|12 Months Ended|
Dec. 31, 2020
|Income Tax Disclosure [Abstract]|
NOTE 19 – INCOME TAXES
At December 31, 2020 and 2019, the Company’s cumulative net operating losses were approximately $10.6 million and $26.3 million, respectively. At December 31, 2020 and 2019, the Company recorded a provision for state taxes of approximately $2.1 million and approximately $67,000, respectively. No federal provision was required at December 31, 2020 and 2019.
The reconciliations between the Company’s effective tax rates and the statutory tax rate for the years ended December 31, 2020 and 2019 were as follows:
SCHEDULE OF RECONCILIATION OF INCOME TAXES
The approximate income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2020 and 2019 were as follows:
SCHEDULE OF DEFERRED TAX ASSET
Federal net operating losses carryforward indefinitely, subject to an annual limitation of 80% of taxable income, while state net operating losses expire at various dates beginning in 2031. These tax attributes are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under IRC Section 382. The Company recorded a valuation allowance against its net deferred tax assets at December 31, 2020 and 2019 due to the uncertainty regarding the realization of such assets. The Company’s assessment of the realization of its deferred tax assets of future periods may differ in light of changing circumstances.
For the years ended December 31, 2020 and 2019, the Company’s wholly-owned subsidiaries in Illinois and Massachusetts that cultivated and manufactured cannabis and cannabis-infused products were subject to the limitations of Section 280E of the Internal Revenue Code (“Section 280E”). Section 280E denies all deductions from gross income in computing taxable income of these subsidiaries, but allows for cost of goods sold to be taken into account in the calculation of gross income. As the Company files consolidated income tax returns, the taxable income generated from these subsidiaries subject to Section 280E was offset by loss carryforwards generated by the Company’s subsidiaries not subject to Section 280E.
The Company previously adopted the provision for uncertain tax positions under ASC 740. The adoption did not have an impact on the Company’s retained earnings balance. At December 31, 2020 and 2019, the Company had no recorded liabilities for uncertain tax positions and had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal tax jurisdiction and various state jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 2017 through 2020.
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