Ascent Solar Technologies, Inc. Income Taxes Disclosure
NOTE 18. INCOME TAXES
At December 31, 2024, the Company had $233.6 million of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income through the year 2037. At December 31, 2024, the Company had $91.5 million of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income indefinitely. Under the Internal Revenue Code, the future utilization of net operating losses may be limited in certain circumstances where there is a significant ownership change. The Company prepared an analysis for the year ended December 31, 2012 and determined that a significant change in ownership had occurred as a result of the cumulative effect of the sales of common stock through its offerings. Such change resulted in a limitation of the Company’s utilizable net operating loss carryforwards and ultimately a write-off of the associated limited NOLs in the amount of $87 million. Available net operating loss carryforwards may be further limited in the event of another significant ownership change.
Deferred income taxes reflect an estimate of the cumulative temporary differences recognized for financial reporting purposes from that recognized for income tax reporting purposes. At December 31, 2024 and 2023, the components of these temporary differences and the deferred tax asset were as follows:
|
|
As of December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Deferred Tax Asset |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
69,000 |
|
|
$ |
214,000 |
|
Inventory allowance |
|
|
17,000 |
|
|
|
26,000 |
|
Operating lease liability |
|
|
499,000 |
|
|
|
627,000 |
|
Tax effect of NOL carryforward |
|
|
79,943,000 |
|
|
|
78,427,000 |
|
Share-based compensation |
|
|
406,000 |
|
|
|
1,909,000 |
|
Section 174 costs |
|
|
653,000 |
|
|
|
547,000 |
|
Warranty reserve |
|
|
5,000 |
|
|
|
5,000 |
|
Gross Deferred Tax Asset |
|
|
81,592,000 |
|
|
|
81,755,000 |
|
Valuation allowance |
|
|
(81,122,000 |
) |
|
|
(81,142,000 |
) |
Net Deferred Tax Asset |
|
$ |
470,000 |
|
|
$ |
613,000 |
|
Operating lease right-of-use asset, net |
|
|
(459,000 |
) |
|
|
(585,000 |
) |
Depreciation |
|
|
(4,000 |
) |
|
|
(15,000 |
) |
Amortization |
|
|
(7,000 |
) |
|
|
(13,000 |
) |
Net Deferred Tax Liability |
|
$ |
(470,000 |
) |
|
$ |
(613,000 |
) |
Total |
|
|
— |
|
|
|
— |
|
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical losses and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is not more-likely-than-not that the Company will realize the benefits of these deductible differences at December 31, 2024. The Company’s deferred tax valuation allowance was $81.1 million and $81.1 million for the year ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Company has not recorded a liability for uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2024.
The Company’s effective tax rate for the years ended December 31, 2024 and 2023 differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):
|
|
2024 |
|
|
|
2023 |
|
|
||
Federal statutory rate |
|
|
21.0 |
|
% |
|
|
21.0 |
|
% |
State statutory rate |
|
|
3.1 |
|
% |
|
|
2.7 |
|
% |
Permanent tax differences |
|
|
(2.2 |
) |
% |
|
|
(5.9 |
) |
% |
Deferred true-ups |
|
|
(18.4 |
) |
% |
|
|
(0.9 |
) |
% |
Deferred rate change |
|
|
(3.7 |
) |
% |
|
|
— |
|
% |
Change in valuation allowance |
|
|
0.2 |
|
% |
|
|
(16.9 |
) |
% |
Total |
|
|
0.0 |
|
% |
|
|
0.0 |
|
% |
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.