Income Taxes

12 Months Ended

Dec. 31, 2025

Income Taxes [Abstract]

Income Taxes

Note 7 - Income Taxes

The components of income tax expense (benefit) are as follows:

(in thousands)	Year Ended December 31, 2025			Year Ended December 31, 2024
Federal - current	$	-		$	-
State - current		1			1
Total current		1			1
Federal - deferred		(956	)		(1,389	)
State - deferred		(54	)		(202	)
Change in valuation allowance		1,010			1,591
Total deferred		-			-
Income tax expense (benefit)	$	1		$	1

The Company adopted ASU 2023-09 on a prospective bias beginning with year ended December 31, 2025. A reconciliation of the United States federal statutory income tax rate to our effective income tax rate for the year ended December 31, 2025, is presented accordingly as follows.

(in thousands)	Year Ended December 31, 2025
Income (loss) before income taxes	$	(4,559	)
Tax expense (benefit):
Federal income taxes federal statutory rate	$	(957	)	21.0	%
State and local income tax, net of federal income tax effect		(53	)	1.2
Changes in valuation allowance
Federal and state changes		1,010		(22.2	)
Non-taxable or non-deductible items
Other		1		(0.00	)
Income tax expense (benefit)	$	1		0.0	%

For the years ended December 31, 2025, and 2024, the Company paid no cash amounts related to income taxes. All payments made to taxing authorities were for non-income based tax liabilities and are outside the scope of ASC 740. Taxes in New Jersey comprise the majority (greater than 50%) of the tax effect in this category for the year ended December 31, 2025.

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (OBBBA), which includes several changes to U.S. federal income tax law, including temporary and permanent extension, of expiring provisions of the Tax Cuts and Jobs Act of 2017. Significant provisions for corporate taxpayers include permanent 100% bonus depreciation for qualified property, immediate expensing of domestic R&D expenditures, and changes to the limitation on business interest expense deductions under Section 163(j). None of these provisions have a material impact on the Company’s 2025 income tax provision.

The components of pretax income (loss) and the difference between income taxes computed at the statutory federal rate and the provision for income taxes for the year ended December 31, 2024, is as follows:

(in thousands)	Year Ended December 31, 2024
Income (loss) before income taxes	$	(6,619	)
Tax expense (benefit):
Tax at statutory federal rate	$	(1,391	)
State income taxes		(202	)
Permanent items, tax credits and other adjustments		3
Change in valuation allowance		1,591
Income tax expense (benefit)	$	1

A reconciliation of the United States federal statutory rate to the Company’s effective income tax rate for the year ended December 31, 2024 is as follows:

	Year Ended December 31,  2024
Tax at statutory federal rate		21.0	%
State income taxes		3.0
Permanent items, tax credits and other adjustments		-
Change in valuation allowance		(24.0	)
Effective income tax rate		0.0	%

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided an employee retention credit which was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the “Appropriations Act”) extended and expanded the availability of the employee retention credit through December 31, 2021. The Appropriations Act amended the employee retention credit to be equal to 70% of qualified wages paid to employees during the 2021 fiscal year. The Company qualified for the employee retention credit for qualified wages for tax periods ending March 31, 2021, June 30, 2021, and September 30, 2021, and filed a cash refund claim. In April 2025, the Company received the refund claimed and recorded the employee retention credit received as other income in the consolidated statement of operations for the year ended December 31, 2025.

The utilization of net operating loss (“NOL”) carryforwards are subject to limitations under U.S. federal income tax and various state tax laws. Based on the Company’s federal tax returns as filed, the Company estimates it has approximately $144 million of federal NOL carryforwards available to reduce future federal taxable income which if not utilized will begin to expire in 2026 and continue to expire at various dates thereafter. Additionally, based on the Company’s state tax returns as filed and to be filed, the Company estimates that it has approximately $243 million of state NOL carryforwards to reduce future state taxable income which if not utilized will begin to expire in 2030 and continue to expire at various dates thereafter.

The Company has not been notified of any potential tax audits by any federal, state, or local tax authorities. As such, the Company believes the statutes of limitations for the assessment of additional federal and state tax liabilities are generally closed for tax years prior to 2022. Interest and/or penalties related to uncertain tax positions, if applicable, would be included as a component of income tax expense (benefit). The accompanying financial statements do not include any amounts for interest and/or penalties.

There is risk relating to assumptions regarding the outcome of tax matters, based in whole or in part upon consultation with outside advisors; risk relating to potential unfavorable decisions in tax proceedings; and risks regarding changes in, and/or interpretations of federal and state income tax laws. Moreover, applicable provisions of the Code and IRS regulations permit the IRS to challenge Company tax positions and filed returns or additional taxes for an extended period of time after such returns are filed. The Company can give no assurances as to the final outcome of any IRS review, if any.

The Company was a plaintiff in a legal proceeding seeking recovery of damages from the United States Government for the loss of the Company’s wholly-owned subsidiary, Carteret Savings Bank, F.A. (the “SGW Legal Proceedings”). A settlement agreement in the SGW Legal Proceedings between the Company, the Federal Deposit Insurance Corporation-Receiver (“FDIC-R”) and the Department of Justice (“DOJ”) on behalf of the United States of America (the “United States”), was executed (the “SGW 2012 Settlement Agreement”) which was approved by the United States Court of Federal Claims (the “Court of Federal Claims”) in October 2012. On August 6, 2013, Senior Judge Smith issued an opinion which addressed the relief sought by AmBase. In summary, the court held that the Settlement Agreement is a contract and that it entitles the Company to receive both “(1) the amount of the tax consequences resulting from taxation of the damages award plus (2) the tax consequences of receiving the first component.” But the Court of Federal Claims did not award an additional amount for the second component at that time given the remaining uncertainty surrounding the ultimate tax treatment of the settlement proceeds and the gross-up, as well as uncertainty relating to the Company’s future income. The Court of Federal Claims indicated that either the Company or the government is entitled to seek further relief “if, and when, the facts justify it.”

The Company’s deferred tax asset, arising from NOL carryforwards, is as follows:

(in thousands)	December 31, 2025			December 31, 2024
Deferred tax asset	$	44,385		$	43,375
Valuation allowance		(44,385	)		(43,375	)
Net deferred tax asset recognized	$	-		$	-

A full valuation allowance remains on the remaining deferred tax asset amounts, as management has no basis to conclude that realization is more likely than not. Management does not believe that any significant changes in unrecognized income tax benefits are expected to occur over the next year.