Comstock Holding Companies, Inc.CHCI
Comstock Holding Companies, Inc. Income Taxes Disclosure
Income Tax
The following table summarizes the components of the provision for (benefit from) income tax (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current: | |||||||||||
| Federal | $ | — | $ | — | |||||||
| State | — | — | |||||||||
| Total current taxes | — | — | |||||||||
| Deferred: | |||||||||||
| Federal | 2,711 | 2,313 | |||||||||
| State | 612 | 358 | |||||||||
| Total deferred taxes | 3,323 | 2,671 | |||||||||
| Other: | |||||||||||
| Valuation allowance | (7,497) | (6,506) | |||||||||
| Provision for (benefit from) income taxes | $ | (4,174) | $ | (3,835) | |||||||
The following table presents a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
| Statutory rate | $ | 2,704 | 21.00 | % | $ | 2,252 | 21.00 | % | ||||||||||||||||||
State income taxes—net of federal benefit (1) | (770) | (5.98) | % | (608) | (5.67) | % | ||||||||||||||||||||
| Change in valuation allowance | (6,117) | (47.50) | % | (5,404) | (50.39) | % | ||||||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||
| Sec. 162(m) compensation disallowance | 167 | 1.30 | % | 96 | 0.90 | % | ||||||||||||||||||||
| Stock compensation | (252) | (1.96) | % | (131) | (1.23) | % | ||||||||||||||||||||
| Other | 94 | 0.73 | % | (40) | (0.38) | % | ||||||||||||||||||||
| Effective tax rate | $ | (4,174) | (32.41) | % | $ | (3,835) | (35.77) | % | ||||||||||||||||||
(1) | State taxes in Virginia made up the majority (greater than 50%) of the tax effect in this category. | |||||||||||||||||||||||||
The Company's effective tax rates for the years ended December 31, 2025 and 2024 differ from the of 21%, primarily due to state income taxes and the impact of valuation allowance releases related to projected increases in future period income forecasts.
The following table summarizes changes in the Company's deferred tax valuation allowance balance (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Valuation allowance - Beginning balance | $ | (17,146) | $ | (23,666) | |||||||
| Valuation allowance release | 7,497 | 6,506 | |||||||||
| Adjustment from impact of blended tax rate | — | 14 | |||||||||
| Valuation allowance - Ending balance | $ | (9,649) | $ | (17,146) | |||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded valuation allowances for certain tax attributes and deferred tax assets due to the existence of sufficient uncertainty regarding the future realization of those deferred tax assets through future taxable income. Based on its recent financial performance and current forecasts of future operating results, the Company conducts a quarterly analysis to determine if it is more likely than not that a portion of the deferred tax assets related to its net operating loss carryforwards will be utilized in future periods. The Company's effective tax rate in any given period is directly impacted by the timing and magnitude of any partial valuation allowance releases.
The following table summarizes the components of the Company's deferred tax assets and liabilities (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and tax credit carryforwards | $ | 24,839 | $ | 28,589 | |||||||
| Stock-based compensation | 684 | 538 | |||||||||
| Investments in affiliates | 990 | 1,420 | |||||||||
| Right of use lease liability | 1,377 | 1,615 | |||||||||
| Bonus accrual | 1,987 | 1,277 | |||||||||
| Other | 2 | — | |||||||||
| Valuation allowance | (9,649) | (17,146) | |||||||||
| Total deferred tax assets | $ | 20,230 | $ | 16,293 | |||||||
| Deferred tax liabilities: | |||||||||||
| Right of use lease asset | $ | (1,288) | $ | (1,523) | |||||||
| Depreciation and amortization | (48) | (50) | |||||||||
| Total deferred tax liabilities | $ | (1,336) | $ | (1,573) | |||||||
| Net deferred income tax assets (liabilities) | $ | 18,894 | $ | 14,720 | |||||||
As of December 31, 2025, the Company had $96.5 million of net operating loss (“NOL") carryforwards. These NOLs, if unused, will begin expiring in 2028. Under Code Section 382 (“Section 382”) rules, if a change of ownership is triggered, the Company’s NOL assets and possibly certain other deferred tax assets may be impaired. Given Section 382’s broad definition, an ownership change could be the unintended consequence of otherwise normal market trading in the Company’s stock that is outside of the Company’s control. In an effort to preserve the availability of these NOLs, the Company has adopted a Section 382 rights agreement that is scheduled to expire on March 28, 2035. The Section 382 rights agreement helps to reduce the likelihood of an unintended “ownership change”, thus preserving the value of these future tax benefits. We estimate that as of December 31, 2025, the three-year cumulative shift in ownership of the Company’s stock had not triggered a limitation in the use of our NOL asset.
As of December 31, 2025, there were no uncertain tax positions that, if recognized, would affect the Company's effective tax rate. We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. All of our income tax returns remain subject to examination by federal and state tax authorities due to the availability of our NOL carryforwards.
In July 2025, the U.S. government enacted budget reconciliation legislation known as the One Big Beautiful Bill Act of 2025, which included a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both domestic and international), expanding certain Inflation Reduction Act incentives while accelerating the phase-out of others. The provisions of the legislation have multiple effective dates, with certain provisions effective starting in 2025 and others being implemented up through 2027. The impact to the Company’s income tax expense and effective tax rate for the year ended December 31, 2025 associated with this legislation is immaterial.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 17, 2026 | Showing above |
| 2024 | Mar 21, 2025 | |
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.