BTCS Inc. Income Taxes Disclosure

Note 14 - Income Taxes

 

The Company had no income tax expense due to operating loss incurred for the years ended December 31, 2025 and 2024.

 

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2025 and 2024 are comprised of the following:

 Schedule of Deferred Tax Assets and Liabilities

		2024				2023
		As of December 31,
		2025				2024
Deferred tax assets:
Federal net-operating loss carryforward		$	6,380,672			$	4,319,838
State net-operating loss carryforward			1,360,806				845,420
Other (non-qualified stock options)		$	-			$	-
R&D Capitalization Sec 174			122,516				166,015
Unrealized losses on digital assets			970,947				-
Total deferred tax assets			8,834,941				5,331,273
Deferred tax liabilities:
Unrealized (losses)/gains on digital assets			-				2,337,619
Total deferred tax liabilities							2,337,619
Valuation allowance			(8,834,941	)			(2,993,654	)
Deferred tax assets, net		$	-			$	-

 

At December 31, 2025, the Company had federal net operating loss (“NOL”) carry forwards of approximately $30,384,000 and state NOL carryforwards of approximately $22,619,011. Federal NOLs generated prior to 2018 begin to expire in 2034, while federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely under current U.S. tax law. State NOLs are subject to varying carryforward periods and limitations depending on the jurisdiction.

 

Accordingly, the Company’s federal NOL carryforwards by year of generation are as follows: NOLs generated in the tax year December 31, 2014 of $1,290,156 will expire after December 31, 2034. NOLs generated in the tax year December 31, 2015 of $1,545,343 will expire after December 31, 2035. NOLs generated in the tax year December 31, 2016 of $794,762 will expire after December 31, 2036. NOLs generated in the tax year December 31, 2017 of $1,084,564 will expire after December 31, 2037. NOLs generated in the tax years December 31, 2018 and of $25,669,327 may be carried forward indefinitely under current U.S. federal income tax law.

 

Prior to the February 5, 2014 merger, the Company had generated net operating losses, which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue Code Section 382. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential Change of Ownerships might be completely worthless.

 

Therefore, Management of the Company has recorded a Full Valuation Reserve, since it is more likely than not that no benefit will be realized for the Deferred Tax Assets.

 

As of December 31, 2024, the Company had a deferred tax asset (“DTA”) related to unrealized losses on its digital asset holdings amounting to approximately $4,624,000. Under U.S. GAAP (ASC 740), a DTA represents amounts available to reduce future taxable income and provides a source of income to support the realization of some portion of the deferred tax liability. Although these gains remain unrealized and do not currently impact taxable income or NOLs, the corresponding DTA allows for a partial increase in the valuation allowance. Given this, the Company has increased the valuation allowance by the amount of the recognized DTA. However, since the Company continues to operate at a loss and there is no clear evidence of sustained profitability, management has determined that a full release of the valuation allowance is not justified at this time.

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

In assessing the realization 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 depends on the generation of future taxable income during the period in which those temporary differences become deductible. Management evaluates the scheduled reversal of deferred tax liabilities, projected future taxable income, and available tax planning strategies in making this assessment.

 

As a result of the DTA arising from unrealized losses on digital asset holdings, the valuation allowance was increased by approximately $971,000 as of December 31, 2025. However, due to the Company’s continued history of operating losses and lack of clear evidence of sustained profitability, a full release of the valuation allowance remains unjustified at this time.

 

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

 Schedule of Income Tax Rate 

		2025				2024
		2025				2024
Statutory Federal Income Tax Rate			(21.00	)%			(21.00	)%
State Taxes, Net of Federal Tax Benefit			(6.02	)%			(6.46	)%
Other			42.72	%			27.46	%
Permanent Items			-				-
Stock Compensation - RSU			2.05	%			-	%
Stock Compensation - Option			(1.67	)%			-	%
Change in Valuation Allowance			(16.08	)%			-	%
Income Taxes Provision (Benefit)			0.00	%			0.00	%

 

The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2025 and 2024.

 

Income Taxes Paid

 

The Company’s income taxes payable, net of refunds, for the year ended December 31, 2025, were $10,599. These payments primarily relate to state income taxes.

 

In accordance with ASU 2023-09, the Company disaggregates income taxes paid by jurisdiction. For the period presented, payments made to the State of New York and the State of New Jersey each represented more than 5% of total income taxes paid. Despite the Company’s overall net loss position and the maintenance of a full valuation allowance against its deferred tax assets, these cash tax obligations were incurred due to capital base tax and minimum franchise tax requirements.