The ONE Group Hospitality, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of components of income before provision (benefit) for income taxes

The components of income before provision (benefit) for income taxes were as follows (in thousands):


	For the years ended December 31,
	2021		2020
Domestic	$	33,331	$	(19,129)
Foreign		203		106
Total	$	33,534	$	(19,023)

Schedule of components of provision (benefit) for income taxes

The components of the Company’s provision (benefit) for income taxes were as follows (in thousands):


	For the years ended December 31,
	2021		2020
Current:
Federal	$	—	$	—
State and local		564		39
Foreign		110		36
Total current		674		75
Deferred:
Federal		(195)		(4,593)
State and local		1,107		(887)
Foreign		—		5
Total deferred		912		(5,475)
Total provision (benefit) for income taxes	$	1,586	$	(5,400)

Schedule of effective tax rate differs from the statutory rates

The Company’s effective tax rate differs from the statutory rates as follows:


	For the years ended December 31,
	2021	2020
Income tax provision (benefit) at federal statutory rate	21.0 %	(21.0)%
State and local taxes	4.5 %	(4.4)%
FICA tip credit	(7.2)%	(5.3)%
Change in valuation allowance	—	(0.9)%
Compensation subject to IRC Section 162(m)	6.2%	—
Equity based compensation	(7.6)%	—
PPP income exclusion	(11.6)%	—
Other items, net	(0.6)%	3.2 %
Effective income tax rate	4.7 %	(28.4)%

Schedule of income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities

The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):


	For the years ended December 31,
	2021		2020
Deferred tax assets:
Operating lease liabilities	$	17,152	$	15,255
Stock compensation		247		439
FICA tip credit carryforward		9,929		6,860
Net operating loss		3,290		6,038
Goodwill		1,055		1,283
Inventory		10		23
Charitable contributions carryforward		—		2
Foreign tax credit carryforward		382		336
Deferred revenue		165		321
State and local tax credit carryforward		310		299
Expenses not deductible until paid		1,667		985
Basis in LLC interest		—		175
IRC 163(j) disallowed interest carryforward		—		835
Debt issuance costs		143		—
Kona related acquisition costs		813		201
Deferred payroll taxes		281		703
Total deferred tax assets		35,444		33,755
Deferred tax liabilities:
Operating lease right-of-use assets		(13,150)		(10,381)
Depreciation and amortization		(9,605)		(9,812)
Other		(40)		—
Total deferred tax liabilities		(22,795)		(20,193)
Valuation allowance		(336)		(336)
Net deferred tax assets	$	12,313	$	13,226

Schedule of activity of uncertain tax positions

The following table summarizes the activity related to the Company’s uncertain tax positions (in thousands):


	For the years ended December 31,
	2021		2020
Balance, beginning of year	$	814	$	814
Increase related to current year positions		—		209
Decrease related to prior period positions		(367)		(209)
Balance, end of year	$	447	$	814