|12 Months Ended|
Dec. 31, 2022
|Income Tax Disclosure [Abstract]|
NOTE 21 – INCOME TAXES –
Components of the net loss consist of the following (in thousands):
In 2022, the foreign losses are primarily comprised of $86.7 million related to the Irish operations and $1.5 million related to the Bermudan operations of Tonix International Holding. In 2021, the foreign losses were primarily comprised of $71.9 million related to the Bermudan operations of Tonix International Holding.
A reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate used to calculate the Company’s income tax provision is as follows:
Deferred tax assets (liabilities) and related valuation allowance as of December 31, 2022 and 2021 were as follows (in thousands):
The Company has incurred research and development (“R&D”) expenses, a portion of which qualifies for tax credits. The Company conducted an R&D credit study to quantify the amount of credits and has claimed an R&D credit on its 2014-2017 tax returns. A portion of these R&D credit carryforwards are subject to annual limitations in their use in accordance with Internal Revenue Service Code (“IRC”) section 383. The R&D credit carryforwards at December 31, 2022 have been reduced to $0.0 million to reflect IRC section 383 ownership changes through December 31, 2022 and the resulting inability to utilize a portion of the R&D credit prior to its expiration.
At December 31, 2022, the Company has $165.5 million of Ireland net operating loss (“NOL”) carryforwards that do not expire. As of December 31, 2022, the Company's Federal NOL carryforwards of $3.6 million, which do not expire, but their utilization is limited to 80% of taxable income. Additionally, the Company has New Jersey NOL carryforwards of $2.3 million and Massachusetts NOL carryforwards of $0.3 million, which both expire in 20 years. The NOL carryforwards at December 31, 2022 have been reduced to reflect IRC section 382 ownership changes through December 31, 2022 and the resultant inability due to annual limitations, to utilize a portion of the NOL prior to its expiration.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. As such, the Company has determined that it is not more likely than not that the deferred tax assets will be realized and accordingly, has provided a full valuation allowance against its gross deferred tax assets. The increase in the valuation allowance for the years ended December 31, 2022 and 2021 were $9.5 million, and $15.3 million respectively.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. However, as of December 31, 2022 there are no unrecognized tax benefits recorded. The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2022, the Company’s tax returns remain open and subject to examination by the tax authorities for the tax years 2019 and after.
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