INCOME AND OTHER TAXES

12 Months Ended

Dec. 31, 2024

INCOME AND OTHER TAXES

INCOME AND OTHER TAXES

NOTE 10 – INCOME AND OTHER TAXES 

There was no income tax expense (benefit) for the years ended December 31, 2024 and 2023.

Domestic and foreign components of loss before income taxes for the years ended December 31, 2024 and 2023 were as follows:

	2024			2023
Domestic	$	(1,009,939	)	$	(397,156	)
Foreign		(720,465	)		(5,951,131	)
Loss before income taxes	$	(1,730,404	)	$	(6,348,287	)

The income tax expense (benefit) differs from the amount of income tax determined by applying the U.S. federal income tax rate to pre-tax income (loss) for the years ended December 31, 2024 and 2023 due to the following:

	2024			2023
U.S. federal statutory tax provision (benefit)	$	(363,000	)	$	(1,333,000	)
State income tax provision (benefit) net		(30,000	)		(88,000	)
Foreign taxes		(63,000	)		(536,000	)
VAT refund reserve and other non-deductible items		257,000			1,008,000
Adjustment for prior year tax estimate to actual-domestic		155,000			(7,000	)
Adjustment for prior year tax estimate to actual-foreign		63,000			136,000
Share-based compensation		21,000			-
Impact on change in foreign exchange rate		532,000			(275,000	)
Change in valuation allowance - Domestic		57,000			170,000
Change in valuation allowance - Foreign		(629,000	)		925,000
Total income tax expense	$	-		$	-

At December 31, 2024 and 2023, the Company had net deferred tax assets and liabilities as follows:

	2024			2023
Deferred tax asset:
Domestic net operating loss carry forward	$	692,000		$	646,000
Foreign net operating loss carry forward		2,255,000			2,883,000
Share-based compensation		67,000			-
Other		93,000			69,000
Deferred tax asset	$	3,107,000		$	3,598,000
Valuation allowance (domestic)		(285,000	)		(228,000	)
Valuation allowance (foreign)		(2,255,000	)		(2,883,000	)
Total deferred tax asset	$	567,000		$	487,000
Deferred tax liability:
Property, plant, and equipment		(567,000	)		(487,000	)
Total deferred tax liability		(567,000	)		(487,000	)
Net deferred tax asset after valuation allowance	$	-		$	-

At December 31, 2024 and 2023, the Company had deferred tax assets arising principally from net operating loss carry forwards for income tax purposes. As management cannot determine that it is more likely than not the benefit of the net deferred tax asset will be realized, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at December 31, 2024 and 2023.

At December 31, 2024, the Company has federal net operating loss (“NOL”) carry forwards of approximately $1.96 million, $1.91 million of which will never expire but is limited to offsetting up to 80% of taxable income in any future year, and $0.05 million of which will expire at the end of 2037 but is not limited regarding offsetting taxable income in future years. The Company has Montana state NOL carry forwards of approximately $2.3 million which expire between 2026 and 2031, and Idaho state NOL carry forwards of approximately $3.4 million, which expire between 2034 and 2044. The Company has approximately $7.5 million of Mexican NOL carry forwards which expire between 2025 and 2033. All carryforwards in all jurisdictions are subject to certain limitations.

During the years ended December 31, 2024 and 2023, there were no material uncertain tax positions taken by the Company. The Company’s United States income tax filings are subject to examination for the years 2021 through 2024 and for the years 2019 through 2024 in Mexico. However, for tax attributes from prior years, the statute remains open. The Company charges penalties on assessments to general and administrative expense and charges interest to interest expense.

Mexico Tax Assessment

In 2015, the Mexican tax authority (“SAT”) initiated an audit of the USAMSA’s 2013 income tax return. In October 2016, as a result of its audit, SAT assessed the Company $13.8 million pesos, which was approximately $666,400 in U.S. Dollars (“USD”) as of December 31, 2016. SAT’s assessment was based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. The assessment was settled in 2018 with no assessment due from the Company.

In 2019, the Company was notified that SAT re-opened its assessment of USAMSA’s 2013 income tax return and, in November 2019, SAT assessed the Company $16.3 million pesos, which was approximately $865,000 USD as of December 31, 2019. Management reviewed the 2019 assessment notice from SAT and, similar to the earlier assessment, believed the findings have no merit. An appeal was filed by the Company in November 2019 suspending SAT from taking immediate action regarding the assessment. In August 2020, the Company filed a lawsuit against SAT for resolution of the process and, in December 2020, filed closing arguments.  In 2022, the Mexican court ruled against the Company in the above matter, which was subsequently appealed by the Company.

As of December 31, 2023, the updated SAT assessment was approximately $22.4 million pesos, or approximately $1,320,000 USD, which includes $352,000 of unpaid income taxes and $968,000 of interest and penalties. Management, along with its legal counsel, assessed the possible outcomes for this tax audit and believed, based on discussions with its attorneys located in Mexico, that the most likely outcome would be that the Company would be successful in its appeal resulting in no tax due. Management determined that no amount should be accrued at December 31, 2023 relating to this potential tax liability.

In March 2024, Mexico’s appellate court ruled in favor of the Company with no assessment due related to this audit of USAMSA’s 2013 income tax return by SAT and instructed the lower court to issue a new ruling. In May 2024, Mexico’s lower court issued a final ruling on this matter in favor of the Company but left open the possibility for the SAT to re-open their audit. Subsequent to this judgment, the Company requested a final ruling on whether SAT can re-open this matter, on which the appellate court has not ruled. These rulings support the Company’s position on this tax matter and have had no impact on the Company’s financial statements.

Mexico Import Value Added Tax

USAMSA recorded a receivable of $907,408 and $1,122,628 at December 31, 2024 and December 31, 2023, respectively, for the Import Value Added Tax (“IVA tax” or “VAT”) it pays on certain goods and services representing amounts to be reimbursed from the Mexican government. USAMSA also recorded a reserve on this IVA tax receivable of $575,151 and $687,534 at December 31, 2024 and December 31, 2023, respectively. The net IVA tax receivable of $332,257 and $435,094 at December 31, 2024 and 2023, respectively, is recorded in “IVA receivable and other assets, net” in the Consolidated Balance Sheets.