10. INCOME TAXES

For the years ended December 31, 2022 and 2021, income tax expense computed at the federal statutory income tax rate of 21% differed from the recorded amount of income tax expense due primarily to state income taxes and permanent differences.

As of December 31, 2022 and 2021, the Company maintained a valuation allowance of $84,952 and $83,153, respectively. The valuation allowance was recorded due to the fact that the Company has incurred operating losses to date and is unable to forecast when such deferred tax assets will be utilized.

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by $1,799 and increased by $24,054 during the twelve months ended December 31, 2022 and 2021, respectively.

The Company's financial statements included a full valuation allowance against net deferred tax assets before the ML Enterprise Acquisition. After considering the ML Enterprise Acquisition, the projected consolidated results and the available net deferred tax liability from ML Enterprise of approximately $29,100, the Company was able to release part of the valuation allowance due to the change in the overall net deferred tax asset. The acquired deferred tax liability supports the realization of certain deferred tax assets of the Company and, therefore, a benefit for the valuation allowance release is included in the tax provision. The partially offsetting increase to the valuation allowance of approximately $27,819 was in relation to normal business operations.

Total U.S. federal and state operating loss carryforwards as of December 31, 2022 and 2021 were approximately $786,600 and $517,700, respectively. U.S. federal net operating loss carryforwards begin to expire in 2033, and state operating loss carryforwards begin to expire in 2027. U.S. Federal net operating losses of approximately $417,000 carry forward indefinitely.

The Company has completed a review to determine whether the future utilization of net operating loss and credit carryforwards will be restricted due to ownership changes that have occurred. Due to the ML Enterprise Acquisition, the Company experienced an ownership change on February 17, 2022. Thus, the Company's net operating loss carryforwards are subject to an annual limitation of approximately $8,200 per year. The Company had a net unrealized built-in gain corporation on the ownership change date and had a net unrealized built-in gain of approximately $330,700 at the change date. As a result, under the section 338 Approach of Notice 2003-65, the Company's annual limitation is expected to be increased in the first five years post-change by approximately $121,400. Based on the February 17, 2022 limitation, all of the total net operating loss carryforwards are expected to become utilizable by the tax year ending December 31, 2043.