INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

17. INCOME TAXES

Eightco Holdings Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income.

Forever 8 Fund, LLC, BlockHiro, LLC and Cryptyde Shares Services, LLC are limited liability companies which are disregarded entities for income tax purposes and are owned 100% by Eightco Holdings Inc. and Ferguson Containers, Inc., respectively. The Company pays corporate federal, state and local taxes on income allocated to it from BlockHiro, LLC and 8co Holdings Shared Services, LLC.

CW Machines, LLC is a limited liability company for income tax purposes and is owned 51% by Eightco Holdings Inc. The Company pays corporate federal, state and local taxes on income allocated to it from CW Machines, LLC.

Ferguson Containers is taxed as a corporation and pays corporate federal, state and local taxes on income.

Forever 8 UK Ltd. is taxed as a corporation and pays foreign taxes on income.

F8 Fund EU Holdings BV is taxed as a corporation and pays foreign taxes on income.

Components of income before income taxes were as follows:

	2022			2021
United States	$	(46,850,995	)	$	109,920
Foreign		(768,062	)		-
Income before income tax expense	$	(47,619,057	)	$	109,920

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

	2022			2021
Deferred tax assets:
Stock-based compensation	$	154,298		$	-
Goodwill and intangibles		54,453			-
Leases		14,808			-
Net operating loss carryforwards		4,419,519			108,018
Less: valuation allowance		(4,628,672	)		(108,018	)
Net deferred tax assets	$	14,406		$	-
Deferred tax liabilities:
Right of use assets	$	(14,406	)		-
Property and equipment	$	(82,104	)		(82,104	)
Net deferred tax liabilities	$	(96,510	)	$	(82,104	)
Net deferred taxes	$	(82,104	)	$	(82,104	)

The income tax provision consists of the following:

	2022			2021
Current:
Federal	$	(172,997	)	$	142,845
State		-			67,155
Foreign		-			-
Total current		(172,997	)		210,000
Deferred:
Federal		(4,150,207	)		(108,018	)
State		-			-
Foreign		145,932			-
Less: valuation allowance		4,004,275			108,018
Total deferred		-			-
Total income tax provision	$	(172,997	)	$	210,000

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

	2022			2021
Tax at federal statutory rate		21.0	%		21.0	%
Income from pass-through entities taxable to noncontrolling interests		-0.1	%		0.0	%
Warrant valuation		-11.2	%		0.0	%
Nondeductible expenses		-0.7	%		0.0	%
State and local income taxes		0.0	%		7.1	%
Foreign income not subject to U.S. federal taxes		-0.3	%		0.0	%
U.S. income taxes subject to valuation allowance		-8.7	%		163.0	%
Other		0.4	%		0.0	%
Total income tax provision		0.4	%		191.1	%

Income tax (benefit) expense for the years ended December 31, 2022 and 2021 was ($172,997) and $210,000, respectively. The decrease in income tax expense is due to the reversal of income taxes payable due to net operating losses incurred in 2022. The Company has recorded a full valuation allowance on net operating losses.

There are no unrecognized tax benefits and no accruals for uncertain tax positions.

As of December 31, 2022, the Company had a net operating loss carryforward for federal income tax purposes of approximately $4,150,207 and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The Company’s net operating loss carryforward begins to expire in 2041.

EIGHTCO HOLDINGS, INC.

(f/k/a CRYPTYDE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31, 2022 and 2021