Note 13 – Income Taxes



The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and tax bases of its assets and liabilities, and for net operating loss and tax credit carryforwards.



The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) repealed the alternative minimum tax (“AMT”) for corporations. The law provides that AMT carryovers can be utilized to reduce or eliminate the tax liability in subsequent years or to obtain a tax refund. For tax years beginning in 2018, 2019 and 2020, to the extent the AMT credit carryovers exceed regular tax liability, 50% of the excess AMT credit carryovers will be refundable. Any remaining credits will be fully refundable in 2021. At December 31, 2019, the Company has $0.5 million of AMT credit carryovers in prepaid expenses and other current assets and other assets due to the expectation that the AMT credits will be refundable over the next several years.



As of September 30, 2019, the Company had U.S. federal and state net operating loss carryforwards of $42.7 million and $25.4 million, respectively, for income tax purposes with $14.4 million and $20.5 million, respectively, expiring in years 2022 to 2038 and $28.3 million and $4.9 million, respectively, which can be carried forward indefinitely. The Company’s U.K. subsidiary has U.K. net operating loss carryforwards of $61.7 million as of September 30, 2019, which can be carried forward indefinitely to be used to offset future U.K. taxable income.



A reconciliation of income tax (benefit) expense and the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes is as follows:



Significant components of the Company’s deferred tax assets and liabilities are as follows:





The deferred tax amounts have been classified on the accompanying unaudited condensed consolidated balance sheets as follows: