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INCOME TAXES

12 Months Ended

Sep. 30, 2022

INCOME TAXES.

INCOME TAXES

NOTE 17 – INCOME TAXES

On December 2, 2019, we entered into a tax sharing agreement with Mullen Technologies Inc. Our tax provision is calculated primarily as though the Company was a separate taxpayer. However, under certain circumstances, transactions between us and Mullen Technologies are assessed using consolidated tax return rules. Tax sharing agreement governs the payment of tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of tax returns, and provide for certain other matters relating to taxes.

We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities.

The components of loss before income taxes are $740,323,152 and $44,239,780, for the years ended September 30, 2022 and 2021, respectively.

The Company's total provision (benefit) for income taxes consists of the following for the year ended September 30, 2022:

​

​	​	​	​	​	​	​
​	​	September 30,		​	September 30,
​		2022		​	2021
Current	​	​	​	​	​	​
Federal	​	$	—	​	$	—
State	​	​	1,600	​	​	800
​	​	​	​	​	​	​
Total Current	​	$	1,600	​	$	800
​	​	​	​	​	​	​
​	​	​	​	​	​	​
Deferred	​	​	​	​	​	​
Federal	​	$	(280,552)	​	$	—
State	​	​	—	​	​	—
​	​	​	​	​	​	​
Total Deferred	​	​	(280,552)	​	​	—
​	​	​	​	​	​	​
Total provision (benefit) for income taxes	​	$	(278,952)	​	$	800

​

For the year ended September 30, 2022, we had income tax NOL carryforwards of approximately $341.4 million for Federal and $318.9 million for California, which will expire as follows:

​

​	​	​	​	​	​	​
​	​	September 30,		​	September 30,
​		2022		​	2021
Federal	​	​	​	​	​	​
2034-2037	​	$	29,838,716	​	$	29,838,716
Indefinite	​	​	311,525,886	​	​	162,818,819
​	​	​	​	​	​	​
Total Federal	​	$	341,364,602	​	$	192,657,535
​	​	​	​	​	​	​
California	​		​	​
2034-2040	​	​	318,862,714	​	​	191,722,566
​	​	​	​	​	​	​
Total California	​	$	318,862,714	​	$	191,722,566
​	​	​	​	​	​	​

​

The reconciliation of our effective tax rate to the statutory federal rate of 21% for the years ended September 30, 2022 and 2021 is as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	September 30,		​	September 30,	​	September 30,		​	September 30,	​
​		2022			2022 - %		2021			2021 - %	​
Income tax benefit at statutory rate	​	$	(155,466,389)	​	21.00	%	$	(9,247,200)		21.00	%
State income taxes	​		1,600	​	—	%		800		—	%
Permanent Differences	​		995,227	​	(0.13)	%		158,166		(0.36)	%
Valuation Allowance	​		154,180,328	​	(20.83)	%		9,091,163		(20.65)	%
Other	​		10,282	​	—	%		(2,129)		—	%
Total (benefit) provision for income taxes	​	$	(278,952)	​	0.04	%	$	800		—	%

​

We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities.

Significant components of the Company's net deferred tax assets as of September 30, 2022, are as follows:

​

​	​	​	​	​	​	​
​		2022			2021
Deferred tax assets:		​	​	​	​
Stock Compensation		​	8,442	​	​	—
Net Operating loss carryforwards	​	​	78,791,906	​	​	38,676,405
Charitable Contributions		​	1,219	​	​	894
Accrued Expenses		​	86,926	​	​	315,555
Impairment Other	​	​	—	​	​	—
Other Assets	​	​	426,099	​	​	364,419
Intangibles		​	48,382,778	​	​	—
163(j) Limitation		​	14,522,536	​	​	14,491,332
Mark-to-Market Warrants		​	121,545,414	​	​	—
​	​	​	​	​	​	​
Total gross deferred tax assets		​	263,765,320	​	​	53,848,604
​	​	​	​	​	​	​
R&D Tax Credits	​	​	578,842	​	​	—
​	​	​	​	​	​	​
Less valuation allowance		​	(258,903,457)	​	​	(53,416,875)
​	​	​	​	​	​	​
Total net deferred tax assets		​	5,440,705	​	​	431,729
​	​	​	​	​	​	​
Deferred tax liabilities:		​	​	​	​
​	​	​	​	​	​	​
Intangibles		​	-	​	​	(146,639)
Fixed Assets		​	(969,201)	​	​	(284,922)
IP	​	​	(12,243,969)	​	​	—
Patents	​	​	(6,802,149)	​	​	—
Trademarks	​	​	(225,760)	​	​	—
Non-competes	​	​	(156,649)	​	​	—
Other		​	(336)	​	​	(168)
​	​	​	​	​	​	​
Total deferred tax liabilities		​	(20,398,064)	​	​	(431,729)
​	​	​	​	​	​	​
Net deferred tax assets	​	$	(14,957,359)	​	$	—

​

For the year ended September 30, 2022, and 2021,we recorded a full valuation allowance against the deferred tax assets because the Company is in a three year cumulative pre-tax book loss, which is significant negative evidence. We do not believe that the deferred tax assets recorded as of September 30, 2022 are more likely than not realizable.

We follow the guidance for accounting for uncertainty in income taxes in accordance with FASB ASC 740, which clarifies uncertainty in income taxes recognized in an enterprise's financial statements. The standard also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken, or expected to be taken, in an income tax return. Only tax positions that meet the more likely than not recognition threshold may be recognized. In addition, the standard provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. As of September 30, 2022, the Company has recorded $15.2 million related to unrecognized tax benefits. The Company's tax years for 2014 through 2022 are still subject to examination by the tax authorities.

Tax Reform. The Tax Cuts and Jobs Act of 2017 (the “TCJA”) was enacted on December 22, 2017, and among other changes, reduced the federal statutory tax rate from 35.0% to 21.0%. In accordance with U.S. GAAP for income taxes, as well as SEC Staff Accounting Bulletin No. 1187 (“SAB”), the Company made a reasonable estimate of the impacts of the TJCA and recorded this estimate in Company results for the year ended September 30, 2022. SAB 118 allows for a measurement period of up to one year, from the date of enactment, to complete the accounting for the impact of TJCA. As of September 20, 2022, our analysis of under SAB 118 was completed and resulted in no material adjustments to the provisional amounts recorded as of September 30, 2022.

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The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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