14. Income Taxes

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries, Public Ventures, MDB Management, PatentVest, and M1 are Subchapter C-corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity; it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company, except as set forth in the tables below. Amounts recognized for income taxes are reported in “income tax expense (benefit)” on the consolidated statements of operations. 

The Company’s taxable income or loss, which may vary substantially from the net income or net loss reported on the consolidated statements of operations, is includable in the federal and state income tax returns of each unitholder.

Income tax expense (benefit) (including Subchapter C-corporations) consisted of the following (in thousands):

   Schedule of Income Taxes Expenses (benefit) 

Total cash taxes paid net of refunds received in 2025 was $0.

As of December 31, 2025, the Company had approximately $23.3 million and $0.1 million of net operating loss carryforwards for U.S. federal and Florida income tax purposes, respectively. These net operating losses may be carried forward indefinitely

Effective for the year ended December 31, 2025, the Company adopted ASU 2023-09-Improvements to Income Tax Disclosures, prospectively. The reconciliation of income tax expense (including Subchapter C-corporations) computed at the U.S. federal statutory income tax rate of 21% to the recognized income tax expense for the year ended December 31, 2025, presented in accordance with the disclosure requirements of ASU 2023-09-Improvements to Income Tax Disclosures, is as follows (in thousands):

 Schedule of Federal Statutory Tax Rate to The Effective Tax Rate 

A reconciliation of the federal statutory tax rate to the effective tax rate (including Subchapter C-corporations) for the year ended December 31, 2024 and 2024 is as follows:

Significant components of the deferred tax assets and liabilities (including Subchapter C-corporations) were as follows (in thousands):

 Schedule of Deferred Tax Assets and Liabilities

Net deferred tax assets and liabilities were classified on the consolidated balance sheets as follows (in thousands):

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. At December 31, 2025, based on projections of future taxable income for the periods in which the deferred tax assets are deductible, a valuation allowance of approximately $6.6 million was recorded for tax carry forwards and attributes to reduce the net deferred tax assets to an amount that is more likely than not to be recognized. The amount of deferred tax assets considered realizable could be reduced in the future if estimates of future taxable income during the carry forward period are reduced.

In accordance with the applicable accounting standards, the Company recognizes only the impact of income tax positions that, based on their merits, are more likely than not to be sustained upon audit by a taxing authority. To evaluate its current tax positions in order to identify any material uncertain tax positions, the Company developed a policy of identifying and evaluating uncertain tax positions that considers support for each tax position, industry standards, tax return disclosures and schedules and the significance of each position. It is the Company’s policy to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company had no material uncertain tax positions at December 31, 2025 and December 31, 2024. The tax years 2022 – 2025 remain open to examination for federal income tax purposes.