|12 Months Ended|
Dec. 31, 2019
|Income Tax Disclosure [Abstract]|
NOTE 18. INCOME TAXES
The Company is required to file a consolidated U.S. federal income tax return and various state tax returns.
The Company has accumulated net losses for the past two years and has not recorded an income tax provision or benefit from continuing operations during the years ended December 31, 2019 and 2018.
Deferred income taxes reflect the net 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 Company’s deferred tax assets relate primarily to its net operating loss carryforwards and other balance sheet basis differences. In accordance with ASC 740, “Income Taxes,” the Company recorded a valuation allowance to fully offset the gross deferred tax asset, because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets at December 31, 2019 and 2018.
At December 31, 2019 and 2018, the Company had net deferred tax assets from continuing operations of $52,252 and $41,121, respectively, against which a full valuation allowance of $52,252 and $41,121, respectively, had been recorded. The change in the valuation allowance for the year ended December 31, 2019 was an increase of $11,131. The increase in the valuation allowance for the year ended December 31, 2019 was mainly attributable to the net operating losses. The increase in the valuation allowance for the year ended December 31, 2018 was mainly attributable to increases in net operating losses and accrued liabilities.
The Company recorded a deferred tax liability of $1,641 as of December 31, 2018, related to the acquisition of Benchmark Builders, Inc. This deferred tax liability was recorded to account for the book vs. tax basis difference related to the goodwill intangible asset, which was recorded in connection with the acquisition. This deferred tax liability was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the indefinite life of the goodwill. As such, this deferred tax liability cannot be used to offset the valuation allowance. This deferred tax liability is recorded in Liabilities of discontinued operation on the Consolidated Balance Sheets as of December 31, 2018 and has been disposed of as of December 31, 2019.
Significant components of the Company’s deferred tax assets at December 31, 2019 and 2018 are as follows:
A reconciliation of the federal statutory tax rate and the effective tax rates from continuing operations for the years ended December 31, 2019 and 2018 is as follows:
The Company had approximately $206,650 and $166,300 of available gross net operating loss (“NOL”) carryforwards (federal and state) as of December 31, 2019 and 2018, respectively, which begin to expire in 2023. However, the Company has not yet filed its tax returns for its fiscal years ended September 30, 2013, September 30, 2014, September 30, 2015, September 30, 2016, December 31, 2016, December 31, 2018 or December 31, 2019. Therefore, the Company’s NOLs will not be available to offset future taxable income, if any, until the returns are filed.
Sections 382 and 383 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited. Beacon had generated approximately $25,000 of NOLs prior to the Beacon Merger, which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue Code Section 382, such that no deferred tax asset has been reflected herein related to the Beacon NOLs.
The Company has not yet assessed whether an ownership change under Section 382 occurred during the years ended December 31, 2019 and 2018. If an ownership change occurred, there is a potential that a portion of the Company’s NOLs could be limited. However, since there is a full valuation allowance offsetting the deferred tax asset related to the NOL, a limitation should not have a material impact on the Company’s financial statements. The Company will continue to monitor its ownership changes for purposes of Section 382.
During the period of September 30, 2014 through December 31, 2017, the Company operated primarily in Florida, Indiana, Nevada, North Carolina, Colorado, Texas, Iowa, Washington, Missouri, Georgia, and New York. If the Company is required to pay income taxes or penalties in the future, penalties will be recorded in general and administrative expenses and interest will be separately stated as interest expense. The Company has not yet filed its tax returns for its fiscal years ended September 30, 2012, September 30, 2013, September 30, 2014, September 30, 2015, September 30, 2016, December 31, 2016, December 31, 2018 or December 31, 2019, but has engaged an accounting firm to begin to compile the past due returns. The Company’s tax returns for the periods from October 1, 2012 through December 31, 2019 remain subject to examination and may be subject to penalties for late filing.
The Company does not have any uncertain tax positions for which it is reasonably possible that the total amount of gross unrecognized tax benefits will increase or decrease within 12 months as of December 31, 2019. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.
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://www.xbrl.org/2003/role/disclosureRef