CHEETAH NET SUPPLY CHAIN SERVICE INC. Income Taxes Disclosure
NOTE 12 — INCOME TAXES
The Company and its operating subsidiaries in the United States are subject to federal and various state income taxes. The Company elected to file income taxes as a corporation instead of an LLC for the tax years ended December 31, 2020 through December 31, 2025.
(i)(Loss) before Income tax expense (benefit)
For the Years Ended | ||||||
December 31, | ||||||
| 2025 | | 2024 | |||
(Loss) from continuing operations before income taxes | $ | (3,633,787) | $ | (3,448,016) | ||
(ii) | The components of the income tax provision were as follows: |
| For the Years Ended | |||||
December 31, | ||||||
2025 | 2024 | |||||
Current: |
| |||||
Federal | $ | — | $ | (128) | ||
State | 5,200 | 5,200 | ||||
Total current income tax provision | 5,200 | 5,072 | ||||
Deferred: |
|
| ||||
Federal | — | (203,120) | ||||
State | — | (17,774) | ||||
Total deferred income tax expenses (benefits) | — | (220,894) | ||||
Adjustments related to prior year income taxes | 10,716 | — | ||||
Total income tax expenses (benefits) | $ | 15,916 | $ | (215,822) | ||
The consolidated statement of operations reflects income tax expense of approximately $18,342 for the year ended December 31, 2025, which includes the current quarter provision of $5,200, and approximately $13,142 of tax payments related to prior periods and acquisition-related tax filings upon the filing of 2024 tax returns in April 2025. These additional amounts primarily consist of: (i) $2,155 of tax obligations owed by Cheetah for the 2024 tax year, (ii) $1,101 of pre-acquisition tax obligations of Edward, and (iii) $9,886 of pre-acquisition tax obligations of TWEW. These payments do not impact the Company’s estimated annual effective tax rate for 2025.
(iii) | Reconciliations of the statutory income tax rate to the effective income tax rate were as follows: |
| For the Years Ended |
| |||
December 31, | |||||
2025 | | 2024 |
| ||
Federal income tax at the statutory rate | 21.0 | % | 21.0 | % | |
State statutory tax rate |
| (0.1) | % | 6.3 | % |
Permanent items |
| (4.4) | % | (0.1) | % |
Change in valuation allowance | (12.3) | % | (19.9) | % | |
Other |
| (4.3) | % | (1.0) | % |
Effective tax rate | (0.1) | % | 6.3 | % | |
(iv) | Deferred tax assets, net were composed of the following: |
| December 31, | | December 31, | |||
2025 | 2024 | |||||
Deferred tax assets: |
| | ||||
Net operating loss carry forwards | $ | 1,552,937 | $ | 1,001,992 | ||
Lease liability | 329,930 | 398,757 | ||||
Others |
| 458,966 |
| 436,613 | ||
Total deferred tax assets | 2,341,833 | 1,837,362 | ||||
Deferred tax liabilities: | ||||||
Intangible assets | (221,790) | (249,183) | ||||
Fixed assets | — | — | ||||
Right of use assets | (326,154) | (429,050) | ||||
Total deferred tax liabilities | (547,944) | (678,233) | ||||
Less valuation allowance | (1,793,889) | (1,159,129) | ||||
Total deferred tax assets, net | $ | — | $ | — | ||
The Company assesses deferred tax assets to determine whether they are realizable. As of December 31, 2025, the Company recorded a full valuation allowance against deferred tax assets, as it has generated a three-year cumulative pretax book loss and is forecasting a loss for 2026. Based on this evidence, realization of deferred tax assets is not considered more-likely-than-not at this time.
The Company records uncertain tax positions in accordance with ASC 740, using a two-step process to determine whether tax positions will be sustained. The Company has concluded that there are no uncertain tax positions requiring recognition as of December 31, 2025 and 2024.
The Company was not previously subject to the interest expenses limitation under §163(j) of the U.S. Internal Revenue Code, due to the small business exemption. Its average annual gross receipts for the three tax years preceding 2022 do not exceed the relevant threshold amount ($27 million for 2022). The Company no longer met the small business exception in 2024, but it meets one of the other exceptions to the §163(j) limitation, “floor plan financing indebtedness” (indebtedness used to finance the acquisition of motor vehicles held for sale or lease or secured by such inventory) and will therefore continue to be exempt from the §163(j) interest expenses limitation in 2025.
The Company monitors tax law changes and has determined that no recent changes materially impact the financial statements.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 20, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Mar 18, 2024 | |
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.