XML 27 R16.htm IDEA: XBRL DOCUMENT v3.25.2
Income Taxes
 6 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

Income tax provisions for the three and six months ended June 30, 2025 and 2024 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three months ended June 30, 

​

Six months ended June 30, 

​

    

2025

    

2024

    

2025

    

2024

Current:

​

​

​

​

​

​

​

​

​

​

​

​

Federal

​

$

1,794,581

​

$

401,042

​

$

3,358,642

​

$

467,310

State

​

​

501,330

​

​

89,717

​

​

928,915

​

​

100,492

Total current income tax expense

​

​

2,295,911

​

​

490,759

​

​

4,287,557

​

​

567,802

Deferred:

​

​

​

​

​

​

​

​

​

​

​

​

Federal

​

​

(413,762)

​

​

(23,214)

​

​

(704,026)

​

​

354,385

State

​

​

(44,462)

​

​

(8,529)

​

​

(75,650)

​

​

(409,121)

Total deferred tax expense

​

​

(458,224)

​

​

(31,743)

​

​

(779,676)

​

​

(54,736)

Income tax expense

​

$

1,837,687

​

$

459,016

​

$

3,507,881

​

$

513,066

​

The Company files federal income tax returns in the United States and Canada, and various returns in state and local jurisdictions.

The Company believes it has appropriate support for the income tax positions taken and to be taken on our tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of various factors including past experience and interpretations of tax law applied to the facts of each matter. The Company's tax returns are

open to audit under the statute of limitations for the years ending December 31, 2021 through December 31, 2024. To the extent we utilize net operating losses generated in earlier years, such earlier years may also be subject to audit.

Starting in 2023, distributions of Epsilon Energy USA Inc. earnings to Epsilon Energy Ltd. incur a 5% U.S. dividend withholding tax, provided the Company is eligible for benefits under the U.S. / Canada income treaty.

Our effective tax rate will typically differ from the statutory federal rate primarily as a result of state income taxes and the valuation allowance against the Canadian net operating loss. The effective tax rate for the six months ended June 30, 2025 was higher than the statutory federal rate as a result of state income taxes partially offset by the valuation allowance against the Canadian net operating loss.

​

On July 4, 2025, Public Law No. 119-21, commonly referred to as the One Big Beautiful Bill Act (the “Act”), was enacted by the U.S. government. While the enactment of the Act does not have an impact on the historical financial data, the Company’s future tax liabilities may be impacted. Among other changes, the Act: (i) allows for 100% expensing of the costs of certain qualified property acquired after January 19, 2025; (ii) allows election to immediately deduct R&D costs incurred; and (iii) modifies the provision related to the limitations on deduction of interest expense.

​

The Company expects to realize net benefits from U.S. tax reform, primarily driven by the accelerated depreciation of qualified assets for tax purposes. However, the Company continues to evaluate the impacts of the Act and further understand its implications, as well as the related, and yet to be issued, regulations and interpretations which could impact this outlook.