Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table summarizes the components of pre-tax income (loss) as either domestic or foreign for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):

Years Ended December 31,
2022 2021 2020
United States $ (38,642) $ (104,028) $ (5,038)
Foreign 1,984  1,000  589 
Total pre-tax loss $ (36,658) $ (103,028) $ (4,449)

The provision for income taxes charged to operations consisted of the following for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):
Years Ended December 31,
2022 2021 2020
Current tax expense:
Federal $ —  $ —  $ (2)
State 58  47 
Foreign 762  310  317 
Total current tax expense 820  357  323 
Deferred tax expense:
Federal 11 
State (13) (186) (124)
Foreign (1) (8) (5)
Total deferred tax benefit (3) (191) (127)
Provision for income taxes $ 817  $ 166  $ 196 

A reconciliation between the Company’s federal statutory tax rate and its effective tax rate for the years ended December 31, 2022, 2021 and 2020 is as follows:

Years Ended December 31,
2022 2021 2020
Federal statutory tax rate 21.00  % 21.00  % 21.00  %
State tax, net of federal benefit 6.71  % 3.01  % 3.93  %
Meals and entertainment (0.14) % (0.11) % (1.07) %
Global intangible low-taxed income inclusion 0.00  % (0.07) % (2.41) %
Nondeductible stock-based compensation (3.81) % (0.11) % (2.83) %
Nondeductible compensation 0.00  % (2.15) % 0.00  %
Transaction costs 0.00  % (2.61) % 0.00  %
Prior year provision to return true-up 13.46  % 0.16  % (2.13) %
Change in valuation allowance (38.50) % (19.20) % (18.90) %
Foreign tax differential and permanent items (0.99) % (0.07) % (2.27) %
Other 0.01  % (0.01) % (0.08) %
Effective tax rate (2.26) % (0.16) % (4.76) %

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities consisted of the following at December 31, 2022 and 2021 (dollars in thousands):
December 31, 2022 December 31, 2021
Deferred tax assets:
Net operating loss carryforward $ 33,370  $ 26,828 
SPAC transaction 885  944 
Compensation accruals 552  1,326 
Share based compensation 1,313  807 
Foreign tax credits —  487 
Bad debt reserve 365  319 
Interest expense limitation 1,918  1,080 
Lease liability 1,328  1,489 
R&D expenditures capitalization 5,195  — 
Other intangibles amortization 259  — 
Other 630  398 
Total deferred tax assets 45,815  33,678 
Deferred tax liabilities:
Capitalized commissions (2,636) (2,346)
Right-of-use asset (1,232) (1,363)
Other intangibles amortization —  (2,447)
Other (465) (274)
Total deferred tax liabilities (4,333) (6,430)
Net deferred tax assets before valuation allowance 41,482  27,248 
Valuation allowance (41,481) (27,250)
Net deferred tax assets (liabilities) $ $ (2)

At December 31, 2022, the Company had available federal and combined state net operating loss (“NOL”) carryforwards which may offset future taxable income of $121.7 million and $127.3 million, respectively. $23.6 million of the federal NOLs are scheduled to expire between 2027 and 2035, while the remaining federal NOLs of $98.1 million do not expire. $104.0 million of the state NOLs are scheduled to expire between 2025 and 2042, while the remaining state NOLs of $23.3 million do not expire. There were insufficient federal and state deferred tax liabilities to offset the federal and state deferred tax assets at December 31, 2022 and 2021; therefore, based on this and other available evidence, management believes it is more likely than not that the net federal and state deferred tax assets of LiveVox will not be fully realized and has recorded valuation allowances in the amounts of $41.5 million and $27.3 million as of December 31, 2022 and 2021, respectively.
Past ownership changes and other equity transactions have triggered Section 382 and 383 provisions of the Internal Revenue Code, resulting in certain annual limitations on the utilization of existing federal and state NOLs and credits. Such provisions may limit the potential future tax benefit to be realized by the Company from its accumulated NOLs and tax credit carryforwards.
Historically, the Company had not accrued a provision for U.S. deferred taxes or foreign withholding taxes on undistributed earnings of the Company’s wholly owned foreign subsidiaries because it was the intention of management to reinvest the undistributed earnings indefinitely in foreign operations. Undistributed earnings are generally no longer subject to U.S. tax upon repatriation beginning January 1, 2018; however, undistributed earnings remain subject to certain state income and foreign withholding taxes. It remains the intention of management to reinvest the undistributed earnings indefinitely in foreign operations. The Company also believes that any such state income or foreign withholding taxes would be immaterial.
On August 16, 2022, the President signed into law the Inflation Reduction Act of 2022 which contained provisions effective January 1, 2023, including a 15% corporate minimum tax and a 1% excise tax on stock buybacks, both of which we expect to be immaterial to our financial results, financial position and cash flows.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, India and Colombia. The tax returns are subject to statutes of limitations that vary by jurisdiction. At December 31, 2022, the Company remains subject to U.S. and certain state income tax examinations for tax years 2019 through 2022, and in certain other states for tax years 2018
through 2022. However, due to the Company’s NOL carryforwards in various jurisdictions, tax authorities have the ability to adjust carryforwards related to closed years.