit is recorded if future evidence allows for a partial or full release of the valuation allowance.

As of December 31, 2023, we had the following carry-forwards:

approximately $88.6 million in Federal loss carry-forwards with no expiration date;

approximately $58.8 million in California loss carry-forwards expiring in 2043;

approximately $34.2 million in Hawaii loss carry-forwards expiring in 2043;

approximately $3.3 million in New Jersey state loss carry-forwards expiring in 2043;

approximately $53.9 million in New York state loss carry-forwards expiring in 2043;

approximately $52.0 million in New York city loss carry-forwards expiring in 2043; and,

We expect no substantial limitations on the future use of U.S. loss carry-forwards.

The provision for income taxes is different from amounts computed by applying U.S. statutory rates to consolidated losses before taxes. The significant reason for these differences is as follows:

(Dollars in thousands)	2023		2022		2021
Expected tax provision	$	(6,425)	$	(7,526)	$	8,559
Increase (decrease) in tax expense resulting from:
Foreign tax rate differential		30		384		6,473
Change in valuation allowance		6,781		8,071		(6,339)
State and local tax provision		48		21		(6,458)
Prior year adjustment		472		(405)		(211)
Unrecognized tax benefits		(398)		75		(3,937)
GILTI		—		—		7,858
Other		82		199		(1)
Total income tax expense (benefit)	$	590	$	819	$	5,944

The undistributed earnings of the Company's Australian subsidiaries are not indefinitely reinvested. Due to the enactment of the Tax Act, future repatriations of foreign earnings will generally not be subject to U.S. federal taxation but may incur minimal state taxes.

The following table is a summary of the activity related to unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2023, 2022, 2021:

(Dollars in thousands)	2023		2022		2021
Unrecognized tax benefits – gross beginning balance	$	11,454	$	11,536	$	2,086
Gross increase (decrease) - prior year tax positions		(340)		(82)		(1,664)
Gross increase (decrease) - current year tax positions		—		—		11,114
Settlements		—		—		—
Unrecognized tax benefits – gross ending balance	$	11,114	$	11,454	$	11,536

As of December 31, 2023 and 2022, if recognized, $11.1 million and $11.5 million respectively, of the unrecognized tax benefits would impact the Company’s effective tax rate.

During the year ended December 31, 2023, we recorded a decrease to tax interest of $151,000, resulting in a total $491,000 in interest. During the year ended December 31, 2022, we recorded a decrease to tax interest of $257,000, resulting in a total $641,000 in interest.

It is difficult to predict the timing and resolution of uncertain tax positions. Based upon the Company’s assessment of many factors, including past experience and judgments about future events, it is probable that within the next 12 months the reserve for uncertain tax positions will increase within a range of $500,000 to $1.5 million. The reasons for such change include but are not limited to tax positions expected to be taken during 2023, revaluation of current uncertain tax positions, and expiring statutes of limitations.

As of December 31, 2023, federal income tax returns for 2020 and after are open for examination. California worldwide unitary income tax returns for 2019 and after are open for examination. The Company’s net operating loss carry-forwards are subject to examination until they are fully utilized or expired. Some of the tax years which the losses originated from are currently closed. Australia income tax returns for calendar years 2019 and after are open for examination. Generally, New Zealand returns for calendar years 2018 and after remain open for examination.