Income Tax |
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| Income Tax |
14. Income Tax
The following table presents the provision for income taxes and our effective tax rate for the three-month periods ended December 31, 2025 and 2024:
No income tax benefit was recognized for the three months ended December 31, 2025 as the Company is forecasting pre-tax income for the full year so the tax benefit is not expected to be realized during the current year in accordance with the provisions of ASC Topic 740, Income Taxes. Similarly, the Company did not recognize an income tax benefit for the three months ended December 31, 2024 as the Company was then forecasting pre-tax income for the full year.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets (“DTAs”). In view of the significance of the Company’s recent pre-tax book losses, and likelihood of continuing uncertainty in the industry and economy as a whole, management reduced projections of future income from its forecast of the reversal of its DTAs as of September 30, 2025. As a result, it was determined that the Company's net DTAs would not be realized as there is not sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets are realizable. The Company holds a full valuation allowance of $12,757 as of December 31, 2025 and September 30, 2025, accordingly.
Under Internal Revenue Code 382, if a corporation undergoes a specified change in ownership, the corporation’s ability to use its pre-change net operating loss (“NOL”) carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Such limitation may result in the expiration of the NOL carryforwards generated before 2018 prior to their utilization. The Company engaged outside tax experts to perform a comprehensive section 382 study to calculate the estimated limitation and evaluate the corporation’s ability to use its NOL carryforwards and other pre-change tax attributes. The study was finalized in the quarter ended March 31, 2025 and concluded that the Company’s pre-2018 NOL carryovers and other tax attributes are subject to limitation under section 382.
The One Big Beautiful Bill of 2025
On July 4, 2025, H.R.1 - One Big Beautiful Bill was enacted, introducing a wide range of tax reforms for businesses. Due to the Company's loss position and limited exposure to affected provisions, the bill’s overall impact is not material. The Company has historically elected out of bonus depreciation for all classes of property under Section 168(k)(7) and depreciates assets under MACRS without accelerated expensing. The Company continues to monitor ongoing regulatory guidance related to the new law. |
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