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Note 5 - Income Taxes
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 5. Income Taxes

 

For the three and six months ended June 30, 2025, the Company recorded an income tax expense of $275 and $945, respectively, resulting in an effective tax rate of 13.86%.  The Company's taxable income is generated in the United Sates and taxed at a federal and state statutory rate of 26.72%. Relative to the federal and state statutory rate, the effective tax rate for the six months ended June 30, 2025, was reduced by the tax impact of research and development tax credits.

 

For the three and six months ended June 30, 2024, the Company recorded an income tax expense of $220 and $241, respectively.  The effective tax rate for the six months ended June 30, 2024, was 9.32%. Relative to the federal and state statutory rate, the effective tax rate for the six months ended June 30, 2024, was primarily impacted by the tax benefit for research and development tax credits for 2024 as compared to projected income before tax.

 

 

 Based on our analysis of all available evidence, both positive and negative, we have concluded that, except for the capital loss carryforward of approximately $0.8 million, we will have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets. Accordingly, we recorded a decrease in the valuation allowance of approximately $1.4 million as of June 30, 2025. We cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future. If we incur future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2025.

 

Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax assets may be necessary. If future losses are incurred, it may be necessary to record an additional valuation allowance related to the Company’s net deferred tax assets recorded as of June 30, 2025. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.

 

   The Company performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by GAAP. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return that has not been reflected in measuring income tax expense for financial reporting purposes.

 

On July 4, 2025, the U.S. government enacted The One Beautiful Bill Act of 2025, (known as the "One Big Beautiful Bill Act or "OBBBA") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025.  In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026.  The Company is currently evaluating the impact of the new legislation but does not expect it to have a material impact on the results of operations.