v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 – Income Taxes

 

Taxes payable consisted of the following at December 31, 2025 and 2024:

 

   2025   2024 
Income tax payable - current   -   (1,852,399)

 

As of December 31, 2025 and 2024, current tax payable were nil million and $1.85 million, respectively. For 2024, current tax payable, $1.85 million was arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below).

 

As of December 31, 2025 and 2024, noncurrent tax payable were nil million, respectively, arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below).

 

 

The (benefit) provision for income taxes on loss from continuing operations consisted of the following:

 

   2025   2024 
Current:          
Federal  $194,021   $- 
State   800    2,400 
Malaysia   (775,808)   214 
Income tax expense current   (580,987)   2,614 
           
Deferred:          
Federal   -    - 
State   -    - 
Total provision expense for income taxes  $(580,987)  $2,614 

 

The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes from continuing operations:

 

   2025   2024 
Tax at federal statutory rate  $(106,257)  $(1,167,410)
State and local income taxes, net of federal effect   800    

-

 
Foreign tax effects          
Malaysia          
Foreign rate differential   (10,549)   (128,754)
Tax effects of liquidation   (691,414)   - 
Other foreign   (16,467)   

-

 
Stock based compensation   -    123,077 
Non-deductible Expenses   -    - 
Penalty   194,021    - 
Others   (19,966)   (779,043)
Valuation allowance   68,845    1,954,744
Total provision for income taxes  $(580,987)  $2,614 

 

The following presents the aggregate dollar effects of the Company’s tax exemption from its continuing operations:

 

    2025    2024 
Aggregate dollar effect of tax holiday  $-   $- 

 

Deferred Tax Assets and Liabilities

 

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are comprised of the following:

 

   2025   2024 
Non-Current Deferred Tax Assets:          
Accrued liabilities  $408   $57,773 
Accrued Warranty Liability   8,955    3,796 
Fed & CA amortization   2,489    5,587 
Stock compensation   155,532    143,960 
ASC 842 – lease liability   176,800    335,645 
Inventory   -    - 
U.S. NOL   5,214,957    5,374,809 
Capital loss   734,976    734,976 
Charitable Contribution   1,906    1,129 
R&D Capitalization   2,047    794,736 
Interest   1,944    1,944 
           
Non-Current Deferred Tax Liabilities:          
Fed & CA depreciation   (5,679)   (7,926)
Prepaid expenses   (4,114)   (18,940)
ASC 842- ROU Asset   (166,447)   (320,454)
Unrealized Gain on Preamble   (88,452)   - 
           
Net Non-Current Deferred Tax Assets before Valuation Allowance   6,035,322    7,107,035 
Less: Valuation Allowance   (6,035,322)   (7,107,035)
Non-Current Deferred Tax Assets, Net:   -    - 
Total Deferred Assets, Net:  $-   $- 

 

 

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:

  

   2025 
Federal  $1,304,247 
State   - 
Foreign   - 
Cash paid for income taxes, net of refunds received  $1,304,247 

 

Nova LifeStyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI is incorporated in the BVI. There is no income tax for a company domiciled in the BVI. Accordingly, the Company’s consolidated financial statements do not present any income tax provision related to the BVI tax jurisdiction where Nova Furniture BVI is domiciled.

 

For U.S. Federal income tax purpose, the Company has net operating loss, or NOL carryforwards of approximately $16.6 million and $ 15.1 million at December 31, 2025 and 2024, respectively. The Company has capital loss carryforwards of approximately $3.5 million at December 31, 2025.

 

For U.S. California income tax purpose, the Company has net operating loss, or NOL carryforwards of approximately $22.7 million and $20.6 million, at December 31, 2025 and 2024, respectively.

 

Malaysia has net operating loss, or NOL carryforwards of approximately $0 million at December 31, 2025.

 

Corporate income tax in Malaysia is calculated at the statutory rate of 24% of the estimated taxable profit for the year ended December 31, 2025.