Ambow Education Holding Ltd. Income Taxes Disclosure

14. TAXATION

 

a. Income taxes

 

Cayman Islands

 

Under the current laws of Cayman Islands, the Company and its subsidiaries incorporated in the Cayman Islands are not subject to tax on income or capital gains. In addition, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

 

US

 

Significant components of the income taxes benefit (expense) on earnings for the years ended December 31, 2024 and 2025 are as follows:

 

		Years ended December 31,
		2024				2025
Current:
Federal		$	—				—
State and local			839				(6	)
Foreign			—				—
Total current portion of income tax benefit (expense)			839				(6	)
Deferred:
Federal		$	—				—
State and local			—				—
Foreign			—				—
Total deferred portion of income tax benefit (expense)			—				—
Total income tax benefit (expense)		$	839			$	(6	)

 

The principal components of the Company’s deferred tax assets and liabilities were as follows:

 

		As of December 31,
		2024				2025
Deferred tax asset:
Net Operation Loss Carryover		$	7,401			$	7,531
Lease Liability			77				1,603
Allowance for doubtful accounts			152				232
Tax Credits			—				26
Accrued expense			1				21
Research and development capitalization			922				—
Total deferred tax assets			8,552				9,413
Valuation allowance			(8,371	)			(7,764	)
Deferred tax assets, net of valuation allowance		$	181			$	1,649
Deferred tax liabilities:
- Right-of-use assets			—				1,412
- Fixed Assets & Intangibles			—				237
- Unrealized gain on acquisition/disposal			181				—
Total deferred tax liabilities		$	181			$	1,649
Deferred tax assets, net of valuation allowance and deferred tax liabilities			—				—

For entities incorporated in U.S., federal net loss generated before 2018 of $122 can be carried forward for 20 years and will begin to expire in 2037. Federal net loss generated in 2018 and onward of $26,947 can be carried forward indefinitely. State net loss of $27,933 can be carried forward for 20 years and will begin to expire in 2037.

 

The Company is subject to income tax in the U.S. federal jurisdiction. The Company has not been audited by the U.S. Internal Revenue Service in connection with income taxes. The Company’s tax years beginning with the year ended December 31, 2016, through December 31, 2025, generally remain open to examination by the Internal Revenue Service until its net operating loss carry-forwards are utilized and the applicable statutes of limitation have expired. The Group had no unrecognized tax benefits as of December 31, 2024 and $14 as of December 31, 2025.

 

The Company evaluated the recoverable amounts of deferred tax assets to the extent that future taxable profits will be available against which the net operating loss and temporary difference can be utilized. As of December 31, 2025, the deferred tax assets were offset with a full valuation allowance as the Company does not expect to realize its deferred taxes in the near future.

 

The following represents a roll-forward of the valuation allowance for each of the years:

 

		As of December 31,
		2024				2025
Balance at beginning of the year		$	7,794			$	8,371
Allowance made during the year			577				(607	)
Reversals			—				—
NOL expire			—				—
Balance at end of the year		$	8,371			$	7,764

 

The following is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate:

 

		Year Ended December 31, 2025
		$ Amount
Tax provision at the U.S. federal statutory rate			288				21.0	%
State income taxes, net of federal tax benefits			54				3.9	%
Foreign tax effects
Cayman Islands			130				9.4	%
Nontaxable or nondeductible items			—				0.0	%
Prior year true up			159				11.7	%
Changes in valuation allowance			(607	)			(44.3	)%
Tax Credits
Research and development			(18	)			(1.3	)%
Other
Tax Provision			6				0.4	%

 

As previously disclosed for the years ended December 31, 2024, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate:

 

		Years ended December 31,
		2024				2025
Statutory federal income tax rate			(21.0	)%			21.0	%
States taxes, net of federal benefit			(4.0	)%			3.9	%
Foreign income taxed at different rates			28.4	%			9.4	%
Prior year true up			—	%			11.7	%
Changes in valuation allowance			(3.4	)%			(44.3	)%
Tax Credits			—	%			(1.3	)%
Effect of tax amendment			(158.1	)%			—	%
Tax Provision			(158.1	)%			0.4	%

 

Income/(loss) before income taxes is attributable to the following geographic locations for the years ended December 31, 2024 and 2025:

 

		Year ended December 31,
		2024				2025
United States		$	186			$	1,828
Foreign			(716	)			(463	)
Total (loss) income before income taxes		$	(530	)		$	1,365