The provision (benefit) for income taxes consists of the following components:

The following table presents U.S. and foreign income (loss) before income taxes:

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:

Our net deferred tax liability of $219,000 and $172,000 at June 30, 2026 and 2025, respectively, represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax assets, and are recorded in other non-current liabilities on the accompanying consolidated balance sheets at June 30, 2026 and 2025. Realization of deferred tax assets is dependent upon the generation of future taxable income. As required by ASC 740, we have evaluated the positive and negative evidence bearing upon our ability to realize the deferred tax assets as of June 30, 2026 and 2025. We have determined that it was more likely than not that Lantronix would not realize the deferred tax assets due to our cumulative losses and uncertainty of generating future taxable income.

We adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis beginning with year ended June 30, 2026. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our actual global effective amount and rate for the year ended June 30, 2026:

* State tax in California, Illinois and Texas represented more than 50% of the tax effect in this reconciling item

The following table presents a reconciliation of the provision (benefit) for income taxes to taxes computed at the U.S. federal statutory rate before adoption of ASU 2023-09:

We continue to assert that our foreign earnings are indefinitely reinvested in our overseas operations and as such, deferred income taxes were not provided on undistributed earnings of certain foreign subsidiaries. The 2017 Tax Cuts and Jobs Act (the “2017 Act”) created a requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (“GILTI”), must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. During the fiscal years ended June 30, 2026 and 2025, we elected to treat the tax effect of GILTI as a current-period expense when incurred.

At June 30, 2026, we had federal net operating loss (“NOL”) carryforwards of $27,074,000 and state net operating loss carryforwards of $11,825,000. Our federal net operating loss carryforwards generated for tax years beginning before July 1, 2018 continue to expire in future fiscal years. Pursuant to the 2017 Act, we also have federal NOL carryforwards of $9,024,000 that will not expire but can only be used to offset 80% of future taxable income. For state income tax purposes, our NOL carryforwards continue to expire in future fiscal years. A valuation allowance has been recorded against certain deferred tax assets related to these carryforwards to the extent management concluded that realization is not more likely than not.

Unrecognized Tax Benefits

The following table summarizes our liability for uncertain tax positions for the fiscal year ended June 30, 2026:

At June 30, 2026, we had $150,000 of gross unrecognized tax benefits related to federal R&D credit which was recorded as a reduction to deferred tax assets, and a corresponding reduction in our valuation allowance of $150,000. At June 30, 2026 there was a payable of $50,000 related to state income tax liability and accrued interest and penalties. The state income tax payable balance decreased by $112,000 from the prior year due to expiration of state statute of limitation periods. There was a deferred tax asset reversal of $2,587,000 due to the reduction of historical California R&D credits. There was a full valuation allowance on the $2,587,000 deferred tax asset, so no provision impact. To the extent such portion of unrecognized tax benefits is recognized at a time such valuation allowance no longer exists, the recognition would reduce the effective tax rate. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. During the fiscal years ended June 30, 2026 and 2025, we recorded an immaterial expense for interest and penalties related to income tax matters in the provision for income taxes. At June 30, 2026, we had approximately $14,000 of accrued interest and penalties related to uncertain tax positions.

At June 30, 2026, our fiscal years ended June 30, 2023 through 2025 remain open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2022 through 2025 remain open to examination by the state taxing jurisdictions. However, we have NOLs beginning in the fiscal year ended June 30, 2007 which would cause the statute of limitations to remain open for the year in which the NOL was incurred. Our fiscal years ended June 30, 2018 through 2025 remain open to examination by foreign taxing authorities.

Cash Taxes Paid

We adopted ASU 2023-09 on a prospective basis for the year ended June 30, 2026 and have included the following table as a result of our adoptions, which presents income taxes paid (net of refunds received) for the year ended June 30, 2026: