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

9. Income Taxes

 

Due to an ownership change in the first quarter of 2020, the future utilization of certain post-change income tax attributes of Yunhong CTI Ltd , including net operating loss carryovers, are anticipated to be limited for U.S. income tax purposes.

 

Income tax provision (benefit) related to operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows (in thousands):

 

U.S. Federal provision (benefit)  2024   2023 
   Year Ended December 31, 
U.S. Federal provision (benefit)  2024   2023 
At Statutory Rate  $(315,000)  $(49,000)
State Taxes   (71,000)   (71,000)
Change in Valuation Allowance   181,000    299,000 
Foreign Tax Differential   (4,000)   - 
Foreign Valuation Allowance   25,000    - 
Other   184,000    (179,000)
Total provision (benefit)  $-   $- 

  

 

Deferred Tax Assets and Liabilities

 

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:

  

   2024   2023 
   Year Ended December 31, 
   2024   2023 
Deferred Tax Assets:          
Federal & State NOL Carryforward  $5,391,000   $5,163,000 
Foreign Tax Credit & Other Credits   224,000    307,000 
Capitalized R&D   128,000    98,000 
Reserves and Accruals   140,000    147,000 
Capital Loss Carryforward   2,360,000    2,360,000 
Unicap 263A Adjustment   246,000    233,000 
Lease liability   1,232,000    1,026,000 
Foreign NOL Carryforward   28,000    2,000 
Fixed Assets & Intangibles   279,000    261,000 
Total Gross deferred tax assets   10,028,000    9,597,000 
Less: Val. Allowance   (8,702,000)   (8,476,000)
Total Deferred Tax Assets   1,326,000    1,121,000 
           
Deferred Tax Liabilities:          
Right of use operating leases   1,326,000    1,121,000 
Total Gross deferred tax liabilities   1,326,000    1,121,000 
Net Deferred Tax Assets  $-   $- 

 

Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Because of our lack of U.S. earnings history the net U.S. deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $0.2 million and $0.3 million during the years ended December 31, 2024 and 2023, respectively.

 

Net Operating Loss and Tax Credit Carryforwards

 

As of December 31, 2024, we had a net operating loss carryforward for federal income tax purposes of approximately $16.9 million, of which $0.2 million is subject to expiration beginning 2037. We had a total state net operating loss carryforward of approximately $19.5 million, with various expiration dates. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization.

 

We have federal credits of approximately $0.2 million, federal tax credits in the amount of $0.08 million expired during 2024.