LGL GROUP INC
For the period ended Dec 31, 2023. Filed Apr 1, 2024.
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FY2023 · Filed Apr 1, 2024
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Income Taxes
9. Income Taxes
Income tax provision (benefit) for the years ended* December 31, 2023and2022* is as follows:
| Year Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Current tax expense (benefit): | ||
| Federal | $42 | $(147) |
| State and local | 177 | 209 |
| Total current tax expense | 219 | 62 |
| Deferred tax expense (benefit): | ||
| Federal | 83 | (1,411) |
| State and local | (1) | (180) |
| Total before change in valuation allowance | 82 | (1,591) |
| Change in valuation allowance | — | — |
| Net deferred tax expense (benefit) | 82 | (1,591) |
| Total income tax expense (benefit) | $301 | $(1,529) |
Effective Tax Rate
A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate to Income (loss) before income taxes is detailed below:
| Year Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Income (loss) before income taxes | $646 | $(6,406) |
| Tax rate | 21.0% | 21.0% |
| Income tax expense (benefit) at federal statutory rate | 136 | (1,344) |
| Tax effect of: | ||
| State taxes, net of federal benefit | 57 | (114) |
| Permanent differences | — | 43 |
| Noncontrolling interests | (10) | — |
| Change in rate | (18) | (17) |
| Change in uncertain tax positions | 41 | 29 |
| Other | 95 | (126) |
| Income tax provision (benefit) | $301 | $(1,529) |
| Effective tax rate | 46.5% | 23.9% |
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Deferred Tax Assets
Deferred income taxes for2023 and2022 were provided for the temporary differences between the financial reporting basis and the income tax basis of the Company's assets and liabilities. Tax effects of temporary differences and carryforwards as of* December 31, 2023and2022* were as follows:
| December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Deferred tax assets: | ||
| Inventory reserve | $19 | $12 |
| Allowance for doubtful accounts | 15 | 20 |
| Lease liability | 19 | 31 |
| Unrealized gains on marketable securities | 3 | 166 |
| Stock-based compensation | 1 | 8 |
| Depreciation and amortization | 13 | 11 |
| Federal tax loss carryforwards | 77 | — |
| Other reserves and accruals | 24 | 17 |
| Total deferred tax assets | $171 | $265 |
| Deferred tax liabilities: | ||
| Right-of-use asset | 19 | 31 |
| Total deferred tax liabilities | 19 | 31 |
| Net deferred tax assets before valuation allowance | 152 | 234 |
| Valuation allowance | — | — |
| Net deferred tax assets (liabilities) | $152 | $234 |
The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that is more likely thannot that all or some of the deferred tax asset willnot be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance isnot needed. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.
As of* December 31, 2023and2022*, the Company didnot record a valuation allowance against its deferred tax assets.
Uncertain Tax Benefits
Significant judgment is required in determining our provision for income taxes. In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain. We review our tax contingencies on a regular basis and make appropriate accruals as necessary.
As of* December 31, 2023*, our unrecognized tax benefits totaled $678, and are included within Other liabilities on the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Year Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Balance, beginning of year | $637 | $458 |
| Additions for tax positions of prior years | (31) | 37 |
| Additions based on tax positions related to the current year | 72 | 142 |
| Balance, end of year | $678 | $637 |
The Company will recognize any interest and penalties related to unrecognized tax positions in income tax expense. Net adjustments to accruals for interest and penalties associated with uncertain tax positions were immaterial as of* December 31, 2023*. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $678. We donot expect a significant change to the amount of unrecognized tax benefits over the next12 months. We believe that the taxes accrued in our Consolidated Balance Sheet fairly represent the amount of income taxes to be settled or realized in the future.
Tax Regulatory Matters
The Company files a consolidated U.S. federal income tax return with our eligible subsidiaries. The Company also files income tax returns in various state and local jurisdictions including California, Florida, Massachusetts, New York, and Texas.
The statute of limitations for assessment by the Internal Revenue Service ("IRS") and state tax authorities is open for tax returns for years ended* December 31, 2019,2020 and 2021; although carryforward attributes that were generated prior to tax year2019,* including NOL carryforwards and tax credits,* may*still be adjusted upon examination by the IRS or state tax authorities, if they either have been or will be used in a future period. The Company is generally subject to examinations by foreign tax authorities from 2017 to the present.
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