Annual report pursuant to Section 13 and 15(d)

Income taxes

v3.22.0.1
Income taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income taxes

Note 16. Income taxes

The components of the loss from continuing operations before income taxes for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):

For the years ended December 31,

2021

2020

2019

Domestic

$

(7,672

)

$

(12,667

)

$

(20,446

)

Foreign

 

Loss from Continuing Operations before Income Taxes

$

(7,672

)

$

(12,667

)

$

(20,446

)

F-48


Riot Blockchain, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except for share and per share amounts)

The components of income tax benefit (expense) are as follows (in thousands):

As of December 31,

2021

 

2020

2019

Current:

US Federal

$

 

$

$

US State

(254

)

Foreign

Total current benefit (expense)

$

(254

)

$

$

Deferred:

US Federal

$

$

$

117

US State

26

Foreign

Total deferred benefit

143

Total benefit (expense) for income taxes

$

(254

)

$

$

143

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2021 and 2020 are comprised of the following (in thousands):

As of December 31,

2021

 

2020

Deferred income tax assets:

Net operating loss carryforwards

$

64,394

$

51,938

Research and development credit carryforwards

1,063

1,063

Long-term investments

3,402

-

Operating lease liabilities

1,454

-

Stock option expense

15,827

1,253

Impairment of mining related assets and other

10,504

803

Total deferred tax assets

96,644

55,057

Valuation allowance

(59,039

)

(55,057

)

Net deferred tax assets

37,605

-

Deferred income tax liabilities:

Derivative asset

(5,477

)

-

Property and equipment and other

(32,128

)

-

Net deferred tax assets (liabilities)

$

-

$

-

The Company has approximately $264.9 million and $219.6 million of federal and state tax Net Operating Losses (“NOLs”), respectively, that may be available to offset future taxable income. Federal and state net operating loss carryforwards of $125.2 million and $147.1 million, respectively, if not utilized, expire between 2026 and 2037. Under the Tax Cuts and Jobs Act, $139.7 million federal and $72.5 million state NOLs incurred after December 31, 2017 are carried forward indefinitely, but may be limited in utilization to 80% of taxable income. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed in to law on March 27, 2020, provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020, may be carried back five years and forward indefinitely. In addition, the 80% taxable income limitation is temporarily removed, allowing NOLs to fully offset net taxable income.

Furthermore, as a result of changes in the ownership of our common stock and changes in our business operations, our ability to use our federal NOLs may be limited under Internal Revenue Code Section 382 and 383. State NOLs are subject to similar limitations in many cases. As a result, our substantial NOLs may not have any value to us.

The statute of limitations for assessment by the IRS and state tax authorities is open for tax years ending December 31, 2017 through 2021, although carryforward attributes that were generated prior to tax year 2017 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. Currently, no federal or state income tax returns are under examination by the respective taxing authorities.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. In case the deferred tax assets will not be realized in future periods, the Company has provided a valuation allowance for the full amount of the deferred tax assets at December 31, 2021 and 2020. The valuation allowance increased by approximately $4.0 million during the year ended December 31, 2021.

F-49


Riot Blockchain, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except for share and per share amounts)

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows (in thousands):

For the years ended December 31,

2021

2020

2019

Statutory federal income tax expense (benefit)

$

(1,611

)

$

(2,660

)

$

(4,293

)

State taxes, net of federal tax expense (benefit)

347

(471

)

(664

)

Nondeductible/nontaxable items

1,732

(45

)

1,142

Tax return to provision true-up

313

(8,737

)

-

State tax rate change

(1,897

)

2,231

-

Other

-

-

195

Change in valuation allowance

1,370

9,682

3,477

Income taxes expense (benefit)

$

254

$

-

$

(143

)

The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2021 and 2020. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue either interest or penalties for the years ended December 31, 2021 and 2020.

The Company is subject to U.S. federal income tax and primarily Florida, Colorado and Texas state income tax. The Company has not been under tax examination in any jurisdiction for the years ended December 31, 2021 and 2020.