Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Taxes [Abstract]  
Income Taxes

12.    Income Taxes



The Company’s United States and foreign components of (loss) income from continuing operations before income taxes are as follows (in thousands):







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

U.S.

 

$

(59,096)

 

 

29,638 

 

 

(2,170)

Foreign

 

 

849 

 

 

(653)

 

 

(852)

Total

 

$

(58,247)

 

 

28,985 

 

 

(3,022)



The Company’s (benefit) provision for income taxes from continuing operations consisted of the following (in thousands):





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$  

(5,895)

 

 

4,163 

 

 

914 

State

 

 

(599)

 

 

1,738 

 

 

536 



 

 

(6,494)

 

 

5,901 

 

 

1,450 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

(3,800)

 

 

2,665 

 

 

1,471 

State

 

 

(937)

 

 

(232)

 

 

(56)



 

 

(4,737)

 

 

2,433 

 

 

1,415 

(Benefit) provision for income taxes

 

$  

(11,231)

 

 

8,334 

 

 

2,865 



The table below sets forth a reconciliation of the difference between the (benefit) provision for income taxes and the amount that results from applying the federal statutory tax rate of 21% to (loss) income from continuing operations before income taxes (dollars in thousands):





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Income tax (benefit) provision at expected federal income tax rate (1)

 

$

(12,232)

 

 

6,087 

 

 

(635)

Increase (decrease) resulting from:

 

 

 

 

 

 

 

 

 

(Benefit) provision for state taxes, net of federal effect

 

 

(1,219)

 

 

1,156 

 

 

343 

Taxes related to noncontrolling interests in subsidiaries not consolidated for income tax purposes

 

 

854 

 

 

62 

 

 

83 

Nondeductible goodwill

 

 

437 

 

 

 —

 

 

832 

Nondeductible executive compensation

 

 

773 

 

 

1,119 

 

 

1,205 

(Decrease) increase in valuation allowance

 

 

(142)

 

 

(153)

 

 

226 

Other – net

 

 

298 

 

 

63 

 

 

811 

(Benefit) provision for income taxes

 

$

(11,231)

 

 

8,334 

 

 

2,865 



(1)

Expected tax is computed based upon (loss) income from continuing operations before income taxes.



The Company’s deferred income taxes consisted of the following significant components (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

As of December 31,



 

2020

 

2019

Deferred federal and state tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

7,275 

 

 

6,714 

Book reserves for credit losses, inventory, real estate and property and equipment

 

 

1,324 

 

 

1,407 

Expensed recognized for books and deferred for tax

 

 

1,860 

 

 

3,439 

Investment in IT'SUGAR, LLC

 

 

3,510 

 

 

 —

Intangible assets

 

 

226 

 

 

 —

Other assets

 

 

835 

 

 

49 

Total gross federal and state deferred tax assets

 

 

15,030 

 

 

11,609 

Less deferred tax asset valuation allowance

 

 

(6,772)

 

 

(6,914)

Total deferred tax assets

 

 

8,258 

 

 

4,695 

Deferred federal and state tax liabilities:

 

 

 

 

 

 

Tax over book depreciation

 

 

(456)

 

 

(245)

Intangible assets

 

 

 —

 

 

(592)

Other liabilities

 

 

(378)

 

 

(578)

Total gross deferred federal and state tax liabilities

 

 

(834)

 

 

(1,415)

Net federal and state deferred tax assets

 

$

7,424 

 

 

3,280 





The Company’s income tax provision (benefit) and current and deferred income taxes were calculated on a separate return basis through September 30, 2020, the date of the spin-off from BVH. The Company became a tax filer when it converted from a Florida limited liability company into a Florida corporation as of September 29, 2020.  



The Company’s effective income tax rate from continuing operations was approximately 19%,  29% and (96%) during the years ended December 31, 2020, 2019, and 2018, respectively. The provision for income taxes was different than the expected federal income tax rate of 21% primarily due to the impact of nondeductible executive compensation and state income taxes, as well as the impact of a nondeductible goodwill impairment loss recognized during the years ended December 31, 2020 and 2018.



The Company evaluates its deferred tax assets to determine if valuation allowances are required. In the evaluation, management considers expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. Valuation allowances are established based on the consideration of all available evidence using a more likely than not standard. Based on the Company’s evaluation a deferred tax valuation allowance was established for $5.8 million of federal and state net operating loss carryforwards (“NOL”) and $1.0 million of Canadian NOL and other temporary differences as of December 31, 2020.



As of December 31, 2020, the Company had federal NOL carryforwards of $3.4 million that do not expire and can only reduce annual taxable income by 80%. The Company also had federal and Florida NOL carryforwards that can only be utilized if the separate entity that generated them has separate company taxable income (the “SRLY Limitation”). These carryforwards cannot be utilized against most of the Company’s subsidiaries’ taxable income. As such, a full valuation allowance has been established for these carryforwards. The Company’s Canadian operations have had cumulative taxable losses in recent years, and as a result, a full valuation allowance has been applied to the NOL carryforwards as of December 31, 2020 and 2019. In addition, one of the Canadian subsidiaries has a capital loss carryforward that can only be used to reduce capital gains, and the tax on Canadian capital gains is 50% of the Canadian tax rate. Canadian capital loss carryforwards do not expire. A full valuation allowance is maintained for the Canadian capital loss carryforward as it is unlikely that the Canadian subsidiary will generate capital gains in the future. Federal and Florida NOLs subject to SRLY limitations expire in the years 2026-2034 and the Canadian NOLs expire in the years 2033-2040.  



The Company recognizes liabilities for uncertain tax positions. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company has not identified any uncertain tax positions as of December 31, 2020.



The Company was previously a party to an Agreement to Allocate Consolidated Income Tax Liability and Benefits with BVH. Under this tax sharing agreement, the parties calculated their respective income tax liabilities and attributes as if each of them was a separate filer. If any tax attributes were used by another party to the agreement to offset its tax liability, the party providing the benefit would receive an amount for the tax benefits realized. However, this tax sharing agreement was terminated with respect to the Company upon the consummation of the spin-off. During the years ended December 31, 2020 and 2019, Renin paid BVH $0.3 million and $1.0 million in accordance with this tax sharing agreement. As of December 31, 2020, no amounts were due to BVH pursuant to the tax sharing agreement, while as of December 31, 2019, $2.8 million was due to BVH pursuant to the agreement.