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Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 10.

INCOME TAXES

 

We are subject to taxation in all jurisdictions in which we operate that impose an income tax on our business activities.

 

The components of the income tax expense for the years ended  December 31, and the tax effects of temporary differences that give rise to deferred taxes at  December 31, are as follows:

 

  

December 31,

 
  

2024

  

2023

 
         

Income tax (benefit) provision:

        

Current federal income tax expense

 $-  $- 

Current state income tax expense

  2,992   166,223 

Deferred federal income tax benefit

  272,435   (2,138,204)

Deferred state income tax benefit

  (550,248)  (1,006,757)
         

Total income tax benefit

 $(274,821) $(2,978,738)
         

Deferred tax assets:

        

Net operating loss carryforwards

 $21,943,518  $18,672,782 

Tax credits

  643,945   643,945 

Lease liabilities

  13,228,639   14,555,615 

Premium adjustments and IBNR

  440,447   580,373 

Long-term investments

  4,768,942   - 

Disallowed interest expense carryforwards

  78,388   1,204 

Other

  103,687   70,452 

Total deferred tax assets

  41,207,566   34,524,371 

Valuation allowance

  (862,510)  (846,633)
         

Net deferred tax assets

 $40,345,056  $33,677,738 
         

Deferred tax liabilities:

        

Property and equipment

 $(22,263,046) $(19,504,745)

Intangibles

  (11,510,781)  (8,269,752)

Right of use assets

  (13,224,225)  (14,684,988)

Long-term investments

  -   (2,570,253)

Unrealized gain on securities

  (5,272,973)  (759,812)
         

Total deferred tax liabilities

  (52,271,025)  (45,789,550)
         

Net deferred tax liabilities

 $(11,925,969) $(12,111,812)

 

The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards and credits. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. As of December 31, 2024, the Company has only recorded a valuation allowance against certain state net operating loss deferred tax assets that it has determined to be more-likely-than-not not realizable.

 

As of December 31, 2024, we have available federal tax operating loss carry forwards of approximately $91.1 million. Of the $91.1 million, $7.1 million arose in tax years beginning before December 31, 2017 and may be carried forward 20 years. The remaining tax net operating losses were generated in years beginning after December 31, 2017. Tax net operating loss carry forwards generated in years beginning after December 31, 2017 may be carried forward indefinitely but are only available to offset 80% of future taxable income. We have available state tax operating loss carry forwards of approximately $61.6 million, which are available to reduce future state taxable income and expire at various times and amounts.

 

Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, annual use of our net operating losses may be limited if it is determined that an ownership shift has occurred. An ownership shift is generally defined as a cumulative change in equity ownership by ‘‘5% shareholders’’ that exceeds 50 percentage points over a rolling three-year period. We have determined that through December 31, 2024, two ownership shifts occurred; however, we do not anticipate that these shifts would result in any permanent limitation on our ability to utilize our net operating loss and credit carryforward amounts.

 

The reconciliation of our total income tax expense (benefit) at the federal statutory income tax rate and our actual effective income tax rate is as follows:

 

  

For the Year Ended December 31,

 
  

2024

  

2023

 
         

Federal income tax at statutory rate

 $644,659  $(1,941,583)

State tax income taxes, net of federal benefit

  (138,994)  (1,118,721)

Non-controlling interest

  (1,126,491)  (213,753)

Provision to return adjustments

  (1,092,238)  129,405 

Limitation on deduction for officer compensation

  539,138   - 

Permanent differences

  60,886   137,649 

State rate change

  719,612   - 

Valuation allowance

  15,877   14,510 

Other

  102,730   13,755 

Total income tax benefit

 $(274,821) $(2,978,738)

 

Uncertain Tax Positions

 

We believe that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12 months of the reporting date.

 

As of December 31, 2024 we do not have any open or ongoing exams by any taxing authorities. The federal and state statutes of limitation for assessment of tax liability generally lapse three and four years, respectively, after the date the tax returns are filed. However, income tax attributes that are carried forward, such as net operating loss carryforwards, may be challenged and adjusted by taxing authorities at any time prior to the expiration of the statute of limitations for the tax year in which they are utilized.