Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.7.0.1
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 13 – Income Taxes
 
The Company is taxed as a C Corporation. The historical audited financial results and other Predecessor financial information included herein reflect the Predecessor results as a limited liability company, which was taxed as a partnership for federal income tax purposes and not at the entity level. Following the Business Combination, LHLLC was treated as a disregarded entity (i.e., a business entity that is separate from its owner for liability purposes but is the same as its owner for income tax purposes); therefore, the financial results include the effects of federal and state income taxes at the parent level.
 
The provision (benefit) for income taxes for the 2016 Successor period consists of the following:
 
 
 
Successor
 
 
 
July 20, 2016
 
 
 
through
 
 
 
December 31,
 
(in thousands)
 
2016
 
Current tax provision
 
 
 
 
U.S. Federal
 
$
-
 
State and local
 
 
17
 
Total current tax provision
 
 
17
 
 
 
 
 
 
Deferred tax benefit
 
 
 
 
U.S. Federal
 
 
(3,219)
 
State and local
 
 
(669)
 
Total deferred tax benefit
 
 
(3,888)
 
Provision (benefit) for income taxes
 
$
(3,871)
 
 
Prior to the Business Combination, the Company had a deferred tax asset of $2.4 million which was offset by an equivalent valuation allowance. The valuation allowance was recorded due to management’s assumptions and judgments regarding the recoverability of the deferred tax asset, based on the more likely than not criterion. After considering the Business Combination on July 20, 2016, the projected post-combination results and all available evidence, the Successor released $2.4 million of valuation allowance that was previously provided against the Company’s deferred tax assets. In accordance with ASC 805 740-30-3, the Company recorded this release as income tax benefit during the period from July 20, 2016 through December 31, 2016 (Successor). This resulted in $2.4 million of deferred income tax benefit. No valuation allowance was required as of December 31, 2016.
 
The components of deferred tax assets (liabilities) were as follows:
 
 
 
Successor
 
 
 
As of
 
 
 
December 31,
 
(in thousands)
 
2016
 
Deferred tax assets:
 
 
 
 
Accrued expenses
 
$
340
 
Allowance for doubtful accounts
 
 
74
 
Intangibles
 
 
974
 
Goodwill
 
 
6,832
 
Startup costs
 
 
176
 
Deferred rent
 
 
84
 
Percentage of completion
 
 
38
 
Net operating losses
 
 
280
 
Total deferred tax assets
 
 
8,798
 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Fixed assets
 
 
(4,530)
 
Total deferred tax liabilities
 
 
(4,530)
 
 
 
 
 
 
Net deferred tax asset
 
$
4,268
 
 
The Company performed an analysis of its tax positions and determined that no material uncertain tax positions exist. Accordingly, there is no liability for uncertain tax positions as of December 31, 2016. Based on the provisions of ASC 740, the Company had no material unrecognized tax benefits as of December 31, 2016.
  
A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows:
 
 
 
Successor
 
 
 
July 20, 2016
 
 
 
through
 
 
 
December 31,
 
 
 
2016
 
Federal statutory income tax rate
 
 
34.0
%
State income taxes, net of federal tax effect
 
 
4.6
%
Change in valuation allowance
 
 
49.0
%
Permanent differences
 
 
-9.6
%
Other
 
 
-0.4
%
Effective tax rate
 
 
77.6
%