BROADWIND, INC. Income Taxes Disclosure

15. INCOME TAXES

 

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

 

		For the Years Ended Year Ended December 31,
		2025				2024
Current provision
Federal		$	—			$	—
State			97				74
Total current provision			97				74
Deferred provision
Federal			(1,482	)			(1,194	)
State			(49	)			(84	)
Total deferred provision			(1,531	)			(1,278	)
Increase in deferred tax valuation allowance			1,521				1,278
Total provision for income taxes		$	87			$	74

 

On  August 16, 2022, Congress enacted the Inflation Reduction Act which includes AMP credits for manufacturers of eligible components, including wind and solar components produced and sold in the US from 2023 through 2032. The OBBBA, enacted on July 4, 2025, eliminates the credit for components produced and sold after 2027. These credits will have no impact on income tax expense. 

 

The changes in the deferred tax valuation allowances in 2025 and 2024 were primarily the result of increases to the deferred tax assets pertaining to federal and state NOLs. Management believes that significant uncertainty exists surrounding the recoverability of deferred tax assets. As a result, the Company recorded a valuation allowance against the remaining deferred tax assets.

 

As disclosed in Note 5, “Recent Accounting Pronouncements”, the Company has prospectively adopted the guidance in Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The following table is a reconciliation of the Company’s effective income tax rate to the statutory income tax rate for the year ended December 31, 2025 in accordance with the guidance in Accounting Standards Update No. 2023-09:

 

		For the Year Ended
		December 31,
		2025
		Tax				Percent
Statutory U.S. federal income tax rate		$	1,158				21.0	%
State and local income taxes, net of federal effect (a)			87				1.6
Changes in valuation allowance			1,482				26.9
Nontaxable or nondeductible items
AMP credits			(2,543	)			(46.2	)
Other			69				1.3
Other adjustments			(166	)			(3.0	)
Effective income tax rate		$	87				1.6	%

 

(a) For the year ended December 31, 2025, taxes were primarily incurred in Texas and North Carolina.

 

The following table is a reconciliation of the Company’s effective income tax rate to the statutory income tax rate for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of Accounting Standards Update No. 2023-09:

		For the Year Ended
		December 31,
		2024
Statutory U.S. federal income tax rate			21.0	%
State and local income taxes, net of federal income tax benefit			(3.7	)
Other permanent differences			5.8
Change in valuation allowance			104.3
Other			3.4
Other deferred adjustment			26.4
AMP credits			(151.2	)
Effective income tax rate			6.0	%

 

Cash paid for income taxes, net of refunds, for the year ended December 31, 2024 was $192. Cash paid for income taxes, net of refunds, for the year ended December 31, 2025 is as follows:

 

		For the Year Ended
		December 31,
		2025
		Tax
Federal			—
State:
Texas		$	71
North Carolina			92
Other states			1
Total		$	164

 

The tax effects of the temporary differences and NOLs that give rise to significant portions of deferred tax assets and liabilities are as follows:

 

		As of Year Ended December 31,
		2025				2024
Noncurrent deferred income tax assets:
Net operating loss carryforwards		$	76,926			$	76,361
Accrual and reserves			5,008				4,721
Leases			2,791				3,106
Other			6				6
Total noncurrent deferred tax assets			84,731				84,194
Valuation allowance			(79,315	)			(77,794	)
Noncurrent deferred tax assets, net of valuation allowance			5,416				6,400
Noncurrent deferred income tax liabilities:
Fixed assets			2,041				2,480
Intangible assets			171				325
Leases			3,169				3,570
Total noncurrent deferred tax liabilities			5,381				6,375
Net deferred income tax asset		$	35			$	25

 

 A reconciliation of the beginning and ending amounts of the valuation is as follows:

 

Valuation allowance as of December 31, 2024		$	(77,794	)
Gross increase for current year activity			(1,521	)
Valuation allowance as of Balance at December 31, 2025		$	(79,315	)

 

As of December 31, 2025, the Company had federal and unapportioned state NOL carryforwards of approximately $298,182 of which $227,519 will begin to expire in 2027. The majority of the NOL carryforwards will expire in various years from 2028 through 2037. NOLs generated after January 1, 2018 will not expire.

The Company accounts for the uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken, or expected to be taken, in a tax return that is required to be met before being recognized in the financial statements. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense. As of December 31, 2025, the Company had no unrecognized tax benefits that could impact the income tax expense.

 

The Company files income tax returns in the U.S. federal and state jurisdictions. As of December 31, 2025, with few exceptions, the Company is no longer subject to federal or state income tax examinations by taxing authorities for years before December 31, 2019; however, taxing authorities have the ability to adjust NOL carryforwards in open tax years that may have been carried forward from closed years.   The Company’s 2008 and 2009 federal tax returns were examined in 2011 and no material adjustments were identified related to any of the Company’s tax positions. Although these periods have been audited, they continue to remain open until all NOLs generated in those tax years have either been utilized or expire.

 

Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), generally imposes an annual limitation on the amount of NOL carryforwards and associated built-in losses that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership. The Company’s ability to utilize NOL carryforwards and built-in losses may be limited, under this section or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership. Upon completion of the Company’s analysis of IRC Section 382, the Company has determined that aggregate changes in stock ownership have resulted in an annual limitation of $14,284 on NOLs and built-in losses available for utilization based on the triggering event in 2010. To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future due to additional changes in stock ownership, the Company’s income could be subject to U.S. corporate income tax earlier than it would if the Company were able to use NOL carryforwards and built-in losses without such annual limitation, which could result in lower profits and the loss of the majority of the benefits from these attributes.

 

In February 2013, the Company adopted a Stockholder Rights Plan, which was amended in February 2016 and approved by our stockholders (as amended, the “Rights Plan”), designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under Section 382 of the IRC. On February 7, 2019, the Board of Directors (the “Board”) approved an amendment extending the Rights Plan for an additional three years, which was subsequently approved by the Company’s stockholders at the 2019 Annual Meeting of Stockholders held on April 23, 2019 (the “2019 Annual Meeting of Stockholders”). On February 3, 2022, the Board approved an amendment which included an extension of the Rights Plan for an additional three years, which was subsequently approved by the Company's stockholders at the 2022 Annual Meeting of Stockholders. On February 3, 2025, the Board approved an amendment which included an extension of the Rights Plan for an additional three years. The amendment was approved by the Company’s stockholders at the Company’s 2025 Annual Meeting of Stockholders.

 

The Rights Plan is intended to act as a deterrent to any person or group, together with its affiliates and associates, being or becoming the beneficial owner of 4.9% or more of the Company’s common stock and thereby triggering a further limitation of the Company’s available NOL carryforwards. In connection with the adoption of the Rights Plan, the Board declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to the Company’s stockholders of record as of the close of business on February 22, 2013. Since the record date, the Company has issued one Right with each newly issued share of its common stock. Until the distribution date (unless earlier redeemed or exchanged or upon expiration of the Rights, as applicable), the Rights will be evidenced by certificates of the Company's common stock and will be transferred only with such certificates. Each Right entitles its holder to purchase from the Company one one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $7.70 per Right, subject to adjustment. As a result of the Rights Plan, any person or group that acquires beneficial ownership of 4.9% or more of the Company’s common stock without the approval of the Board would be subject to significant dilution in the ownership interest of that person or group. Stockholders who owned 4.9% or more of the outstanding shares of the Company’s common stock as of February 12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date.