Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

13. Income Taxes.

Income tax (benefit) expense from continuing operations consists of the following:

Year Ended December 31	2024		2023
State	$	21,000	$	20,000
Foreign		730,000		—
Total current tax expense		751,000		20,000
Federal		(2,731,000)		—
State		(193,000)		—
Foreign		(156,000)
Total deferred tax benefit		(3,080,000)		—
Total income tax (benefit) expense	$	(2,329,000)	$	20,000

For the year ended December 31, 2024, the income tax benefit attributable to noncontrolling interest was $298,000.

Income tax (benefit) expense differs from the expected tax (benefit) expense computed by applying the U.S. federal corporate income tax rate of 21% to loss from continuing operations before income taxes as a result of the following:

Year Ended December 31	2024		2023
Federal statutory rate	21.0	%	21.0	%
Stock-based awards	—		(0.5)
State income taxes	1.0		3.1
Foreign income taxes	(0.6)		—
Permanent differences	(0.7)		—
Change in valuation allowance	5.4		(24.6)
Other	(0.9)		0.3
Effective income tax rate	25.2	%	(0.7)	%

Components of resulting noncurrent deferred tax assets (liabilities) are as follows:

As of December 31	2024		2023
Deferred tax assets
Accrued expenses	$	57,000	$	117,000
Stock-based awards		—		9,000
Reserve for bad debts		—		2,000
Net operating loss and credit carryforwards		1,968,000		529,000
Right of use liability		8,458,000
Other		665,000		2,000
Total deferred tax assets	$	11,148,000	$	659,000
Deferred tax liabilities
Depreciation	$	(2,207,000)	$	(5,000)
Accrued expenses		(1,530,000)		—
Intangible assets		(6,581,000)		—
Right of use asset		(8,321,000)		—
Prepaid expenses		—		(9,000)
Other		(7,000)		—
Total deferred tax liabilities		(18,646,000)		(14,000)
Net deferred tax liabilities		(7,498,000)		645,000
Valuation allowance		(144,000)		(645,000)
Net deferred tax liabilities after valuation allowance	$	(7,642,000)	$	—

As of December 31, 2024, the Company had a Federal pre-tax net operating loss (NOL) to carry forward of approximately $8,110,000 and state pre-tax NOLs of approximately $7,185,000 to carry forward. The Federal NOLs can be carried forward indefinitely. The expiration of state NOLs carried forward varies by taxing jurisdiction. Future utilization of NOLs carried forward may be subject to certain limitations under Section 382 of the Internal Revenue Code.

The Company evaluates all significant available positive and negative evidence, including the existence of losses in prior years and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and take into consideration the Company’s recent performance. The change in the valuation allowance for the year ended December 31, 2024 was a decrease of $501,000. The decrease in the valuation allowance in 2024 related to the reversal of the valuation allowance on federal deferred tax assets due to the Company being in an overall deferred tax liability position. The Company’s valuation allowance as of December 31, 2024 was related to state NOLs that are not expected to be utilized.

The Company has recorded a liability of $35,000 and $42,000 for uncertain tax positions taken on tax returns in previous years as of December 31, 2024 and 2023, respectively. This liability is reflected as accrued expenses and other current liabilities on the Company’s balance sheet. The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $35,000. The Company files income tax returns in the United States and numerous state and local tax jurisdictions. Tax years 2021 and forward are open for examination and assessment by the Internal Revenue Service. With limited exceptions, tax years prior to 2021 are no longer open in major state and local tax jurisdictions. The Company has recorded a decrease of approximately $8,000 in unrecognized tax benefits related to state exposure in the year ended 2024, which reduced accrued income taxes and increased the current income tax benefit. The Company determined it was no longer more likely than not that the Company would realize the tax expense.

A reconciliation of the beginning and ending amount of the liability for uncertain tax positions is as follows:

Balance at December 31, 2022	$	53,000
Decrease due to state tax expense		(16,000)
Increases due to interest and state tax		5,000
Balance at December 31, 2023	$	42,000
Decrease due to state tax expense		(8,000)
Increases due to interest and state tax		1,000
Balance at December 31, 2024	$	35,000