v3.25.4

Note 23 - Income Taxes | 12 Months Ended
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Dec. 31, 2025
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 23. INCOME TAXES ﻿ Cohen & Company Inc. is treated as a C corporation for United States federal income tax purposes. The components of income tax expense / (benefit) included in the consolidated statements of operations for each year presented herein are shown in the table below.
INCOME TAX EXPENSE
(Dollars in Thousands)
|  | For the Year Ended December 31, |
|  | 2025 |  |  | 2024 |  |  | 2023 |
Current income tax expense / (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal income tax expense / (benefit) |  | $ | - |  |  | $ | - |  |  | $ | - |
French income tax expense / (benefit) |  |  | 369 |  |  |  | 118 |  |  |  | 120 |
State and local income tax expense / (benefit) |  |  | 868 |  |  |  | 230 |  |  |  | 71 |
|  |  | 1,237 |  |  |  | 348 |  |  |  | 191 |
Deferred income tax expense / (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal income tax expense / (benefit) |  |  | (3,230 | ) |  |  | (1 | ) |  |  | 3,205 |
French income tax expense / (benefit) |  |  | - |  |  |  | - |  |  |  | - |
State and local income tax expense / (benefit) |  |  | 1,361 |  |  |  | (676 | ) |  |  | 2,149 |
|  |  | (1,869 | ) |  |  | (677 | ) |  |  | 5,354 |
Total |  | $ | (632 | ) |  | $ | (329 | ) |  | $ | 5,545 |
The components of income (loss) before income taxes are shown below. ﻿
INCOME (LOSS) BEFORE INCOME TAXES
(Dollars in Thousands)
|  | For the Year Ended December 31, |
|  | 2025 |  |  | 2024 |  |  | 2023 |
U.S. |  | $ | 37,908 |  |  | $ | 7,220 |  |  | $ | 15,705 |
France |  |  | 1,594 |  |  |  | 640 |  |  |  | 239 |
Total |  | $ | 39,502 |  |  | $ | 7,860 |  |  | $ | 15,944 |
The Company had prepaid taxes of $0 and $235 in the consolidated balance sheet as of December 31, 2025 and 2024, respectively. ﻿ In 2025, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, on a prospective basis. The reconciliation of taxes at the federal statutory rate to the Company's provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows:
|  | For the Year Ended December 31, 2025 |
|  | Amount |  |  | Percent |
Federal statutory rate |  | $ | 8,295 |  |  |  | 21.0 | %
State and local income tax, net of federal tax effect |  |  |  |  |  |  |  |
New York City |  |  | 1,325 |  |  |  | 3.4 | %
Philadelphia |  |  | 508 |  |  |  | 1.3 | %
Other U.S. States |  |  | 255 |  |  |  | 0.6 | %
Foreign tax effects |  |  | 344 |  |  |  | 0.9 | %
Effect of changes in tax laws or tax rates |  |  | - |  |  |  | 0.0 | %
Effect of cross-border tax laws |  |  | - |  |  |  | 0.0 | %
Tax credits |  |  | - |  |  |  | 0.0 | %
Changes in valuation allowances |  |  | (6,418 | ) |  |  | (16.2 | )%
Nontaxable or non-deductible items |  |  |  |  |  |  |  |
Non-deductible compensation - 162m |  |  | 721 |  |  |  | 1.8 | %
Other non-taxable or non-deductible items |  |  | (261 | ) |  |  | (0.7 | )%
Other |  |  |  |  |  |  |  |
Pass through impact |  |  | (5,401 | ) |  |  | (13.7 | )%
Total |  | $ | (632 | ) |  |  | (1.6 | )%
﻿ State and local tax, net of federal benefit: The Company files taxes in several U.S. states and local jurisdictions. The state and local tax expense (including deferred items), net of the federal benefit are included in this reconciling item. Foreign tax effects: This represents the impact of the Company's consolidated French subsidiaries. Changes in valuation allowances: The Company has significant deferred tax assets that have valuation allowances. These are comprised of federal net operating loss ("NOL") carryforwards, federal net capital loss ("NCL") carryforwards, as well as unrealized loss on the parent company's investment in the Operating LLC. Each reporting period, management determines the expected amount of taxable income it will generate in each jurisdiction where the Company has NOLs. Management then schedules this income against each carryforward asset and determines what portion of the asset it believes is more likely than not to be realized. This determination is subjective and subject to many assumptions and factors including profitability of the Company's business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction the income will be generated in. To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. Because of the magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance have been recorded historically are likely going forward. These future adjustments will likewise result in material amounts of deferred tax benefit or expense going forward. Non-taxable or non-deductible items: This is comprised of various permanent difference items such as non-deductible expenses, tax exempt income, and disallowed executive compensation under Section 162m. Foreign tax effects: This is primarily comprised of current taxes incurred by the Company's French subsidiaries. Pass through impact: Cohen & Company Inc. consolidates the Operating LLC but only owns a minority economic interest in the Operating LLC. In addition, the Operating LLC sometimes consolidates entities in which it owns a majority, but less than 100% interest in. In these cases, the income allocated to the non-controlling interest is not subject to taxation by Cohen & Company Inc. even though the income is included in the consolidated statement of operations. This reconciling item accounts for that difference. The reconciliation of taxes at the statutory rate to the Company's provision for (benefit from) income taxes for the years ended December 31, 2024, and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows: ﻿
INCOME TAX RATE RECONCILIATION
(Dollars in Thousands)
|  | For the Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Federal statutory rate |  | $ | 1,650 |  |  | $ | 3,348 |
Pass through impact |  |  | (1,746 | ) |  |  | (3,257 | )
Changes in valuation allowances |  |  | 95 |  |  |  | 3,114 |
State and local tax, net of federal benefit |  |  | (446 | ) |  |  | 2,220 |
Foreign tax effects |  |  | 118 |  |  |  | 120 |
Total |  | $ | (329 | ) |  | $ | 5,545 |
﻿ The components of the net deferred tax asset (liability) are as follows. ﻿
DEFERRED TAX ASSET AND LIABILITY
(Dollars in Thousands)
|  | December 31, 2025 |  |  | December 31, 2024 |
|  | Asset |  |  | Liability |  |  | Net |  |  | Asset |  |  | Liability |  |  | Net |
Federal net operating loss carryforward |  | $ | 15,274 |  |  | $ | - |  |  | $ | 15,274 |  |  | $ | 19,434 |  |  | $ | - |  |  | $ | 19,434 |
State and local net operating loss carryforward |  |  | 3,362 |  |  |  | - |  |  |  | 3,362 |  |  |  | 4,293 |  |  |  | - |  |  |  | 4,293 |
Federal capital loss carryforward |  |  | 12,470 |  |  |  | - |  |  |  | 12,470 |  |  |  | 12,020 |  |  |  | - |  |  |  | 12,020 |
Disallowed interest expense carryforward |  |  | 829 |  |  |  | - |  |  |  | 829 |  |  |  | 885 |  |  |  | - |  |  |  | 885 |
Unrealized gain on debt |  |  | - |  |  |  | (5,701 | ) |  |  | (5,701 | ) |  |  | - |  |  |  | (5,712 | ) |  |  | (5,712 | )
Investment in Operating LLC |  |  | 16,006 |  |  |  | - |  |  |  | 16,006 |  |  |  | 13,141 |  |  |  | - |  |  |  | 13,141 |
Other |  |  | 466 |  |  |  | - |  |  |  | 466 |  |  |  | 1,000 |  |  |  | (5 | ) |  |  | 995 |
Gross deferred tax asset / (liability) |  |  | 48,407 |  |  |  | (5,701 | ) |  |  | 42,706 |  |  |  | 50,773 |  |  |  | (5,717 | ) |  |  | 45,056 |
Less: valuation allowance |  |  | (38,580 | ) |  |  | - |  |  |  | (38,580 | ) |  |  | (42,799 | ) |  |  | - |  |  |  | (42,799 | )
Net deferred tax asset / (liability) |  | $ | 9,827 |  |  | $ | (5,701 | ) |  | $ | 4,126 |  |  | $ | 7,974 |  |  | $ | (5,717 | ) |  | $ | 2,257 |
As of December 31, 2025, the Company had NOLs of approximately $72,735, which will be available to offset future taxable income, subject to limitations described below. If not used, these NOLs will begin to expire in 2028. The Company also had NCLs in excess of capital gains of $59,382 as of December 31, 2025, which can be carried forward to offset future capital gains, subject to the limitations described below. If not used, this carryforward began to expire in 2024. No assurance can be made that the Company will have future taxable income or future capital gains to benefit from its NOL and NCL carryforwards. ﻿ The Company has determined that its NOL and NCL carryforwards are not currently limited by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). However, the Company may experience an ownership change as defined in that section (“Ownership Change”) in the future. If an Ownership Change were to occur in the future, the Company’s ability to use its NOLs, NCLs, and certain recognized built-in losses to reduce its taxable income in a future year would generally be limited to an annual amount (the “Section 382 Limitation”) equal to the fair value of the Company immediately prior to the Ownership Change multiplied by the “long term tax-exempt interest rate.” In the event of an Ownership Change, NOLs and NCLs that exceed the Section 382 Limitation in any year will continue to be allowed as carryforwards for the remainder of the carryforward period, and such NOLs and NCLs can be used to offset taxable income for years within the carryforward period subject to the Section 382 Limitation in each year. However, if the carryforward period for any NOL or NCL were to expire before that loss is fully utilized, the unused portion of that loss would be lost. See discussion of stockholder rights plan in note 21. ﻿ Notwithstanding the fact that the Company has determined that the use of its remaining NOL and NCL carryforwards are not currently limited by Section 382 of the Code, the Company recorded a valuation allowance for a substantial portion of its NOLs and NCLs when calculating its net deferred tax liability as of December 31, 2025. The Company applies ASC 740-10 in determining uncertain tax positions. The Company has evaluated its tax positions under these criteria and has determined that as of December 31, 2025 and 2024 it has not taken any material uncertain tax positions that would require adjustment to the financial statements. On July 4, 2025, the United States enacted the One Big Beautiful Bill Act of 2025 (the “Act”). The Act includes, among other provisions, changes to the U.S. corporate income tax system, including permanent extensions of certain provisions of the Tax Cuts and Jobs Act. The Act contains multiple effective dates, with certain provisions effective beginning in calendar year 2025 and others phased in through calendar year 2027. Based on the Company’s current analysis of the Act’s provisions, the Company does not expect the Act to have a material impact on its financial position, results of operations, or cash flows. The following table shows tax payments made by the Company and tax refunds received by the Company by jurisdiction for the year ended December 31, 2025:
|  | 2025 |
U.S. Federal |  | $ | - |
U.S. State & Local |  |  | 161 |
France |  |  | 115 |
Cash paid for income tax |  | $ | 276 |
|  | 2025 |
U.S. Federal |  | $ | - |
U.S. State & Local |  |  | - |
France |  |  | - |
Income tax refunds received |  | $ | - |
﻿

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