Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.22.2.2
Income Taxes
 9 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Note 7 - Income Taxes
The following table summarizes the Company’s income tax expense and effective tax rates for the three and nine months ended September 30, 2022 and 2021:
 
    
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
    
2022
    
2021
    
2022
    
2021
  
Loss before income taxes
    $ (17,670 )    $ (11,745 )    $ (391,068 )    $ (31,278 ) 
Income tax expense
      4,325       4,090       14,591       19,265  
    
 
 
    
 
 
    
 
 
    
 
 
  
Effective tax rate
      (24.5 )%      (34.8 )%      (3.7 )%      (61.6 )% 
    
 
 
    
 
 
    
 
 
    
 
 
  
The effective tax rate may vary significantly from period to period and can be influenced by many factors. These factors include, but are not limited to, changes to the statutory rates in the jurisdictions where the Company has operations and changes in the valuation of deferred tax assets and liabilities. The difference between the effective tax rate and the federal statutory rate of 21.0% primarily relates to certain
non-deductible
items, state and local income taxes and the valuation allowance for deferred tax assets of
non-cultivator
entities.
In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its
pre-change
net operating loss carryforwards (“NOLs”) to offset future taxable income. Similarly, where control of a corporation has been acquired by a person or group of persons, subsection 111(5) of the Income Tax Act (Canada), and equivalent provincial income tax legislation restrict the corporation’s ability to carry forward
non-capital
losses from preceding taxation years. The Company’s existing NOLs may be subject to limitations arising from the Company’s ownership changes. The Company is currently in the process of reviewing any potential limitation on the use of its NOLs or
non-capital
losses as a result of the Recapitalization Transaction which closed on June 24, 2022.
The Internal Revenue Service filed Notices of Federal Tax Lien against GHHIA Management Inc. (“GHHIA”) and Mayflower Medicinals Inc. (“Mayflower”) on February 23, 2022 and April 21, 2022, respectively. The liens are for corporate income tax, penalty and interest owed by GHHIA for its tax year ended December 31, 2020 and Mayflower for its tax years ended December 31, 2019 and December 31, 2020. The Company is actively working to resolve these matters with the Internal Revenue Service.