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Note 14 - Income Taxes
 3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 14. INCOME TAXES

 

The Company's provision for income taxes for interim periods is determined using either an estimated annual effective tax rate or, where applicable, the actual effective tax rate for the year-to-date period, in accordance with ASC 740-270. Discrete items are recorded in the period in which they occur. The Company recorded an income tax provision of $3.5 million for the three months ended March 31, 2026, a rate of 0.62%, recognized in continuing operations. The rate differs from the statutory rate due primarily to warrant income that is not recognized for income tax purposes and the reversal of our valuation allowance against the deferred tax assets.

 

For the three months ended March 31, 2025, the Company's effective income tax rate from continuing operations was 0%, primarily due to a full valuation allowance against deferred tax assets. The $0.3 million income tax provision recognized in the three months ended March 31, 2025 related entirely to discontinued operations and is included in net income from discontinued operations, net of taxes.

 

In accordance with ASC 740-270-30-18, the Company has determined that it is unable to make a reliable estimate of its annual effective tax rate for the year ending December 31, 2026. Small variations in forecasted pre-tax book income produce significant variability in the estimated annual effective tax rate due to the magnitude of non-cash items, including the remeasurement of liability-classified warrants and the recognition of unrealized gains and losses on digital assets measured at fair value. As a result, the Company has computed its income tax provision for the three months ended March 31, 2026 using the actual effective tax rate for the year-to-date period, which the Company believes represents the best estimate of the annual effective tax rate.

 

During the three months ended March 31, 2026, the Company released its valuation allowance against its U.S. federal and state deferred tax assets. The Company evaluates the realizability of its deferred tax assets each reporting period based on all available positive and negative evidence, including cumulative results in recent years, and the character and timing of reversals of existing taxable temporary differences. The Company concluded that the existence of taxable temporary differences related to unrealized gains on digital assets, provides sufficient positive evidence to conclude that it is more likely than not that its deferred tax assets will be realized. The Company's assessment of the realizability of its deferred tax assets is subject to change. A sustained decline in the fair value of the Company's digital asset holdings, or a deterioration in the Company's projected operating results, could require the Company to re-establish a valuation allowance against all or a portion of its deferred tax assets in a future period, which could result in a material charge to income tax expense.