|9 Months Ended|
Sep. 30, 2021
|Income Tax Disclosure [Abstract]|
12. Income Taxes
The Company regularly assesses the likelihood that the deferred tax asset will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred income taxes to an amount that is more likely than not to be realized. For the year ended December 31, 2020, the Company maintained a full valuation allowance against net deferred income tax assets because insufficient evidence existed to support the realization of any future income tax benefits. As of September 30, 2021, however, the Company has reassessed this conclusion. Based upon the Company’s assessment of all available evidence, including a number of new contracts awarded to the Company’s Services Segment since the latter part of the second quarter of 2021 (including a contract award with a value of approximately $40,000,000 for the decommissioning of a navy ship), a return to profitability, expectation of future profitability, and the Company’s overall prospects of future business, the Company has determined that it is more likely than not that the Company will be able to realize a portion of the deferred income tax assets as of September 30, 2021. As a result, a deferred income tax benefit in the amount of approximately $2,351,000 attributable to the valuation allowance release on beginning of year deferred tax assets was realized in the three months ended September 30, 2021.
The Company had income tax benefits of $2,836,000 and $133,000 for continuing operations for the three months ended September 30, 2021 and 2020, respectively and income tax benefits of $2,840,000 and $128,000 for the nine months ended September 30, 2021 and 2020, respectively. Our effective tax rates were approximately 194.9% and (9.9%) for the three months ended September 30, 2021 and 2020, respectively, and (455.1%) and (4.4%) for the nine months ended September 30, 2021 and 2020, respectively. The Company’s effective tax rates for the three and nine months ended September 30, 2021 were substantially impacted by the release of valuation allowance as discussed above. The Company’s tax rates for the three and nine months ended September 30, 2020 were impacted by the Company’s full valuation on its net deferred tax assets. For the three and nine months ended September 30, 2021, the primary reasons for the differences between the Company’s effective tax rate and statutory tax rate were due to the aforementioned release of valuation allowance and the forgiveness of the Company’s PPP Loan which is included in the Company’s Consolidated Statement of Operations as “Gain on extinguishment of debt” but is exempt from income taxes.
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