Bogota Financial Corp. Income Taxes Disclosure

NOTE 10 – INCOME TAXES

 

Income tax (benefit) expense was as follows:

 

		2025				2024
Current expense
Federal		$(36,412		)		$	—
State			26,827				85,967
			(9,585	)			85,967
Deferred benefit
Federal			114,438				(372,918	)
State			(123,131	)			(84,618	)
			(8,693	)			(457,536	)
Total income benefit		$	(18,278	)		$	(371,569	)

 

Total income tax benefit expense differed from the amounts computed by applying the federal income tax rate of 21% to income before income taxes as a result of the following for the years ended December 31, 2025 and 2024:

 

		2025				% of Pretax income				2024				% of Pretax income
Expected income tax expense at federal tax rate		$	435,225				21	%		$(533,818		)			21	%
Increase (decrease) in taxes resulting from:
State income tax, net of federal income tax effect*			(45,308	)			-2	%			1,067				0	%
Bank Owned Life Insurance			(301,576	)			-15	%			(183,068	)			7	%
Tax exempt interest, net			(2,430	)			0	%			(6,423	)			0	%
Stock equity plans			42,331				0	%			55,627				-2	%
Change in valuation allowance			14,407				15	%			255,424				-10	%
Other, net			(160,927	)			-8	%			39,622				-7	%
		$	(18,278	)			-1	%		$	(371,569	)			-15	%

 

 

Year-end deferred tax assets and liabilities were due to the following:

 

		2025				2024
Deferred tax assets:
Allowance for credit losses		$	711,169			$	770,200
Deferred compensation			818,245				896,378
Nonaccrual interest			946,123				680,269
Stock equity plans			425,626				358,431
Federal and NJ NOL carryforward			368,415				748,903
Charitable foundation contribution			-				313,209
Cash flow hedges			56,314				-
Net unrealized gain on securities available for sale			745,687				1,566,078
Other			596,572				526,457
			4,668,151				5,859,925
Deferred tax liabilities:
Loan fees/costs			982,848				1,095,311
Purchase accounting			81,840				97,346
Cash flow hedges			-				183,092
Other			-				-
			1,064,688				1,375,749
Valuation allowance			(194,448	)			(502,868	)
Net deferred tax asset		$	3,409,015			$	3,981,308

 

For the period ending December 31, 2025, there was a valuation allowance of $193,000 against deferred assets related to an outstanding insurance claim and capital loss carryforward. Included in retained earnings at December 31, 2025 and 2024 was approximately $4,609,000 in bad debt reserves for which no deferred income tax liabilities have been recorded. The amount represents allocations of income to bad debt deductions for tax purposes only. Reduction of these reserves for purposes other than tax bad-debt losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate. There were no unrecognized tax benefits at December 31, 2025 or 2024. The Bank does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. There was no material interest or penalties recorded in the income statement or accrued during the years ended December 31, 2025 or 2024. The Bank is subject to U.S. federal income tax as well as income tax of the State of New Jersey. The Bank is no longer subject to federal and state examination by taxing authorities for years before 2022 and 2021, respectively.