Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 16 — Income Taxes

 

Vinco Ventures, Inc. is taxed as a corporation and pays federal, state and local taxes on income allocated to it from Ferguson Containers, Cryptyde Shared Services LLC, EVNT Platform LLC, Cryptyde Inc, CW Machines LLC, BlockHiro LLC, Edison Nation Holdings LLC, Edison Nation LLC, Safe TV Shop LLC, Everyday Edison LLC, CBAV1 LLC, Pirasta LLC, Vinco Shared Services LLC, TBD Safety LLC, Honey Badger Media LLC, ZVV Media Partners LLC, Best Party Concepts LLC, Global Clean Solutions LLC, Lomotif Private Limited, and Lomotif Inc. based upon the Company’s economic interest in those entities.

 

Edison Nation Holdings, LLC and its subsidiaries are disregarded limited liability companies for US income tax purposes. Accordingly, Edison Nation was not subject to income taxes prior to the acquisition on September 4, 2018 and the results of operations were not material and therefore the tax provision is only for the post-acquisition period.

 

TBD Safety, LLC is a disregarded limited liability company for US income tax purposes. Accordingly, TBD was not subject to income taxes prior to the acquisition on October 16, 2020 and the results of operations were not material and therefore the tax provision is only for the post-acquisition period.

 

Global Clean Solutions, LLC is a partnership for US income tax purposes and the Company’s share of the partnership income is included in its tax provision. Global Clean Solutions, LLC was not subject to income taxes prior to the acquisition on May 20, 2020 and the results of operations were not material and therefore the tax provision is only for the post-acquisition period.

 

Honey Badger, LLC (HB) is a disregarded limited liability company for US income tax purposes. Accordingly, HB was not subject to income taxes prior to the acquisition on November 10, 2020 and the results of operations were not material and therefore the tax provision is only for the post-acquisition period.

 

Cryptyde Shared Services, LLC, EVNT Platform LLC and BlockHiro, LLC were newly formed entities in 2021 and are disregarded limited liability companies for US income tax purposes. CW Machines, LLC and ZVV Media Partners, LLC are newly formed partnerships for US income tax purposes in 2021 and VV’s share of the partnership income is included in its tax provision.

 

In 2021, through ZVV Media Partners, LLC, Lomotif Private Ltd (Singapore) and Lomotif, Inc (US) were acquired.

 

United States and foreign components of loss before income taxes were as follows:

 

    2021     2020  
   

For the Years

Ended December 31,

 
    2021     2020  
United States   $ (711,404,939 )   $ (6,287,903 )
Foreign     (9,618,416 )     -  
Loss before income taxes   $ (721,023,355 )   $ (6,287,903 )

 

  

The income tax provision (benefit) consists of the following:

 

    2021     2020  
   

For the Years

Ended December 31,

 
    2021     2020  
Current:                
Federal   $ -     $ -  
Foreign     -       -  
State and local     81,081       19,197  
Total current   $ 81,081     $ 19,197  
                 
Deferred:                
Federal   $ (8,782,083 )   $ (1,166,562 )
Foreign     -     -  
State     (4,037,793 )     (196,494 )
Total deferred     (12,819,876 )     1,363,056  
Less: valuation allowance increase     12,928,296       1,363,056  
Net deferred   $ 108,420   $ -  
Income tax provision (benefit)   $ 189,501     $ 19,197  

 

 

The tax effects of temporary differences that give rise to deferred tax assets or liabilities are presented below:

 

 

             
    For the Years ended December 31,  
    2021     2020  
Deferred tax assets:                
Stock-based compensation   $ 3,547,401     $ 1,025,745  
Goodwill and intangible assets    

-

      -  
Operating lease liabilities     16,504       32,653  
Net operating loss carryforwards     14,667,049       3,567,490  
Other     759,883      

-

 
Less: valuation allowance     (18,548,212 )     (3,787,253 )
Net deferred tax assets     442,626       838,635  
                 
Deferred tax liabilities:                
Right of use assets     (15,848 )     (32,137 )
Goodwill and intangible assets     (375,889 )     (724,395 )
Property and equipment     (159,308 )     (82,103 )
Net deferred tax liabilities     (551,046 )     (838,635 )
Net deferred taxes   $ (108,420 )   $ -  

 

As of December 31, 2021, the Company has the following gross carryforwards available:

 

 

Jurisdiction   Tax Attribute   Amount     Begin to Expire
U.S. Federal (1)   NOL     42,257,987     No expiration
U.S. State (1)   NOL     41,162,702     2038
Singapore (1)   NOL     16,860,023     No expiration
U.S. Federal   Foreign Tax Credits     316,140     2028

 

(1) Net operating losses (NOL’s) are presented as pre-tax amounts.

 

The above carryforwards may be subject to annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experiences one or more ownership changes. The Company evaluates its ability to realize deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of December 31, 2021 and 2020, the Company has recorded a net deferred tax asset of $18,439,792 and $2,948,616, respectively. However, these net deferred tax assets will only be utilized to the extent the Company generates sufficient taxable income. As of December 31, 2021 and 2020, the Company established a valuation allowance in the amount of $18,548,212 and $3,787,252, respectively, against the net deferred tax assets as it is not more likely than not that is realizable based on current available evidence.

 

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

 

 

             
    For the Years ended December 31,  
    2021     2020  
Tax at federal statutory rate     21.0 %     21.0 %
Warrant fair market adjustment     -16.4 %     0.0 %
U.S. income subject to valuation allowance     -2.0 %     -20.9 %
State and local income taxes     0.4 %     -0.3 %
International rate differences     0.0 %     0.0 %
Income from “pass through” entities taxable to noncontrolling partners     -0.2 %     0.0 %
Nondeductible interest expense     -2.1 %     0.0 %
Transaction costs     -0.2 %     0.0 %
Executive compensation     -0.6 %     0.0 %
Other     0.0 %     -0.1 %
Effective income tax rate     -0.03 %     -0.3 %

 

The Company files income tax returns in various U.S., state, and foreign taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before 2018. With few exceptions, the Company is no longer subject to tax examinations in the foreign jurisdictions for tax periods prior to 2016.

 

It is the Company’s policy to include interest and penalties related to income tax liabilities in income tax expense in the consolidated statements of income and comprehensive income. In addition, the Company records uncertain tax positions in accordance with ASC 740. No interest or penalties related to income tax liabilities were recognized for the years ended December 31, 2021 and 2020.

 

In general, it is the practice and intention of the Company to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States.

 

While the Tax Cuts and Jobs Act provides for a territorial tax system, beginning in 2018, it includes the foreign-derived intangible income (“FDII”) and global intangible low-taxed income (“GILTI”) provisions. The Company elected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings from its Controlled Foreign Corporations (“CFCs”) in excess of an allowable return on the foreign subsidiary’s tangible assets. The FDII provisions allow for a deduction equal to a percentage of the foreign-derived intangible income of a domestic corporation. As a result of these provisions, the Company did not have any additional tax expense or benefit from either GILTI or FDII.