Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company recorded provisions for income taxes of $9.4 million and $5.9 million for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, the Company’s cumulative federal net operating losses were $71.2 million and $39.2 million, respectively. The provision recorded in the year ended December 31, 2023 was due in part to the impact of Section 280E of the Internal Revenue Code ("Section 280E"), which prohibits the deduction of
certain ordinary business expenses, true-ups from changes that occurred between when the provision for the year ended December 31, 2022 as determined and when the related tax returns were filed, and reserves recorded against uncertain tax positions taken on the tax returns as filed. The provision recorded in the year ended December 31, 2022 was due in part to the impact of Section 280E of the Internal Revenue Code, which prohibits the deduction certain ordinary business expenses, and true-ups from changes that occurred between when the provision for the year ended December 31, 2021 was determined and when the related tax return was filed.

Reconciliations of the Company’s effective tax rates and the statutory tax rate for the years ended December 31, 2023 and 2022 were as follows:
Year ended December 31,
2023 2022
U.S federal taxes at the statutory rate 21.0  % 21.0  %
State taxes net of federal benefit (4.2) % 12.8  %
Section 280E adjustment (49.3) % 11.6  %
Stock-based compensation (0.7) % 2.2  %
 Non-cash interest (9.4) % —  %
FIN 48 reserve (28.1) % 19.5  %
Return to Provision adjustments 45.9  % (48.7) %
Other (7.3) % 8.2  %
Valuation allowance (96.9) % 2.0  %
    Effective tax rate (129.0) % 28.6  %
The income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2023 and 2022 were as follows:
Year ended December 31,
2023 2022
Deferred tax assets:
Net operating loss carryforwards $ 14,693  6,947 
Allowance for doubtful accounts 207  256 
Stock compensation 2,434  2,557 
Loss on equity investments 8,094  8,602 
Goodwill write-offs 115  1,188 
Change in fair value of investments 229  616 
Lease payments 2,621  525 
Reserves 484  225 
   Other 448  95 
Deferred tax liabilities:
Depreciation (6,925) (4,758)
Real estate revenue (2,477) (500)
Net deferred tax asset 19,923  15,753 
Valuation allowance (19,923) (15,753)
      Total $ —  $ — 

Federal net operating losses carry forward 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 Internal Revenue Code Section 382. The Company recorded valuation allowances against its net deferred tax assets at December 31, 2023 and 2022 due to the uncertainty regarding the realization of such assets. The Company’s assessment of the realization of its deferred tax assets in future periods may differ due to changing circumstances.
The Company's gross unrecognized tax benefits for the years ended December 31, 2023 and 2022 were as follows (in thousands):
Year ended December 31,
2023
2022
Balance at January 1, $ 4,014  $ — 
Additions based on tax positions related to prior years 1,636  4,014 
Balance at December 31, $ 5,650  $ 4,014 

All of the unrecognized tax benefits are included as a component of Income taxes payable, which is a current liability. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months. During the year ended December 31, 2023, the Company's unrecognized tax benefits increased by $1.6 million as a result of uncertain tax positions relating to net operating losses deducted by subsidiaries that are subject to the provisions of Section 280E. During the year ended December 31, 2022, the Company's unrecognized tax benefits increased by $4.0 million as a result of uncertain tax positions relating to net operating losses deducted by subsidiaries that are subject to the provision of Section 280E of the Internal Revenue Code. The Company believes that its reserves for uncertain tax positions are appropriate, and that it has meritorious defenses for its tax filings and will vigorously defend them during any audit process, appellate process and through litigation in courts, as necessary.

The Company classified interest and penalties related to unrecognized tax benefits as income tax expense. The total amount of interest and penalties related to uncertain tax positions and recognized in the balance sheet at December 31, 2023 was $0.4 million.

The Company files income tax returns in the United States 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 December 31, 2018 through December 31, 2033.

At December 31, 2023, the Company recorded a receivable for income taxes of $1.0 million, comprised of refunds requested from the Internal Revenue Service and state taxing authorities. This receivable is reported as a component of Other current assets in the Company's consolidated balance sheet at December 31, 2023.

At December 31, 2022, the Company recorded a receivable for income taxes of $3.1 million, comprised of $1.3 million of overpayments that will be applied to future periods and $1.8 million that was requested for refund from the Internal Revenue Service. This receivable is reported as a component of Other current assets in the Company's consolidated balance sheet at December 31, 2022.