Contango Silver & Gold Inc. Income Taxes Disclosure
13. Income Taxes
A summary of the reconciliation of the income tax benefit based on the statutory federal income tax rate of 21% to the income tax expense (benefit) reported in these financial statements for the years ended December 31, 2025 and 2024 is as follows:
|
|
Fiscal Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
% |
|
||
Income tax benefit at US federal statutory tax rate |
|
$ |
(7,514,515 |
) |
|
|
21.00 |
% |
State income taxes expense, net of federal income tax effect* |
|
|
160,347 |
|
|
|
-0.21 |
% |
Effect of cross-border tax laws |
|
|
173,618 |
|
|
|
-0.46 |
% |
Foreign tax effects |
|
|
|
|
|
|
||
Canada: |
|
|
|
|
|
|
||
Statutory tax rate difference |
|
|
294,821 |
|
|
|
-0.79 |
% |
Change in valuation allowance |
|
|
(805,516 |
) |
|
|
2.15 |
% |
Nontaxable or nondeductible items |
|
|
|
|
|
|
||
Convertible Debt Interest |
|
|
397,693 |
|
|
|
-1.06 |
% |
Other |
|
|
644,360 |
|
|
|
-1.72 |
% |
Changes in valuation allowance |
|
|
6,780,199 |
|
|
|
-19.26 |
% |
Other |
|
|
172,233 |
|
|
|
-0.46 |
% |
Income tax expense |
|
$ |
303,240 |
|
|
|
-0.81 |
% |
* In 2025, state and local income taxes in Alaska comprise the majority of the state and local income taxes, net of federal tax.
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:
|
|
Fiscal Year Ended December 31, |
|
|
|
|
2024 |
|
|
Income tax benefit at statutory tax rate |
|
$ |
(8,016,170 |
) |
State tax benefit |
|
|
(20,943 |
) |
Return to provision |
|
|
(1 |
) |
Effect of rates different than statutory |
|
|
(74,936 |
) |
Permanent differences |
|
|
347,651 |
|
Convertible debt interest |
|
|
397,630 |
|
Other valuation allowance |
|
|
7,283,368 |
|
Income tax benefit |
|
$ |
(83,401 |
) |
The effective tax rates for the year ended December 31, 2025 was -0.81% (December 31, 2024 - 0.22%). The effective tax rates for the years ended December 31, 2025 and 2024 were less than the statutory rate as the Company is in a tax loss position and does not expect to realize those losses in the near future.
The Company has paid the following in income taxes, net of refunds received:
|
|
Fiscal Year Ended December 31, |
|
|
|
|
2025 |
|
|
Jurisdiction |
|
|
|
|
US - Federal |
|
$ |
(550,000 |
) |
US - State |
|
|
— |
|
Foreign - Canada |
|
|
— |
|
Total income tax refunds |
|
$ |
(550,000 |
) |
The following table summarizes the components of loss before taxes:
|
|
Fiscal Year Ended December 31, |
|
|
Fiscal Year Ended December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Pre-tax Book (Loss) Income: |
|
|
|
|
|
|
||
US |
|
$ |
(40,697,089 |
) |
|
$ |
(36,769,141 |
) |
Foreign |
|
|
4,913,684 |
|
|
|
(1,344,551 |
) |
Total Worldwide Pre-tax Book Loss |
|
$ |
(35,783,405 |
) |
|
$ |
(38,113,692 |
) |
The following table summarizes the components of the income tax provision:
|
|
Fiscal Year Ended December 31, |
|
|
Fiscal Year Ended December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Current: |
|
|
|
|
|
|
||
Federal |
|
$ |
(3,698 |
) |
|
$ |
3,690 |
|
State |
|
|
(3,420 |
) |
|
|
3,420 |
|
Total current income tax (benefit) / expense |
|
$ |
(7,118 |
) |
|
$ |
7,110 |
|
|
|
|
|
|
|
|
||
Deferred: |
|
|
|
|
|
|
||
Federal |
|
$ |
229,280 |
|
|
$ |
(66,866 |
) |
State |
|
|
81,078 |
|
|
|
(23,645 |
) |
Total deferred income tax (benefit) / expense |
|
$ |
310,358 |
|
|
$ |
(90,511 |
) |
|
|
|
|
|
|
|
||
Total income tax (benefit) / expense |
|
$ |
303,240 |
|
|
$ |
(83,401 |
) |
The net deferred tax liability is comprised of the following:
|
|
As of December 31, |
|
|
As of December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Deferred Tax Assets: |
|
|
|
|
|
|
||
Net Operating Losses |
|
$ |
28,660,724 |
|
|
$ |
17,003,077 |
|
Derivatives |
|
|
25,604,789 |
|
|
|
16,081,852 |
|
Capitalized Exploration |
|
|
11,153,058 |
|
|
|
13,424,850 |
|
Investment In Peak Gold JV |
|
|
— |
|
|
|
3,704,040 |
|
Other Assets |
|
|
1,228,312 |
|
|
|
2,022,226 |
|
Total Deferred Tax Assets |
|
|
66,646,883 |
|
|
|
52,236,045 |
|
Valuation allowance |
|
|
(57,180,175 |
) |
|
|
(52,236,045 |
) |
|
|
|
9,466,708 |
|
|
|
— |
|
|
|
|
|
|
|
|
||
Deferred Tax Liabilities |
|
|
|
|
|
|
||
Investment In Peak Gold JV |
|
|
(9,789,261 |
) |
|
|
— |
|
Other Liabilities |
|
|
(294,800 |
) |
|
|
(306,995 |
) |
Total Deferred Tax Liabilities |
|
|
(10,084,061 |
) |
|
|
(306,995 |
) |
|
|
|
|
|
|
|
||
Net Deferred Tax Liability |
|
$ |
(617,353 |
) |
|
$ |
(306,995 |
) |
At each reporting period, the Company weighs all positive and negative evidence to determine whether the deferred tax assets are more likely than not to be realized. As part of the HighGold acquisition, the Company measured and recorded a net deferred tax liability through acquisition accounting with an offsetting entry to the exploration and evaluation assets. The Company used the simultaneous equation method for measuring the net deferred tax liability of $306,995 at December 31, 2024. As a result of this analysis at December 31, 2025 and 2024, the Company provided a valuation allowance against the deferred tax assets as the Company has a history of book and tax losses.
At December 31, 2025, the Company had U.S. federal tax loss carry-forwards of approximately $100.0 million, state of Alaska tax loss carry-forwards of approximately $68.7 million, and Canada tax loss carry-forwards of approximately $12.7 million. Use of future NOLs may be limited if the Company undergoes an ownership change. Generally, an ownership change occurs if certain persons or groups, increase their aggregate ownership in us by more than 50 percentage points looking back over a rolling three-year period. If an ownership change occurs, our ability to use our NOLs to reduce income taxes is limited to an annual amount, or the Section 382 limitation, equal to the fair market value of our common stock immediately prior to the ownership change multiplied by the long term tax-exempt interest rate, which is published monthly by the Internal Revenue Service. In the event of an ownership change, NOLs can be used to offset taxable income for years within a carry-forward period subject to the Section 382 limitation. Based upon the Company’s determination of its annual limitation related to this ownership change, management believes that Section 382 should not otherwise limit the Company’s ability to utilize its federal or state NOLs during their applicable carryforward periods.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted which introduced a series of federal income tax changes effective in 2025. Among other provisions, OBBBA permanently reinstates 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. We do not expect OBBBA to have a material impact on our financial statements. We will continue to evaluate the available options under OBBBA and will finalize our elections in connection with the filing of our 2025 federal income tax return.
The Company did not have any unrecognized tax benefits as of December 31, 2025 and 2024. The amount of unrecognized tax benefits may change in the next twelve months; however, the Company does not expect the change to have a significant impact on our results of operations or our financial position. The Company’s tax returns are subject to periodic audits by the various jurisdictions in which the Company operates. The Company's state of Alaska and federal tax return are generally open for examination for the years. The Company's Canadian tax returns are generally open for examinations for the years . These audits can result in adjustments of taxes due or adjustments of the NOL carryforwards that are available to offset future taxable income. The Company’s policy is to recognize estimated interest and penalties related to potential underpayment on any unrecognized tax benefits as a component of income tax expense in the Consolidated Statement of Operations. The Company does not anticipate that the total unrecognized benefits will significantly change due to the settlement of audits and the expiration of the statute of limitations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Sep 13, 2023 | |
| 2022 | Aug 31, 2022 | |
| 2021 | Aug 31, 2021 | |
| 2020 | Sep 25, 2020 | |
| 2019 | Aug 28, 2019 | |
| 2016 | Aug 25, 2016 | |
| 2015 | Oct 13, 2015 | |
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.