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, 2022

Schedule of components of income before provision for income taxes

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


	For the years ended December 31,
	2022		2021
Domestic	$	14,051	$	33,331
Foreign		142		203
Total	$	14,193	$	33,534

Schedule of components of provision for income taxes

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


	For the years ended December 31,
	2022		2021
Current:
Federal	$	—	$	—
State and local		808		564
Foreign		75		110
Total current		883		674
Deferred:
Federal		(429)		(195)
State and local		420		1,107
Foreign		—		—
Total deferred		(9)		912
Total provision for income taxes	$	874	$	1,586

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,
	2022	2021
Income tax provision at federal statutory rate	21.0%	21.0%
State and local taxes	7.6%	4.5%
FICA tip credit	(22.5)%	(7.2)%
Compensation subject to IRC Section 162(m)	8.6%	6.2%
Equity based compensation	(9.3)%	(7.6)%
PPP income exclusion	—%	(11.6)%
Other items, net	0.8%	(0.6)%
Effective income tax rate	6.2%	4.7%

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,
	2022		2021
Deferred tax assets:
Operating lease liabilities	$	18,871	$	17,152
Stock compensation		415		247
FICA tip credit carryforward		13,976		9,929
Net operating loss		3,203		3,290
Goodwill		906		1,055
Inventory		20		10
Charitable contributions carryforward		3		—
Foreign tax credit carryforward		622		382
Deferred revenue		190		165
State and local tax credit carryforward		135		310
Expenses not deductible until paid		298		1,667
IRC 163(j) disallowed interest carryforward		483		—
Debt issuance costs		113		143
Kona related acquisition costs		755		813
Deferred payroll taxes		—		281
Total deferred tax assets		39,990		35,444
Deferred tax liabilities:
Operating lease right-of-use assets		(13,974)		(13,150)
Depreciation and amortization		(13,064)		(9,605)
Other		(7)		(40)
Total deferred tax liabilities		(27,045)		(22,795)
Valuation allowance		(622)		(336)
Net deferred tax assets	$	12,323	$	12,313

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,
	2022		2021
Balance, beginning of year	$	447	$	814
Increase related to current year positions		—		—
Decrease related to prior period positions		(401)		(367)
Balance, end of year	$	46	$	447