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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table sets forth pretax book loss (in thousands):
Year Ended December 31,
20212020
United States$(9,340)$(7,570)
Foreign199 252 
Total$(9,141)$(7,318)

The following table sets forth income before taxes and the income tax expense for the years ended December 31, 2021 and 2020 (in thousands):
Year Ended December 31,
20212020
Current:
Federal$— $— 
Foreign(75)53 
State(15)50 
Total current (90)103 
Total deferred— — 
Income tax (benefit) expense$(90)$103 

Our effective tax rate differs from the statutory federal tax rate for the years ended December 31, 2021 and 2020 as shown in the following table (in thousands):
Year Ended December 31,
20212020
U.S. federal income taxes at the statutory rate$(1,919)$(1,533)
State taxes, net of federal effects(464)(122)
UK Anti-Hybrid expense addback(1,837)289 
Transaction costs— — 
Goodwill impairment— 114 
Section 382 Limitation— — 
Adjustment to NOL Benefit20 4,640 
NOL Carryforward Adjustment for Expired NOLs78 84 
Stock Compensation Plan Adjustments(38)272 
Change in state apportionment rate(10)(350)
Change in valuation allowance4,662 (3,868)
Research and development credit— 546 
True up of prior year foreign tax expense(108)— 
Other22 31 
Income tax (benefit) expense$(90)$103 
The tax effect of the temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2021 and 2020 is presented below (in thousands):
December 31,
20212020
Deferred tax assets (liabilities):
Tax benefit of operating loss carry forward - Federal$26,902 $23,184 
Tax benefit of operating loss carry forward - State6,225 5,548 
Accrued expenses88 141 
Deferred revenue287 417 
Stock-based compensation449 396 
Fixed assets287 329 
Goodwill102 167 
Inventory197 47 
Intangible amortization(1,777)(2,285)
R&D credit2,154 2,154 
Texas margin tax temporary credit139 159 
Other62 285 
Total deferred tax asset, net$35,220 $30,542 
Valuation allowance(35,220)(30,542)
Net deferred tax liability$— $— 

The ending balances of the deferred tax asset have been fully reserved, reflecting the uncertainties as to realizability evidenced by the Company’s historical results. The change in valuation allowance for the year ended December 31, 2021 is an increase of $4,678,000 resulting from current year tax loss and adjustment to NOL carryforward. The change in valuation allowance for the year ended December 31, 2020 was a decrease of $4,005,000.

We and our subsidiary file federal and state tax returns on a consolidated basis. On October 1, 2019 Oblong, Inc. acquired the stock of Oblong Industries Inc. that resulted in Oblong Industries Inc.'s shareholders now owning 75% of Oblong, Inc. Therefore, an “ownership change” occurred on this date (as defined under Section 382 of the Internal Revenue Code of 1986, as amended), which places an annual limitation on the utilization of the net operating loss (“NOL”) carryforwards accumulated
before the ownership change. If additional ownership changes occur in the future, the use of the net operating loss carryforwards could be subject to further limitation.

As a result of this annual limitation and the limited carryforward life of the accumulated NOLs, we determined that the 2019 ownership change resulted in the permanent loss of approximately $30,880,000 of tax NOL carryforwards. At December 31, 2020, we had federal net operating loss carryforwards of $110,401,000 available to offset future federal taxable income, after Section 382 limitation considerations. Of this amount, $76,500,000 were pre-2018 NOL Carryforwards which expire in various amounts from 2022 through 2037. At December 31, 2021, we had federal net operating loss carryforwards of $128,104,000 available to offset future federal taxable income, after section 382 limitation considerations. Of this amount, $76,165,000 are pre-2018 NOL carryforwards which expire in various amounts from 2022 through 2037. As of December 31, 2021 and 2020, the Company also has various state net operating loss carryforwards of $114,696,000 and $94,223,000, respectively. The determination of the state net operating loss carryforwards is dependent upon apportionment percentages and state laws that can change, from year to year and impact the amount of such carryforwards.

There were no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC Topic 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s consolidated financial statements for the years ended December 31, 2021 and 2020. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.

Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to unrecognized tax benefits. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2021 and 2020.

The Internal Revenue Service may generally access additional income tax for the most recent three years. This would generally prevent the Internal Revenue Service from opening an examination for years ended on or before December 31, 2018. However, there are exceptions that can extend the statute of limitations to six years, and in some cases, prevent the statute of limitations from ever expiring.
The United Kingdom subsidiary is a hybrid entity. It was subject to a United Kingdom tax law that required the Company to disallow the expenses of our United Kingdom subsidiary from our U.S. tax returns for the years 2018 through 2020. This resulted in disallowed deductions in the amount of $7,260,000 on our U.S. tax return. A United Kingdom finance bill enacted in 2021 revised this rule so that this anti-hybrid restriction is no longer applicable to this entity.