Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company recorded provisions for income taxes of $8.2 million and $9.4 million for the years ended December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, the Company’s cumulative federal net operating losses were $64.5 million and $71.2 million, respectively. The provision recorded in the year ended December 31, 2024 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, the change in valuation allowance against deferred tax assets, and other nondeductible expenses. 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 of true-ups from changes that occurred between when the provision for the year ended December 31, 2022 was determined and when the related tax returns were filed, and reserves recorded against uncertain tax positions taken on the tax return as filed.

Reconciliations of the Company’s effective tax rates and the statutory tax rate for the years ended December 31, 2024 and 2023 were as follows:
Year ended December 31,
2024 2023
U.S federal taxes at the statutory rate 21.0  % 21.0  %
State taxes net of federal benefit (9.9) % (4.2) %
Section 280E adjustment (240.4) % (49.3) %
Other permanent non-deductible expenses (27.7) % (6.1) %
Stock-based compensation (3.5) % (0.7) %
 Non-cash interest (1.5) % (9.4) %
FIN 48 reserve (2.7) % (28.1) %
Return to provision adjustments 3.1  % 45.9  %
Other 3.5  % (1.2) %
Valuation allowance 37.6  % (96.9) %
    Effective tax rate (220.5) % (129.0) %
The income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2024 and 2023 were as follows:
Year ended December 31,
2024 2023
Deferred tax assets:
Net operating loss carryforwards $ 12,690  14,693 
Allowance for doubtful accounts 68  207 
Stock-based compensation 2,333  2,434 
Loss on equity investments 8,025  8,094 
Goodwill write-offs —  115 
Change in fair value of investments 247  229 
Lease payments 2,674  2,621 
Accruals and reserves 169  484 
   Other 889  448 
Deferred tax liabilities:
Depreciation (6,047) (6,925)
Goodwill write-offs (303) — 
Real estate revenue (2,613) (2,477)
Net deferred tax asset 18,132  19,923 
Valuation allowance (18,132) (19,923)
      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, 2024 and 2023 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, 2024 and 2023 were as follows (in thousands):
Year ended December 31,
2024 2023
Balance at January 1, $ 5,650  $ 4,014 
Additions based on tax positions related to prior years 3  1,636 
Reductions due to statute of limitations lapse (397) — 
Balance at December 31, $ 5,256  $ 5,650 

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, 2024, the Company's unrecognized tax benefits decreased by approximately $394,000 as a result of the lapse of the statute of limitations for 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, 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 provision of Section 280E of the Internal Revenue Code.

The Company is currently undergoing an IRS audit for the tax year ended December 31, 2022 for certain of its subsidiaries. The result of this audit could reasonably result in a change in our uncertain tax positions related to net operating losses deducted within the next 12 months. At this time, an estimate of the amount that could change for those uncertain tax positions cannot be made. 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, 2024 was $0.9 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, 2021 through December 31, 2024.

At December 31, 2024 and 2023, the Company's consolidated balance sheets included a receivable for income taxes of $0.8 million and $0.7 million, respectively, representing requests for refunds from the Internal Revenue Service and state taxing authorities, and are reported as components of Other current assets as of the respective balance sheets.