All In FutureTech Alliance, Inc. Income Taxes Disclosure

Note 13 – Income Taxes

 

The Company and its subsidiaries file income tax returns in the United States (federal, California, New Jersey and New York), China, and Germany. 

 

The U.S. and foreign components of loss before income taxes were as follows:

 

		For the Years Ended
		December 31,
		2024				2023
United States		$	(14,233,270	)		$	(3,543,090	)
Foreign			(8,768,164	)			(52,271	)
Loss before income taxes		$	(23,001,434	)		$	(3,595,361	)

 

The income tax provision (benefit) for the years ended December 31, 2024 and 2023 consists of the following:

 

		For the Years Ended
		December 31,
		2024				2023
Federal
Current		$	-			$	-
Deferred			(2,232,964	)			(1,302,543	)
State and local:
Current			-				-
Deferred			-				2,621,361
Foreign
Current			-				-
Deferred			(592,060	)			716,439
			(2,825,024	)			2,035,257
Change in valuation allowance			2,399,607				(2,035,257	)
Income tax provision (benefit)		$	(425,417	)		$	-

 

The reconciliation of the expected tax expense (benefit) based on the U.S. federal statutory rates for 2024 and 2023, respectively, with the actual expense is as follows:

 

		For the Years Ended
		December 31,
		2024				2023
U.S. Federal statutory rate			21.0	%			21.0	%
State taxes, net of federal benefit			0.0	%			0.0	%
Permanent differences			(6.5	)%			(0.2	)%
Untaxed foreign jurisdictions			0.0	%			0.0	%
Foreign rate differential			(1.4	)%			(0.7	)%
Change in deferred taxes			(0.4	)%			(76.2	)%
Rate change impact			0.0	%			0.0	%
Change in valuation allowance			(11.3	)%			56.6	%
Other			0.0	%			(0.5	)%
Total			1.4	%			0.0	%

The tax effects of temporary differences that give rise to deferred tax assets are presented below:

 

		As of
		December 31,
		2024				2023
Deferred Tax Assets:
Net operating loss carryforwards		$	18,595,928			$	16,060,226
Capital loss carryforward			2,933,681				-
Investment			-				2,690,777
Stock-based compensation			714,899				712,956
Capitalized start-up costs			-				-
Property and equipment			1,704,122				1,662,594
Accruals and other			401,816				567,119
Gross deferred tax assets			24,350,446				21,693,672
Valuation Allowance			(23,796,039	)			(21,396,432	)
Deferred tax assets, net of valuation allowance			554,407				297,240
Deferred Tax Liabilities:
Property and equipment			-				-
Other DTL			(1,225,150	)			(1,393,400	)
Deferred Tax Liabilities			(1,225,150	)			(1,393,400	)
Deferred tax assets (liabilities), net		$	(670,743	)		$	(1,096,160	)

 

As of December 31, 2024, the Company had $85,699,799, $4,438,469 and $2,772,813 of federal, state and foreign net operating loss (“NOL”) carryforwards available to offset against future taxable income. The federal NOL may be carried forward indefinitely. For state tax purposes, these NOLs will begin to expire in 2038. The foreign NOLs related to Z-Tech will begin to expire in 2028. The federal and state NOL carryovers are subject to annual limitations under Section 382 of the U.S. Internal Revenue Code when there is a greater than 50% ownership change, as determined under the regulations. The Company is not aware that any annual limitations have been triggered. The Company remains subject to the possibility that a future greater than 50% ownership change could trigger annual limitations on the usage of NOLs. For federal income tax purposes, the Company’s future utilization of its NOLs may be limited to 80% of taxable income as provided under Tax Cuts and Jobs Act of 2017.

 

The Company assesses the likelihood that deferred tax assets will be realized. ASC 740, “Income Taxes” requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its federal and state deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2024 and 2023. For the foreign deferred tax assets, management believes the scheduled reversal of deferred tax liabilities will allow them to be a source of taxable income to realize the foreign deferred tax assets, as such no valuation allowance is established against the foreign deferred tax assets for Zhihe Tech.

 

The Company is subject to taxation in the U.S. and various state jurisdictions. In general, the Company’s tax returns remain subject to examination by various taxing authorities beginning with the tax year ended December 31, 2020. However, to the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities. No tax audits were commenced or were in process during the years ended December 31, 2024 and 2023. 

 

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company recognizes liabilities for uncertain tax positions based on a two-step process. To the extent a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the financial statements. If a position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recognized any liability related to uncertain tax provisions as of December 31, 2024 and 2023. 

 

The Company’s practice is to recognize interest and/or penalties related to income tax matters in interest expense. The Company had no accrual for interest or penalties at December 31, 2024 and December 31, 2023, respectively, and has not recognized interest and/or penalties during the years then ended as there are no material unrecognized tax benefits. Management does not anticipate any material changes to the amount of unrecognized tax benefits within the next 12 months. 

 

Litigations, Claims, and Assessments 

 

The Company is periodically involved in various disputes, claims, liens and litigation matters arising out of the normal course of business. Such litigation may have an adverse impact on the Company’s business and results of operations, may be costly to defend, or may cause disruptions to the Company’s operations.