v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Taxes [Abstract]  
INCOME TAXES

NOTE 20—INCOME TAXES

 

As of December 31, 2025, the Company has net operating loss carryforwards of approximately $5.0 million available to reduce future taxable income indefinitely. The related deferred tax assets have not been recognized in these consolidated financial statements as their realization is not considered probable. Accordingly, the Company has recorded a full valuation allowance against the deferred tax assets relating to these net operating loss carryforwards.

 

For the year ended December 31, 2025, the Company’s net deferred tax liability includes a naked credit attributable to a temporary difference arising from an indefinite-lived intangible asset. This naked credit represents a deferred tax liability related to an indefinite-lived asset that cannot be offset by deferred tax assets related to definite-lived assets. Pursuant to the Tax Cuts and Jobs Act of 2017, up to 80% of net operating loss carryforwards generated after December 31, 2017 may be used to offset this liability. The remaining portion of the deferred tax liability cannot be offset by definite-lived deferred tax assets.

 

Deferred income taxes reflect the net tax effects of temporary differences between the amounts recorded for financial reporting purposes and the amounts used for tax purposes.

 

The components of the provision for income taxes for the years ended December 31, 2025 and 2024 consist of the following:

 

   December 31,
2025		   December 31,
2024		 
Current federal and state  $2,300,000   $65,000 
Deferred federal and state   53,000    (767,000)
Total provision (benefit) for income taxes  $2,353,000   $(702,000)

 

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2025 and 2024 is as follows:

 

   December 31,
2025		   December 31,
2024		 
Federal tax   21.4%   21.0%
State tax   0.0%   0.1%
Return to provision   0.9%   0.0%
Valuation allowance   0.3%   (0.2)%
Nontaxable partnership income   (19.1)%   (20.2)%
Effective income tax rate  3.5%   0.7%

The significant components of deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:

 

   December 31,
2025		   December 31,
2024		 
Deferred tax assets        
Inventory obsolescence  $59,000   $105,000 
Allowance for credit losses   23,000    – 
Sales return reserve   27,000    27,000 
Business interest limitation   2,183,000    2,169,000 
Lease liabilities   415,000    448,000 
Accrued expenses   –    220,000 
Loss carryforward   1,065,000    596,000 
Valuation allowance   (3,103,000)   (2,661,000)
Total deferred tax assets  $669,000   $904,000 
           
Deferred tax liabilities          
Fixed assets  $(125,000)  $(180,000)
Construction contracts   (668,000)   (305,000)
Right-of-use assets   (400,000)   (435,000)
Other   (568,000)   – 
Intangibles   (2,493,000)   (2,701,000)
Receivables   –    (933,000)
Total deferred tax liabilities  $(4,254,000)  $(4,554,000)
           
Total net deferred tax liabilities  $(3,585,000)  $(3,650,000)