Income Taxes |
3 Months Ended |
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Mar. 31, 2022 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Note 9 – Income Taxes
We recognize tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for net operating loss carryforwards. Management evaluated the deferred tax assets for recoverability using a consistent approach that considers the relative impact of negative and positive evidence, including historical profitability and projections of future reversals of temporary differences and future taxable income. We are required to establish a valuation allowance for deferred tax assets if management determines, based on available evidence at the time the determination is made, that it is not more likely than not that some portion or all of the deferred tax assets will be realized. As of March 31, 2022 the Company has net deferred tax liabilities for federal and combined states jurisdictions compared to net deferred tax assets with a full valuation allowance as of December 31, 2021. The decrease in deferred tax assets with a corresponding decrease in valuation allowance against those assets as of March 31, 2022 is primarily due to utilization of net operating losses. The Company has net deferred tax assets in other states jurisdictions where we maintain a full valuation allowance. Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, tax initiatives, legislative, and other economic factors. The Company will continue to monitor income levels and potential changes to its operating and tax model, and other legislative or global developments in its determination.
The Company’s effective tax rate for the three months ended March 31, 2022 is 21.47% and it is primarily driven by federal tax at 21%, state taxes at 7.1%, and a decrease in the valuation allowance for federal and combined states jurisdictions. The total tax expense for the three months ended March 31, 2022 is $3.4 million and it mostly relates to current federal and combined state taxes.
ProPhase Labs, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited)
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