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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11 - Income Taxes

 

The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2024 and 2023.

 

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2024 and 2023 are comprised of the following:

 

   2024   2023 
   As of December 31, 
   2024   2023 
Deferred tax assets:          
Federal net-operating loss carryforward  $4,319,838   $3,488,995 
State net-operating loss carryforward   845,420    592,038 
Other (non-qualified stock options)   -    15,997 
R&D Capitalization Sec 174   166,015    - 
           
Total deferred tax assets   5,331,273    4,097,030 
Deferred tax liabilities:          
Unrealized gains on crypto assets   2,337,619    715,899 
Total deferred tax liabilities   2,337,619    715,899 
Valuation allowance   (2,993,654)   (3,381,131)
Deferred tax assets, net  $-   $- 

 

At December 31, 2024, the Company had net operating loss (“NOL”) carry forwards for federal and state tax purposes of approximately $33,665,000 which begins to expire in 2034. The 20-year carryforward period has been replaced with an indefinite carryforward period for these NOLs generated in tax years beginning after December 31, 2017 and future years.

 

Accordingly, the amount of Federal NOLs that were generated in the tax year December 31, 2014 in the amount of $1,290,156 will expire after December 31, 2034. The amount of NOLs that were generated in the tax year December 31, 2015 in the amount of $1,545,343 will expire after December 31, 2035. The amount of NOLs that were generated in the tax year December 31, 2016 in the amount of $794,762 will expire after December 31, 2036. The amount of NOLs that were generated in the tax year December 31, 2017 in the amount of $1,084,564 will expire after December 31, 2037. The NOLs generated in the tax years December 31, 2018 in the amounts of $11,899,437 and onwards will have an indefinite life per current U.S. federal income tax legislation.

 

Prior to the February 5, 2014 merger, the Company had generated net operating losses, which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue Code Section 382. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential change of ownerships might be completely worthless.

 

Therefore, Management of the Company has recorded a full valuation reserve, since it is more likely than not that no benefit will be realized for the deferred tax assets.

 

As of December 31, 2024, the Company had a deferred tax liability related to the unrealized gains on its crypto assets amounting to approximately $2,338,000. The final tax impact could significantly differ from current estimates due to future market fluctuations and changes in tax laws.

 

Therefore, Management of the Company has recorded a full valuation reserve, since it is more likely than not that no benefit will be realized for the deferred tax assets.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which those temporary differences become deductible. Management evaluates the scheduled reversal of deferred tax liabilities, projected future taxable income, and available tax planning strategies in making this assessment.

 

As a result of the deferred tax liability arising from unrealized crypto gains, the valuation allowance was partially reduced by approximately $387,000 as of December 31, 2024. However, due to the Company’s continued history of operating losses and lack of clear evidence of sustained profitability, a full release of the valuation allowance remains unjustified at this time.

 

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

 

   2024   2023 
   For the years ended December 31, 
   2024   2023 
Statutory Federal Income Tax Rate   (21.00)%   (21.00)%
State Taxes, Net of Federal Tax Benefit   (6.46)%   (6.48)%
Federal tax rate change   0.00%   0.00%
Other   27.46%   27.48%
Change in Valuation Allowance   (0.00)%   (0.00)%
Income Taxes Provision (Benefit)   -%   -%

 

The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2024 and 2023.

 

 

BTCS Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS