NOTE 16 — INCOME TAXES

The Company is subject to federal and state/provincial income taxes in the United States, Canada, and the United Kingdom and each legal entity files on a non-consolidated basis. The benefit of the pre-reorganization net operating losses of 180 LP were passed through to its owners.

The losses before income taxes consist of the following domestic and international components:

The provision for income taxes consists of the following benefits (provisions):

Certain deferred tax liabilities are denominated in currencies other than the US dollar and are subject to foreign currency translation adjustments.

The provision for income taxes differs from the United States Federal statutory rate as follows:

Deferred tax assets and liabilities consist of the following:

The change in the valuation reserve for deferred tax assets consists of the following:

As of December 31, 2020, the Company had net operating loss (“NOL”) carryforwards that may be available to offset future taxable income in various jurisdictions as follows:

The utilization of the domestic NOLs to offset future taxable income may be subject to annual limitations under Section 382 of the Internal Revenue Code and similar state statutes as a result of ownership changes, but the United States federal NOLs have no expiration dates.

On July 16, 2019 as part of the Reorganization (see Note 4), we acquired net deferred tax assets of $2,031,811, against which there is a full valuation allowance. On November 6, 2020, we acquired net deferred tax assets of $2,491,161, against which there is a full valuation allowance.

The Company has assessed the likelihood that deferred tax assets will be realized in accordance with the provisions of ASC 740 Income Taxes (“ASC 740”). ASC 740 requires that such a review considers all available positive and negative evidence, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. After the performance of such reviews as of December 31, 2020 and 2019, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of those dates. Thus, the Company established valuation reserves of $2,491,161 and $2,031,811 in connection with the net deferred tax assets acquired in connection with the Business Combination described in Note 5 and the Reorganization described in Note 4 during the years ended December 31, 2020 and 2019, respectively. Additionally, the Company recorded increases in the valuation allowance of $2,238,783 and $1,945,821 in connection with the tax provisions for the years ended December 31, 2020 and 2019, respectively.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2020 and 2019. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date.

No tax audits were commenced or were in process during the years ended December 31, 2020 and 2019 nor were any tax related interest or penalties incurred during those periods. The Company’s tax returns filed in the United States, Canada, and the United Kingdom since inception remain subject to examination, with the exception of the tax returns filed for the 180 LP pass-through entity whose tax returns remain subject to examination beginning with the 2018 tax return.