10. Income taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income taxes

Note 10 – Income taxes

The provision (benefit) for income taxes consists of the following:

	For the Years Ended December 31,
	2020		2019
Current:
Federal	$	398	$	(27	)
State and local		357		276
Total current		755		249
Deferred		841		533
Provision for income taxes	$	1,596	$	782

A reconciliation of the U.S. federal statutory rate to the effective tax rate used in the provision for income taxes is as follows:

	2020						2019
	Amount			Percentage			Amount			Percentage
Federal income tax at statutory rate	$	1,015			21.0%		$	259			21.0%
State and local tax, net		428			8.9%			180			14.5%
Other permanent differences		12			0.3%			14			1.1%
Section 162m		296			6.1%			105			8.5%
Stock based compensation		157			3.2%			149			12.1%
Uncertain tax positions		(43	)		(0.9%	)		79			6.4%
Change in tax rates		(245	)		(5.0%	)		8			0.7%
Change in tax estimate		-			0.0%			(12	)		(1.0%	)
Other		(24	)		(0.5%	)		–			0.0%
Provision for income taxes	$	1,596			33.1%		$	782			63.3%

The tax effects of temporary differences giving rise to deferred income tax assets and liabilities are as follows:

	December 31,
	2020			2019
Deferred tax liabilities attributable to:
Accumulated depreciation and amortization	$	(2,101	)	$	(2,015	)
Unrealized gains		(467	)		(465	)
Total deferred tax liabilities		(2,568	)		(2,480	)
Deferred tax assets attributable to:
Net operating losses		6			507
Accrued compensation		149			89
Incentive compensation		168			473
Inventory		323			312
Allowances for doubtful accounts and discounts		109			115
Deferred revenue		15			40
Other		34			22
Total net deferred tax assets		804			1,558
Net deferred tax liabilities	$	(1,764	)	$	(922	)

The following table details the Company's tax attributes related to net operating losses for which it has recorded deferred tax assets.

Tax Attributes	Gross Amount		Net Amount		Expiration Years
State net operating losses	$	116	$	6		2035
			$	6

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2020			2019
Balance at January 1	$	142		$	63
Additions based on tax positions of prior years		–			79
Reduction for tax positions of prior years		(47	)		–
Balance at December 31	$	95		$	142

Lifeway is subject to U.S. federal income tax as well as income tax in multiple state and city jurisdictions. With limited exceptions, our calendar year 2017 and subsequent federal and state tax years remain open by statute. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was not significant as of December 31, 2020. The annual effective tax rate would have decreased by 2.0% as of December 31, 2019 if the unrecognized tax benefits were recognized.

The amount of interest and penalties recognized in the consolidated statements of operations was $(16) and $41 during 2020 and 2019, respectively. The amount of accrued interest and penalties recognized in the consolidated balance sheets was $44 and $60 at December 31, 2020 and 2019, respectively.