|12 Months Ended|
Dec. 31, 2019
|Income Tax Disclosure [Abstract]|
NOTE 13 – INCOME TAXES
As of December 31, 2019, the U.S. Company had federal and state net operating loss carry forward for tax purposes of approximately $21,199. $7,240 of the federal net operating loss can be carried forward indefinitely and $13,959 of the federal net operating loss can be offset against taxable income for 20 years. Utilization of the U.S. net operating losses may be subject to substantial limitations in the event of a change of ownership provisions of the Internal Revenue Code of 1986.
Income tax expense is comprised of the following:
The difference between the statutory tax rate of the Company and the effective tax rate is primarily the result of tax benefits generated by the Company and its subsidiary which have not been recognized due to the uncertainty that such tax benefits will ultimately be realized. A reconciliation of the statutory U.S Federal rate to the Company’s effective tax rate is as follows:
Tax rates applicable to the income of the Israeli subsidiary:
The Israeli corporate tax rate in 2019 and 2018 is 23%.
In December 2017, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2018 and 2017 Budget Years), 2017 which reduced the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018.
The subsidiary has final tax assessments through 2013.
Loss / (income) before taxes on income:
Deferred income taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
For the year ended December 31, 2019 and 2018, the net increases in valuation allowance of $1,510 and $1,024, respectively was primarily driven by the increase in net operating loss carryforwards.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are able to be utilized. Based on consideration of these factors, the Company concluded that all of its recorded deferred tax assets are not more likely than not realizable and recorded a full valuation allowance at December 31, 2019 and 2018.
The Company considers the earnings of its non-U.S. subsidiary to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We have not recorded a deferred tax liability related to the U.S. federal and state income taxes as an estimate of undistributed earnings of foreign subsidiaries would not be practicable to estimate at this time. If the Company does decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States.
Reconciliation of the theoretical tax expense to the actual tax expense
The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and its subsidiary due to the uncertainty of the realization of such tax benefits.
A reconciliation of the beginning and ending balances of uncertain tax benefits is as follows:
The Company recognizes interest and penalties related to unrecognized tax benefits in tax expense. During the year ended December 31, 2019, the Company accrued $0 for interest and penalties expenses related to uncertain tax positions.
U.S. federal and New York State income taxes are open for examination for years 2017-2019 and Israel tax returns are open for examination for years 2016-2019.
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://fasb.org/us-gaap/role/ref/legacyRef