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

Note 8. Income Taxes

 

Income tax provision (benefit) for the years ended December 31, 2024 and 2023 is summarized below:

 

   2024   2023 
Current:          
Federal  $-   $- 
State   -    - 
Total   -    - 
Deferred:          
Federal   (626,000)   (464,000)
State   1,270,000    (155,000)
Change in valuation allowance   (644,000)   619,000 
Total   -    - 
Provision for income taxes  $-   $- 

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before provision for income taxes. The sources and tax effect of the differences are as follows:

 

   2024   2023 
Statutory federal income tax rate   21%   21%
State tax   4    7 
Permanent differences   -    - 
Change in valuation allowance   (25)   (28)
Total Income tax   -%   -%

 

Components of the net deferred income tax assets at December 31, 2024 and 2023 were as follows:

 

   2024   2023 
Net operating loss carryover  $13,923,000   $14,567,000 
Valuation allowance   (13,923,000)   (14,567,000)
Deferred tax assets, net  $-   $- 

 

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely than not that some portion or all of the deferred tax assets will not be recognized. After consideration of all the evidence, both positive and negative, management has determined that a $13,923,000 and $14,567,000 allowance at December 31, 2024 and 2023, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The decrease in the valuation allowance for the current period is $644,000 resulted from a lower blended state tax rate, partially offset by current year tax losses and the adjustments to finalize the 2023 tax loss upon filing the tax returns.

 

As of December 31, 2024, the Company has a net operating loss carry forward to offset future taxable income of approximately $55,036,000, $28,482,000 of which begins to expire in 2033. Net operating loss carry forwards of $26,554,000 may be carried forward indefinitely. The Company may have experienced an ownership change that could limit its ability to utilize its operating loss carryforward to offset taxable income in future years. An analysis will be required to determine whether such change has occurred, the outcome of which could impact the Company’s operating results and cash flow if and when it achieves profitability in taxable jurisdictions.

 

 

CARES Act

 

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages paid to employees from the start of the COVID-19 pandemic through September 30, 2021. The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic.

 

As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined based upon receipt of confirmation of the claim made by its co-employment partner and review of the calculations provided that it has reasonable assurance for receipt of the ERC and recorded the ERC benefit of $92,000 within general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2023. The Company recorded a corresponding receivable for the benefit expected to be received within other receivables on the consolidated balance sheet as of December 31, 2023. The Company received the refund in March 2024.

 

ERC claims can be made in a variety of circumstances with varying degrees of subjectivity and clear authoritative guidance. Paid claims are subject to IRS inspection which may occur prior to expiration of the statute of limitations. The Company’s ERC claim was based on objectively calculated declines in revenue using methods that are clearly defined in the CARES Act and various regulations and interpretations thereof.