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Note 7 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

7.

Income Taxes

 

The Company recorded no income tax expense during the years ended December 31, 2025, 2024, and 2023.

 

The difference between income tax expense and the amount computed by applying the statutory federal income tax rate to the combined income of the Company before taxes were as follows (dollars in thousands):

 

 

For the year ended

 
 

December 31, 2025

 

Book income before income taxes

$15,313   

REIT income not subject to income taxes

 (15,152)  

Book income before income taxes of the TRS

$161   
      

Statutory rate of 21%

 34 21%

Effect of state and local income taxes, net of federal tax benefit (a)

 10 6%

Permanent adjustments

 24 15%

Change in valuation allowance

 (55)-35%

Valuation allowance release

 — —%

Other

 (13)-8%

Total income tax (benefit) expense

$— —%

(a) State taxes in California made up the majority (greater than 50 percent) of the tax effect in this category.

 

  

For the year ended

 
  

December 31,

 
  

2024

  

2023

 

Book income (loss) before income taxes of the TRS

 $2,905  $(7,309)
         

Statutory rate of 21%

 $610  $(1,535)

Effect of state and local income taxes, net of federal tax benefit

  —   (245)

Permanent adjustments

  21   13 

Change in valuation allowance

  (1,051)  1,579 

Valuation allowance release

  —   — 

Other

  420   188 

Total income tax (benefit) expense

 $—  $— 
         

Effective tax rate

  —%  —%

 

At December 31, 2025 and 2024, the Company had valuation allowances against certain deferred tax assets totaling $19.4 million and $19.3 million, respectively. The increase in the valuation allowance was primarily from the net operating income during the year. The tax effect of each type of temporary difference and carry forward that gives rise to the deferred tax asset as of December 31, 2025 and 2024 are as follows (in thousands):

 

  

For the year ended

 
  

December 31,

 
  

2025

  

2024

 

Gross deferred tax assets:

        

Allowance for doubtful accounts

 $101  $74 

Accrued compensation

  430   375 

Net operating loss

  18,873   18,893 

Gross deferred tax assets

 $19,404  $19,342 

Less: Valuation Allowance

 $(19,404) $(19,342)

Total deferred tax assets net of valuation allowance

 $—  $— 

Gross deferred tax liabilities:

        

Total book/tax difference in partnership

 $—  $— 

Gross deferred tax liabilities:

 $—  $— 

Net, deferred tax assets:

 $—  $— 

 

As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of net deferred tax assets. The Company's TRS continues to have cumulative three-year taxable losses. As of December 31, 2025, the TRS continues to recognize a full valuation allowance equal to 100% of the net deferred tax assets. Management will continue to monitor the need for a valuation allowance.

 

The TRS has income tax NOL carryforwards for Federal and various states of approximately $73.4 million and $65.0 million, respectively. The loss carryforwards begin to expire starting in 2038 for Federal tax purposes and in 2031 and thereafter for state tax purposes.