v3.26.1
Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

11.

Income Taxes

 

Income (loss) from continuing operations before provision (benefit) for income taxes was distributed geographically as follows (in thousands):

 

 

  

Years ended December 31,

 
  

2025

  

2024

 

Domestic

 $8,263  $(5,888)

Foreign

  (235)  28 

Total

 $8,028  $(5,860)

 

The provision (benefit) for income taxes from continuing operations is as follows (in thousands):

 

  

Years ended December 31,

 
  

2025

  

2024

 

Current

        

Federal

 $-  $- 

State

  -   - 

Foreign

  (9)  15 

Total current expense (benefit)

  (9)  15 
         

Deferred

        

Federal

  2,393   (784)

State

  -   99 

Foreign

  (623)  23 

Change in valuation allowance

  (1,770)  662 

Total deferred expense

  -   - 
         

Total provision (benefit) for income taxes

 $(9) $15 

 

Pursuant to the disclosure requirements of ASU 2023-09, the differences between our effective income tax rate from continuing operations and the U.S. federal statutory income tax rate for the year ended December 31, 2025, are as follows (in thousands, except percentages):

 

  

Year ended December 31,

 
  

2025

 
  Dollars  Percent 

US federal statutory tax rate

 $1,686   21.0%

State & local income taxes, net of federal effect(a)

  -   -%

Foreign tax effects

        

Sweden

        

Return to provision adjustment

  (572)  (7.1)%

Changes in valuation allowance

  529   6.6%

Other

  6   0.1%

Other Jurisdictions

  (17)  (0.2)%

Changes in tax laws or rates in current period

  -   -%

Cross border tax laws

        

Global Intangible Low-Taxed Income

  640   8.0%

Tax credits

  -   -%

Changes in valuation allowance

  (2,298)  (28.6)%

Nontaxable or nondeductible items

  17   0.2%

Changes in unrecognized tax benefits

  -   -%

Effective tax rate

 $(9)  (0.1)%

 

(a)

The state that makes up the majority of the state & local income taxes category is California.

 

The differences between our effective income tax rate and the U.S. federal statutory income tax rate for continuing operations for the year ended December 31, 2024, are as follows:

 

  

Year ended December 31,

 
  

2024

 

Amounts at statutory tax rates

  21.0%

Foreign losses taxed at different rates

  (2.0)%

Stock-based compensation

  -%

GILTI inclusion

  (8.0)%

Other

  -%

Total

  11.0%

Valuation allowance

  (11.0)%

Effective tax rate

  -%

 

Significant components of the deferred tax asset balances are as follows (in thousands):

 

  

Years ended December 31,

 
  

2025

  

2024

 

Deferred tax assets:

        

Accruals

 $-  $- 

Net operating losses

  20,274   22,124 

Gross deferred tax assets

  20,274   22,124 

Valuation allowance

  (20,244)  (22,108)

Total deferred tax assets

  30   16 

Deferred tax liabilities:

        

Basis difference in fixed assets

  (15)  - 

Accruals

  (15)  (16)

Net deferred tax assets

 $-  $- 

 

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31,2025 is as follows (in thousands):

 

 

  

Year ended December 31,

 
  

2025

 

Federal

 $- 

State

  - 

Foreign

    

Germany

  (10)

Other

  1 

Cash paid (received) for income taxes, net of refunds received

 $(9)

 

Valuation allowances are recorded to offset certain deferred tax assets due to management’s uncertainty of realizing the benefits of these items. Management applies a full valuation allowance for the accumulated losses of Neonode Inc., and its subsidiaries, since it is not determinable using the “more likely than not” criteria that there will be any future benefit of our deferred tax assets. This is mainly due to our history of operating losses. As of December 31, 2025, we had federal, state and foreign net operating losses of $73.2 million, $18.7 million and $17.5 million, respectively. Of the total federal loss carryforward, approximately $47.0 million will begin to expire in 2031 and the remainder do not expire. The California loss carryforward will begin to expire in 2030. The foreign loss carryforward, which is generated in Sweden, does not expire.

 

Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating losses and tax credit carryforwards before utilization.

 

We follow the provisions of accounting guidance which includes a two-step approach to recognizing, derecognizing and measuring uncertain tax positions. There were no unrecognized tax benefits for the years ended December 31, 2025 and 2024.

 

We follow the policy to classify accrued interest and penalties as part of the accrued tax liability in the provision for income taxes. For the years ended December 31, 2025 and 2024 we did not recognize any interest or penalties related to unrecognized tax benefits.

 

As of December 31, 2025, we had no uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations.

 

We file income tax returns in the U.S. federal jurisdiction, California, Sweden, and Japan. The 2008 through 2024 tax years are open and may be subject to potential examination in one or more jurisdictions. We are not currently under any federal, state or foreign income tax examinations.