ClearSign Technologies Corp Income Taxes Disclosure

Note 8 - Income Taxes

Effective January 1, 2025, the Company adopted ASU 2023-09. The implementation of this standard establishes a requirement to disclose differences between the statutory tax rate and the effective tax rate by jurisdiction and disaggregated information about income taxes paid, income (loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations. Management has determined that this standard is preferable in that the reporting will provide users with more useful information and greater transparency about how the Company's operations and related tax risks affect its tax rate and cash flows. The amendments related to the ASU 2023-09 were applied retrospectively to the beginning of the earliest year presented.

​

For the years ended December 31, 2025 and 2024, the Company's loss from continuing operations before provision for income taxes were as follows:

​

​

There was no provision for income taxes recorded for the years ended December 31, 2025 and 2024.

​

Income tax benefit attributable to losses from continuing operations differed from the amounts computed by applying the statutory U.S federal income tax rate of 21% to pretax loss from continuing operations as a result of the following:

​

​

The significant components of the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:

​

​

The Company did not pay any federal, state, or foreign income taxes during the year ended December 31, 2025 and 2024. Accordingly, no disaggregation of cash income taxes paid is presented.

​

For the year ended December 31, 2025, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was not more likely than not that the net deferred tax assets were fully realizable as of December 31, 2025. Accordingly, the Company established a full valuation allowance against its deferred tax assets.

​

As of December 31, 2025, the Company had $94.4 million of federal and $61.4 million of state net operating loss carryforwards available to reduce future taxable income, of which federal net operating loss carryforwards of $47.6 million have an indefinite life. The federal net operating losses begin to expire in 2028, while state net operating losses begin to expire in 2035.

​

The Company experienced an “ownership change” within the meaning of Section 382 of the Internal Revenue Code in April 2012, subjecting net operating loss carryforwards (incurred prior to the ownership change) to an annual limitation, which may restrict the ability to use these losses to offset taxable income in periods following the ownership change. The Company determined the amount of the annual limitation to be $686 thousand annually. The net operating loss carryforwards generated before 2018 may be used to reduce taxable income through the years 2028 to 2037. Federal net operating loss carryforwards generated for year 2018 and thereafter do not expire.

​

The Company files income tax returns in the U.S. federal, state and foreign jurisdictions. All tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.

​

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, there was no accrued interest or penalties related to uncertain tax positions.