Income Taxes

12 Months Ended

Dec. 31, 2020

Components of the income tax (benefit) expense are as follows (in thousands):


	Years ended December 31,
	2020		2019
Current:
Federal	$	(6,115)	$	(22,923)
State	144		(2,295)
Foreign	(21)		(238)
Total current	(5,992)		(25,456)
Deferred:
Federal	(116)		24,373
State	(71)		1,345
Foreign	—		—
Total deferred	(187)		25,718
Income tax (benefit) expense	$	(6,179)	$	262

The components of loss before income taxes are as follows (in thousands):


	Years ended December 31,
	2020		2019
United States	$	(141,864)	$	(75,633)
Foreign	(765)		(178)
Loss before income taxes	$	(142,629)	$	(75,811)

A reconciliation of the U.S. federal statutory tax rate to the effective income tax rate is as follows:


	Years ended December 31,
	2020		2019
Federal statutory tax rate	21.0	%	21.0	%
State income taxes, net of federal benefit	2.1		0.6
Non-U.S. income taxed at different rates	0.2		0.5

Increase in valuation allowance	(20.3)		(20.5)




Reduction in tax benefit related to stock-based awards	(0.2)		(0.1)

Effect of tax rate differences of NOL carryback	1.5		—
Research and development credit	—		0.2
Other	—		(2.0)
Effective income tax rate	4.3	%	(0.3)	%

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act provided the ability for taxpayers to carryback a net operating loss (“NOL”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 to each of the five years preceding the year of the loss. Based on analysis of the extended NOL carryback provision, the Company recorded a tax receivable of $6.1 million as of March 31, 2020, which was received in July 2020.

Fluctuations in effective tax rates have historically been impacted by permanent tax differences with no associated income tax impact, changes in state apportionment factors, including the effect on state deferred tax assets and liabilities, and non-U.S. income taxed at different rates, except for the NOL carryback claim discussed above.

Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The components of deferred tax assets and liabilities are as follows (in thousands):


	December 31,
	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	23,589	$	17,248
Allowance for doubtful accounts	1,134		1,037
Inventory valuation reserves	2,093		629
Equity compensation	435		353
Goodwill	4,087		965
Accrued compensation	657		587
Foreign tax credit carryforward	3,802		3,894
Accrued liabilities	2,076		3,530
Lease liability	1,945		3,992
Property and equipment	3,640		—
Intangible assets	6,026		—

Other	353		96
Total gross deferred tax assets	49,837		32,331
Valuation allowance	(48,671)		(20,341)
Total deferred tax assets, net	1,166		11,990
Deferred tax liabilities:
Property and equipment	—		(3,696)
Intangible assets	—		(4,134)
ROU asset	(686)		(3,793)



Prepaid insurance and other	(257)		(331)
Total gross deferred tax liabilities	(943)		(11,954)
Net deferred tax assets	$	223	$	36

As of December 31, 2020, the Company had U.S. net operating loss carryforwards of $94.7 million, including $46.4 million expiring in various amounts in 2035 through 2037 which can offset 100% of taxable income and $48.3 million that has an indefinite carryforward period which can offset 80% of taxable income per year. The ability to utilize net operating losses and other tax attributes could be subject to a significant limitation if the Company were to undergo an “ownership change” for purposes of Section 382 of the Tax Code.

Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance, the Company considers all available objective and verifiable evidence, both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, and expectations and risks associated with estimates of future pre-tax income. As of December 31, 2019, the Company determined that it was more likely than not that it would not realize the benefits of certain deferred tax assets and, therefore, recorded a $20.3 million valuation allowance against the carrying value of net deferred tax assets, except for deferred tax liabilities related to certain state jurisdictions. At December 31, 2020, the valuation allowance against the net federal and state deferred tax assets was $48.7 million.

The Company has not calculated U.S. taxes on unremitted earnings of certain non-U.S. subsidiaries due to the Company’s intent to reinvest the unremitted earnings of the non-U.S. subsidiaries. At December 31, 2020, the Company had approximately $5.7 million in unremitted earnings for one of its foreign jurisdictions, which were not included for U.S. tax purposes. Due to the 2017 Tax Act, U.S. federal transition taxes have been recorded for a one-time U.S. tax liability on these earnings which have not previously been repatriated to the U.S. However, certain withholding taxes will need to be paid upon repatriation. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings.

The Company performed an evaluation and concluded there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The evaluation was performed for the tax years which remain subject to examination by tax jurisdictions as of December 31, 2020, which are the years ended December 31, 2017 through December 31, 2020 for U.S. federal taxes and the years ended December 31, 2016 through December 31, 2020 for state tax jurisdictions.

During 2020, the Internal Revenue Service (“IRS”) notified the Company that a 2018 tax return was selected for examination as

a result of a carryback claim. At this time, the Company is not aware of any findings that would have a material impact on the

consolidated financial statements.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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