AMERICAN SHARED HOSPITAL SERVICES Income Taxes Disclosure

NOTE 7 – INCOME TAXES

 

The components of income before income taxes for the years ended  December 31, 2025 and 2024 are as follows:

 

		YEARS ENDED December 31,
		2025				2024
Domestic		$	(4,807,000	)		$	1,086,000
Foreign			1,587,000				151,000
Income before income taxes		$	(3,220,000	)		$	1,237,000

 

For the year ended  December 31, 2025 and 2024, the Company recorded an income tax benefit of $493,000 and $295,000, respectively. 

 

The components of the provision for income taxes for the years ended  December 31, 2025 and 2024 consists of the following:

 

		YEARS ENDED December 31,
		2025				2024
Current:
Federal		$	(203,000	)		$	(83,000	)
State			13,000				(190,000	)
Foreign			506,000				337,000
Total current			316,000				64,000
Deferred:
Federal			(686,000	)			(380,000	)
State			(135,000	)			30,000
Foreign			12,000				(9,000	)
Total deferred			(809,000	)			(359,000	)
		$	(493,000	)		$	(295,000	)

 

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2025 and 2024 are as follows:

 

		December 31,
		2025				2024
Deferred tax liabilities:
Property and equipment		$	(734,000	)		$	(644,000	)
Prepaid expenses			(104,000	)			(444,000	)
Investment in partnerships			(575,000	)			(956,000	)
Other			(12,000	)			(14,000	)
Total deferred tax liabilities			(1,425,000	)			(2,058,000	)
Deferred tax assets:
Net operating loss carryforwards			1,085,000				651,000
Property and equipment			22,000				—
Accruals and allowances			59,000				168,000
Transaction costs			215,000				231,000
Other			135,000				169,000
Total deferred tax assets			1,516,000				1,219,000
Valuation allowance			(206,000	)			(85,000	)
Deferred tax assets net of valuation allowance			1,310,000				1,134,000
Net deferred tax liabilities		$	(115,000	)		$	(924,000	)

 

Upon adoption of ASU 2023-09, the reconciliation of the statutory federal rate to the Company’s effective income tax rate for the year ended December 31, 2025 was as follows:

		December 31, 2025
U.S. federal statutory tax rate		$	(676,000	)			21.0	%
State taxes, net of federal benefits (1)
Return to provision adjustments			(35,000	)			1.1	%
Others			(87,000	)			2.7	%
Nontaxable or nondeductible items
Partnership income			272,000				-8.4	%
Other permanent differences			(27,000	)			0.8	%
Cross-border tax laws			11,000				-0.3	%
Change in tax laws
Change in valuation allowance			60,000				-1.9	%
Other adjustments
Tax refunds			(203,000	)			6.3	%
Other adjustments			7,000				-0.2	%
Foreign tax effects
Mexico
Statutory tax rate difference between local country and United States			88,000				-2.7	%
Local vs. U.S. GAAP book income difference			70,000				-2.2	%
Change in valuation allowance			49,000				-1.5	%
Return to provision adjustments			69,000				-2.1	%
Others			(18,000	)			0.6	%
Peru
Local vs. U.S. GAAP book income differences			(159,000	)			4.9	%
Nontaxable or nondeductible items			132,000				-4.1	%
Others			(5,000	)			0.2	%
Ecuador
Other			7,000				-0.2	%
Worldwide changes in prior year unrecognized tax benefits			(48,000	)			1.5	%
Effective tax rate		$	(493,000	)			15.3	%

 

(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Florida and Rhode Island.

 

The reconciliation of the statutory federal rate to the Company’s effective income tax rate for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

 

		December 31, 2024
Computed expected federal income tax		$	390,000				31.5	%
State income taxes, net of federal benefit			(84,000	)			-6.8	%
Foreign rate differential			14,000				1.1	%
Pass-through income			(18,000	)			-1.5	%
Bargain purchase gain			(790,000	)			-63.9	%
Stock compensation			1,000				0.1	%
Non-deductible expenses			230,000				18.6	%
Return to provision true-up			3,000				0.2	%
Uncertain tax positions			(72,000	)			-5.8	%
Capital loss expired			645,000				52.1	%
Change in valuation allowance			(627,000	)			-50.7	%
Other deferred tax adjustments			13,000				1.1	%
		$	(295,000	)			-23.8	%

 

Due to uncertainty surrounding the realization of certain deferred tax assets and capital losses, the Company has placed a valuation allowance against a portion of its net domestic and foreign deferred tax assets. The net valuation allowance increased by $121,000 and decreased by $627,000 for the years ended December 31, 2025 and 2024, respectively.

 

The Company has federal net operating loss carryforwards of approximately $3,443,000 and $1,966,000 as of  December 31, 2025 and 2024, respectively. All federal net operating losses have an indefinite carryforward period. 

 

The Company has various state net operating loss carryforwards. The determination of the state net operating loss carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. If such net operating carryforwards are not utilized, they will begin to expire in 2029.

 

The tax return years 2020 through 2025 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. 

 

The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Additionally, these accounting standards specify that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. The Company has made no reclassifications between current taxes payable and long term taxes payable under this guidance.

 

As of December 31, 2025, the unrecognized tax benefit was $87,000 which, if recognized, will not affect the annual effective tax rate as these unrecognized tax benefits would increase deferred tax assets, which would be subject to a full valuation allowance. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

 

		YEARS ENDED December 31,
		2025				2024
Balance at beginning of year		$	161,000			$	287,000
Additions based on tax positions of prior years			—				13,000
Additions based on tax positions of current year			13,000				12,000
Reductions in tax positions of prior years			(18,000	)			(18,000	)
Lapse of statues of limitations			(50,000	)			(75,000	)
Removal of penalties			(19,000	)			(58,000	)
Balance at end of year		$	87,000			$	161,000

 

The Company’s policy for deducting interest and penalties is to treat interest as interest expense and penalties as income taxes. As of December 31, 2025, the Company had $21,000 accrued for the payment of penalties and zero interest related to unrecognized tax benefits. The Company does not expect any material changes to our uncertain tax positions within the next 12 months. 

 

Upon adoption of ASU 2023-09, as described in Note 2 - Accounting Policies, cash paid for income taxes, net of refunds, during the year ended December 31, 2025 was as follows:

		December 31,
		2025
Federal		$	—
State			60,000
Foreign			—
Peru			240,000
Mexico			379,000
Ecuador			60,000
Total cash paid for income taxes, net of refunds		$	739,000