ASCENT INDUSTRIES CO.ACNT
ASCENT INDUSTRIES CO. Income Taxes Disclosure
Income Taxes
As discussed in Note 1, in December 2023, the FASB issued ASU 2023-09, which established new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation while also further disaggregating income taxes paid. In the fourth quarter of 2025, the company adopted ASU 2023-09.
On July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA includes several significant changes in the U.S. tax law, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for specific business provisions, including domestic research cost expensing and the business interest expense limitation. This legislation was enacted during the third quarter of 2025 and at this time, the Company does not expect the effects of this legislation to have a material impact on its financial results.
The Company's loss from continuing operations before income taxes is domestic-sourced only, and was as follows for the periods presented:
| (in thousands) | 2025 | 2024 | |||||||||
| Loss from continuing operations before income taxes | $ | (5,562) | $ | (10,771) | |||||||
The Company's income tax expense from continuing operations consisted of the following:
| (in thousands) | 2025 | 2024 | |||||||||
| Current income taxes: | |||||||||||
| Federal | $ | (26) | $ | (39) | |||||||
| State | 134 | (144) | |||||||||
| Total current income taxes | 108 | (183) | |||||||||
| Deferred tax expense: | |||||||||||
| Federal | (98) | 1,653 | |||||||||
| State | 12 | 336 | |||||||||
| Total deferred income taxes | (86) | 1,989 | |||||||||
| Income tax expense | $ | 22 | $ | 1,806 | |||||||
The reconciliation of the statutory federal income tax rate to the effective tax rate for the current year in comparison of prior year in accordance with the adoption of ASU 2023-09 is as follows:
| (in thousands) | 2025 | 2024 | |||||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||||||
| Tax at U.S. statutory rates | $ | (1,168) | 21.0 | % | $ | (2,262) | 21.0 | % | |||||||||||||||
State income taxes, net of federal tax benefit1 | 340 | (6.1) | % | (7) | 0.1 | % | |||||||||||||||||
| State valuation allowance | (225) | 4.0 | % | 158 | (1.5) | % | |||||||||||||||||
| Federal valuation allowance | 966 | (17.3) | % | 4,095 | (38.0) | % | |||||||||||||||||
| Stock option compensation | 104 | (1.9) | % | 37 | (0.3) | % | |||||||||||||||||
| Other nondeductible expenses | 5 | (0.1) | % | (12) | 0.1 | % | |||||||||||||||||
| Other, net | — | — | % | (203) | 1.8 | % | |||||||||||||||||
| Total | $ | 22 | (0.4) | % | $ | 1,806 | (16.8) | % | |||||||||||||||
1The state that contributes the majority (greater than 50%) of the tax effect in this category is South Carolina..
A summary of total income taxes paid (net of refunds), in accordance with the adoption of ASU 2023-09 for the year ended December 31, 2025 is as follows:
| (in thousands) | 2025 | ||||
| U.S. Federal | $ | (20) | |||
| U.S. State total | $ | (73) | |||
Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:
| (in thousands) | 2025 | ||||
| Georgia | $ | 77 | |||
| South Carolina | 12 | ||||
| Illinois | (143) | ||||
| Virginia | (17) | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred tax assets and liabilities from continuing operations are as follows at the respective year ends:
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred income tax assets: | |||||||||||
| Inventory valuation reserves | $ | 306 | $ | 1,570 | |||||||
| Inventory capitalization | 96 | 550 | |||||||||
| Accrued bonus | 483 | 318 | |||||||||
| State net operating loss carryforwards | 1,911 | 2,055 | |||||||||
| Federal net operating loss carryforwards | 5,813 | 4,075 | |||||||||
| Lease liabilities | 3,037 | 7,484 | |||||||||
| Interest limitation carryforwards | 1,302 | 1,488 | |||||||||
| Intangible asset basis differences | (671) | 781 | |||||||||
| Other | 752 | 1,444 | |||||||||
| Total deferred income tax assets | 13,029 | 19,765 | |||||||||
| State valuation allowance | (1,757) | (2,026) | |||||||||
| Federal valuation allowance | (6,681) | (7,040) | |||||||||
| Total net deferred income tax assets | 4,591 | 10,699 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Fixed asset basis differences | 2,163 | 4,010 | |||||||||
| Prepaid expenses | 293 | 300 | |||||||||
| Lease assets | 2,376 | 6,709 | |||||||||
| Total deferred income tax liabilities | 4,832 | 11,019 | |||||||||
| Deferred income taxes, net | $ | (241) | $ | (320) | |||||||
The Company's effective tax rate for 2025 was less than the U.S. statutory rate of 21% primarily driven by adjustments to the valuation allowance in the period and increases in stock compensation. The Company's effective tax rate for 2024 was less than the U.S. statutory rate of 21% primarily due to discrete tax charges associated with recording a valuation allowance on cumulative US Federal and state deferred tax assets.
The Company made no income tax payments in 2025 or 2024. The Company has $27.7 million of U.S. Federal net operating loss carryforwards and $6.2 million of interest limitation carryforwards at the end of 2025 compared to $19.4 million of U.S. Federal net operating loss carryforwards and $7.1 million of interest limitation carryforwards at the end of 2024. During the period, the Company determined that these carryforwards are unrealizable and not more likely than not to be utilized in future periods. The majority of these carryforwards are not subject to expiration.
In addition, on a gross basis the Company had state net operating loss carryforwards of $41.8 million and $46.2 million at the end of 2025 and 2024, respectively. As of the end of 2025, the Company had recognized a state valuation allowance of $1.8 million, representing approximately a $0.3 million decrease year-over-year primarily driven by net operating loss carryforward expiration in jurisdictions for which we believe it is not more likely than not to be utilized in future periods. The majority of these losses will expire between the years of 2026 and 2044, while certain losses are not subject to expiration.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company is no longer subject to U.S. federal examinations for years before 2020 or state examinations for years before 2019.
The Company had no uncertain tax position activity during 2025 or 2024. The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in the provision for income taxes. The Company had no accruals for uncertain tax positions including interest and penalties at the end of 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 3, 2026 | Showing above |
| 2024 | Mar 4, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 29, 2022 | |
| 2020 | Mar 9, 2021 | |
| 2019 | Mar 6, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 14, 2017 | |
| 2015 | Mar 30, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.