NOTE 13

INCOME TAXES

The components of (loss) income before income tax benefits by jurisdiction for continuing operations for the years ended December 31, consisted of the following (in thousands):

 SCHEDULE OF INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE

The components of current and deferred federal and state income tax (benefits) expense for continuing operations for the years ended December 31, consisted of the following (in thousands):

 SCHEDULE OF COMPONENTS OF INCOME TAX (BENEFIT) EXPENSE

An overall reconciliation between the expected tax benefit using the federal statutory rate of 21% for each of the years ended 2021 and 2020 and the benefit for income taxes from continuing operations as reported in the accompanying Consolidated Statement of Operations is provided below (in thousands).

 SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

During the fourth quarter of 2021, the Company sold PFM Poland resulting from its decision to cease all R&D activities under its Medical Segment. Prior to the sale, the Company purchased Perma-Fix Medical LLC which was converted from PFMC, a wholly-owned subsidiary of PFM Poland. Perma-Fix Medical LLC was treated as a disregarded entity for tax purposes, resulting in a realized tax loss of $2,466,000 from uncollected payables. As a condition of the sale of PFM Poland, the Company forgave its receivables from PFM Poland resulting in a $3,089,000 capital loss on the sale of 100% interest of PFM Poland stock (see “Note 14 – PF Medical for a discussion on the sale of PFM Poland).

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. Since the end of the second quarter of 2021, however, the Company entered into a number of new contracts awarded to the Company’s Services Segment (including a contract award with a value of approximately $40,000,000 for the decommissioning of a navy ship). As a result of these new contracts, the Company expected future profitability and improved overall prospects of future business. As such, as of September 30, 2021, the Company determined that it was more likely than not that it would be able to realize a portion of the deferred income tax assets. 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 primarily related to U.S. Federal income taxes was realized in the three months ended September 30, 2021. The Company continues to maintain a valuation allowance against certain state and foreign tax attributes that may not be realizable along with the capital loss carryover generated during 2021 that it does not expect to realize.

The global intangible low-taxed income (“GILTI”) provisions under the Tax Cuts and Jobs Act of 2017 (the “TCJA”) require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2021 and 2020. As the Canada and United Kingdom foreign subsidiaries are in loss positions for 2021, no GILTI inclusion is expected for these entities for the current year. In addition, the aforementioned sale of PFM Poland is not expected to result in any GILTI inclusion.

On March 27, 2020, the CARES Act was enacted and signed into law. The CARES Act included a number of income tax law changes, including modifications to the interest limitation under Internal Revenue Code (“IRC”) §163(j) and reinstatement of the ability to carry back net operating losses. On July 1, 2021, the Company received forgiveness of its PPP Loan which is included in its Consolidated Statement of Operations as “Gain on extinguishment of debt” but is exempt from income taxes.

The Company had temporary differences and net operating loss carry forwards from both our continuing and discontinued operations, which gave rise to deferred tax assets and liabilities at December 31, 2021 and 2020 as follows (in thousands):

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

The Company has estimated net operating loss carryforwards (“NOLs”) for federal and state income tax purposes of approximately $19,920,000 and $72,767,000, respectively, as of December 31, 2021. These NOLs can be carried forward and applied against future taxable income, if any, and expire in various amounts starting in 2021. Approximately $19,725,000 of our federal NOLs were generated after December 31, 2017 and thus do not expire.

The tax years 2018 through 2020 remain open to examination by taxing authorities in the jurisdictions in which the Company operates.

No uncertain tax positions were identified by the Company for the years currently open under statute of limitations.

The Company had no federal income tax payable for the years ended December 31, 2021 and 2020.