Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 19 – INCOME TAXES

 

At December 31, 2021 and 2020, the Company’s cumulative federal net operating losses were approximately $24.0 million and $10.6 million, respectively. At December 31, 2021, the Company recorded a provision for income taxes of approximately $16.2 million, due in part to the aforementioned impact of Section 280E of the Internal Revenue Code, which prohibits the deduction certain ordinary business expenses. At December 31, 2020, no income tax provision was recorded.

 

The reconciliations between the Company’s effective tax rates and the statutory tax rate for the years ended December 31, 2021 and 2020 were as follows:

 

    2021     2020  
U.S federal taxes at the statutory rate     21.0 %     21.0 %
State taxes net of federal benefit     16.5 %    

46.0

 %
Section 280E adjustment     14.7 %     43.6 %
Stock based compensation     10.5 %     30.0 %
Other     0.9 %     (1.0 )%
Valuation allowance     0.0 %     (93.6 )%
Total     63.6 %    

46.0

 %

 

The approximate income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2021 and 2020 were as follows:

 

    2021     2020  
Deferred tax assets:                
Net operating loss carryforwards   $ 6,981,492     2,235,987  
Allowance for doubtful accounts     11,810,425       11,400,555  
Stock compensation     2,556,946       2,758,541  
Loss on equity investments     8,632,902       8,629,490  
Goodwill writeoffs     1,262,877       1,138,419  
Change in fair value of investments     598,957       282,291  
Lease payments     170,543       151,936  
Reserves     147,982       -  
Deferred tax liabilities:                
Depreciation     (2,520,188 )    

(1,717,596

 )
Real estate revenue    

(999,739

 )    

(997,590

 )
Net deferred tax asset     28,642,197       23,882,033  
Valuation allowance     (28,642,197 )    

(23,882,033

 )
Total   $ -     $ -  

 

 

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, 2021 and 2020 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.

 

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.