|12 Months Ended|
Dec. 31, 2019
|Income Tax Disclosure [Abstract]|
23. INCOME TAXES
The Company provides for income taxes using an asset and liability approach under which deferred income taxes are provided for based upon enacted tax laws and rates applicable to periods in which the taxes become payable.
The following table presents domestic and foreign components income (loss) before income tax expense for the years ended December 31, 2019 and 2018 (in thousands):
The provision for federal and state income taxes consists of the following (in thousands):
The differences between income taxes expected by applying the U.S. federal statutory tax rate of 21% and the amount of income taxes provided for are as follows (in thousands):
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The following table presents the significant components of the Company’s deferred tax assets and liabilities (in thousands):
As of December 31, 2019, the Company has federal, state and foreign net operating loss carryforwards totaling $11.6 million, $11.7 million and $1.6 million, respectfully. If not utilized, federal net operating losses of $5.4 million will expire at various dates from 2026 through 2037, and $6.2 million have an indefinite life. State net operating losses of $10.1 million will expire at various dates from 2037 through 2039, and $1.6 million have an indefinite life. Foreign net operating losses originated in Switzerland and will expire at various dates from 2023 through 2026.
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses; the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. The Company does not believe that it is more likely than not that all of the deferred tax assets will be realized; accordingly a valuation allowance has been established for the amount of the deferred tax assets on net operating loss carryforward, startup costs, and other deferred tax assets in excess of the deferred tax liabilities that will reverse prior to any net operating loss carryforward expiration date.
The following table sets forth movement in the valuation allowance for the year ended December 31, 2019 and 2018 (in thousands):
The Company recognizes interest and penalties, if any, related to an underpayment of income taxes in income tax expense. As of December 31, 2019, the Company has accumulated $91,000 in interest related to unrecognized tax benefits ($4,000 as of December 31, 2018).
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits as of December 31, 2019 and 2018 is as follows (in thousands):
As of December 31, 2019, the Company had $5.0 million of undistributed earnings and profits generated by a foreign subsidiary (Solutions Infini) for which no deferred tax liabilities have been recorded, since the Company intends to indefinitely reinvest such earnings in the subsidiary to fund the international operations and certain obligations of the subsidiary. Should the above undistributed earnings be distributed in the form of dividends or otherwise, the distributions would result in $757,000 of tax expense.
The Company files income tax returns in the United States and in foreign jurisdictions including Italy, India, and Switzerland. As of December 31, 2019, the tax years 2007 through the current period remain open to examination in each of the major jurisdictions in which the Company is subject to tax.
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.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef