AirJoule Technologies Corp. Income Taxes Disclosure
Note 14 — INCOME TAX
In the year ended December 31, 2025, the difference between the statutory tax rate and the Company’s effective tax rate was due primarily to state and local income taxes and change in fair values of Earnout, True-up, Subject Vesting and Equity Line liabilities. The Company recorded an income tax expense in the year ended December 31, 2024. In the year ended December 31, 2024, the difference between the statutory tax rate and the Company’s effective tax rate was due primarily to the change in tax status of the entity.
A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate and income tax expense (benefit) is as follows:
|
|
Year Ended December 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
computed at federal statutory tax rate |
|
|
(5,737,452 |
) |
|
|
21.0 |
% |
|
|
62,359,838 |
|
|
|
21.0 |
% |
State and local income taxes, net of federal income tax effect |
|
|
(1,870,165 |
) |
|
|
6.8 |
% |
|
|
16,454,870 |
|
|
|
5.6 |
% |
Foreign tax effects |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effect of changes in relevant tax rates in the current period |
|
|
(5,319,026 |
) |
|
|
19.5 |
% |
|
|
— |
|
|
|
— |
|
Effect of cross-border tax laws |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Tax credits |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Changes in valuation allowances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Nontaxable or nondeductible items |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Change in fair value of Earnout, True-up, Subject Vesting and Equity Line liabilities |
|
|
(5,130,074 |
) |
|
|
18.8 |
% |
|
|
(6,622,560 |
) |
|
|
(2.2 |
)% |
Costs related to Business Combination |
|
|
— |
|
|
|
— |
|
|
|
11,021,988 |
|
|
|
3.7 |
% |
Other permanent adjustments |
|
|
(220,491 |
) |
|
|
0.8 |
% |
|
|
(1,958,089 |
) |
|
|
(0.7 |
)% |
Changes in unrecognized tax benefits |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prior year true-up |
|
|
(3,794 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effective tax rate |
|
|
(18,281,002 |
) |
|
|
66.9 |
% |
|
|
81,256,047 |
|
|
|
27.4 |
% |
The components of income tax expense (benefit) are as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Federal |
|
|
|
|
|
|
||
Current tax expense |
|
$ |
|
|
$ |
|
||
Deferred tax expense (benefit) |
|
|
(9,180,760 |
) |
|
|
60,427,097 |
|
Total federal |
|
|
(9,180,760 |
) |
|
|
60,427,097 |
|
|
|
|
|
|
|
|
||
State and local |
|
|
|
|
|
|
||
Current tax expense |
|
|
|
|
|
|
||
Deferred tax expense (benefit) |
|
|
(9,100,242 |
) |
|
|
20,828,950 |
|
Total state and local |
|
|
(9,100,242 |
) |
|
|
20,828,950 |
|
Total income tax expense (benefit) |
|
$ |
(18,281,002 |
) |
|
$ |
81,256,047 |
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows:
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Net operating losses |
|
$ |
7,558,637 |
|
|
$ |
2,894,110 |
|
Stock-based compensation and other accrued expenses |
|
|
1,533,579 |
|
|
|
621,958 |
|
Start-up costs |
|
|
820,304 |
|
|
|
778,644 |
|
Capitalized R&D expense |
|
|
1,052,373 |
|
|
|
1,287,402 |
|
Lease liabilities |
|
|
30,515 |
|
|
|
40,611 |
|
Total deferred tax asset |
|
|
10,995,408 |
|
|
|
5,622,725 |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Outside basis in joint venture |
|
|
73,941,884 |
|
|
|
86,839,767 |
|
Right-of-use asset |
|
|
28,325 |
|
|
|
38,709 |
|
Other |
|
|
244 |
|
|
|
296 |
|
Total deferred tax liability |
|
|
73,970,453 |
|
|
|
86,878,772 |
|
Net deferred tax liabilities |
|
$ |
62,975,045 |
|
|
$ |
81,256,047 |
|
As of December 31, 2025, the Company has generated federal net operating losses of $30.9 million and state net operating losses of $19.9 million. The federal and state net operating loss carryforwards generated inception to date will never expire. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions.
ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all of the evidence, the Company has not recorded a valuation allowance against its deferred tax assets at December 31, 2025 because management has determined that it is more likely than not that the Company recognize the benefits of its federal and state deferred tax assets.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and state jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2025, the open tax years are December 31, .
The Company has no open tax audits with any taxing authority as of December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2023 | Mar 11, 2024 | |
| 2022 | Apr 17, 2023 | |
| 2021 | Apr 13, 2022 | |
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.