v3.26.1
Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 8 - INCOME TAXES

 

Income taxes recorded in our consolidated statements of income consists of the following:

 

   

2025

    

2024

  

Income Tax Expense

                

Federal

   $ -     $ -  

State

     100,722       381,680  

Deferred Income Taxes

     148,594       (50,555 )

Total Income Tax Expense

   $ 249,316     $ 331,125  

 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. 

 

As of December 31, 2025, and 2024, we had $0 of unrecognized tax benefits that if recognized would affect the tax rate. We do not expect the total amount of unrecognized tax benefits to materially change over the next twelve months.

 

We are primarily subject to United States, Minnesota, Iowa, Nebraska, North Dakota, and Wisconsin income taxes. Tax years subsequent to 2020 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to uncertain income tax matters as income tax expense.

 

The differences between the statutory federal tax rate and the effective tax rate were as follows:

 

Rate reconciliation:

  

2025

    

2024

  
                                 

Income taxes computed at the federal statutory rate

   $ 121,168       21.00 %   $ (860,304 )     21.00 %
                                 

State income taxes, net of federal benefit (a)

     87,345       15.14 %     17,761       -0.43 %

Nontaxable or nondeductible items

                                

Nondeductible goodwill impairment

     -       0.00 %     1,045,457       -25.52 %

Other

     (476 )     -0.08 %     (3,770 )     -0.09 %
                                 

Other adjustments

     41,279       7.15 %     131,981       3.22 %

Total

   $ 249,316       43.21 %   $ 331,125       -1.82 %

 

(a) State taxes in Minnesota and Iowa made up the majority of the tax effect in this category.

 

The Company’s income tax provision was computed based on the federal statutory rate and the average state statutory rates, net of the related federal benefit. The Company’s effective rate for the year ended December 31, 2024, was significantly impacted by a non-deductible goodwill impairment charge. Absent the impairment charge, the Company’s effective tax rate would have been 20.04% in 2024. The Company’s effective rate for the year ended December 31, 2025, was primarily impacted by state taxes computed on a standalone basis, and true-up adjustments with a disproportionate rate impact when compared to similar adjustments in 2024.

 

Deferred income taxes and unrecognized tax benefits reflected in our consolidated balance sheets are summarized as follows:

 

   

2025

    

2024

  

Deferred Tax Assets

                

Accrued Expenses

   $ (334,036 )   $ (124,174 )

Deferred Compensation

     (60,666 )     (73,247 )

Other

     (441,062 )     (316,965 )

State NOL

     (632,539 )     -  

Federal NOL

     (6,925,267 )     (5,315,643 )

Sec. 163(j) business interest limitation

     (5,862,893 )     (5,901,243 )

Leases

     (402,350 )     (318,179 )

Total Deferred Tax Assets

     (14,658,813 )     (12,049,451 )
                 

Deferred Tax Liabilities

                

Fixed Assets

     34,053,523       30,797,486  

Intangible Assets

     2,001,326       2,528,632  

Investments

     562,910       593,993  

Unrealized Gain on SWAP

     37,757       135,861  

Contract Assets

     392,603       416,359  

Leases

     395,397       311,317  

Total Deferred Tax Liabilities:

     37,443,516       34,783,648  
                 

Total Net Deferred Taxes

   $ 22,784,703     $ 22,734,197  

 

As of December 31, 2025, the Company has federal and state net operating loss carryforwards of approximately $33.0 million and $8.4 million, respectively for tax purposes, which will be available to offset future taxable income. The federal losses may be carried forward indefinitely, while the state losses may be carried forward 15 years.

 

The Company’s cash tax payments (net of refunds) are summarized as follows:

 

   

2025

    

2024

  
                 

U.S. Federal

   $ -     $ -  

State:

                

Minnesota

     1,037,209       845,000  

Iowa

     -       278,024  
                 

Total cash paid for income taxes (net of refunds)

   $ 1,037,209     $ 1,123,024