Consolidated Water Co. Ltd. Income Taxes Disclosure
11. Income taxes
The components of income before income taxes for the years ended December 31, 2025, 2024, and 2023 are as follows:
Year Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Foreign (not subject to income taxes) | $ | 12,274,013 | $ | 10,699,269 | $ | 10,002,233 | |||
Mexico |
| (131,596) |
| 10,922,374 |
| (742,367) | |||
United States |
| 8,952,083 |
| 9,412,015 |
| 27,649,330 | |||
| 21,094,500 |
| 31,033,658 |
| 36,909,196 | ||||
Discontinued operations |
| 290,635 |
| (10,355,184) |
| 1,086,744 | |||
$ | 21,385,135 | $ | 20,678,474 | $ | 37,995,940 | ||||
The Company’s provision for (benefit from) income taxes for the years ended December 31, 2025, 2024, and 2023, which related to U.S. operations, consisted of the following:
Year Ended December 31, | |||||||||
| 2025 | | 2024 | | 2023 | ||||
Current: | |||||||||
Federal | $ | 1,160,917 | $ | 2,282,566 | $ | 5,611,360 | |||
State | 507,180 | 255,835 | 1,663,653 | ||||||
Foreign | — | — | — | ||||||
Total current income tax provision (benefit) | 1,668,097 | 2,538,401 | 7,275,013 | ||||||
Deferred: |
|
|
| ||||||
Federal | 457,068 | (267,100) | (276,070) | ||||||
State | 39,483 | (52,787) | (248,929) | ||||||
Foreign | — | — | — | ||||||
Total deferred income tax provision (benefit) | 496,551 | (319,887) | (524,999) | ||||||
Total provision for (benefit from) income taxes | $ | 2,164,648 | $ | 2,218,514 | $ | 6,750,014 | |||
A reconciliation of the U.S. statutory federal tax rate to the effective rate for the year ended December 31, 2025:
Year Ended December 31, | ||||||
| 2025 | | ||||
Amount | Percent | |||||
U.S. statutory federal tax rate | $ | 4,490,879 | 21.00 | % | ||
| 440,154 | 2.06 | % | |||
Foreign tax effects - tax rate differential |
| |||||
Cayman Islands | (1,265,705) | (5.92) | % | |||
The Bahamas | (1,363,912) | (6.38) | % | |||
Nontaxable or nondeductible items | (135,296) | (0.63) | % | |||
Other adjustments | (1,472) | (0.01) | % | |||
Effective tax rate |
| $ | 2,164,648 | 10.12 | % | |
| (a) | State taxes in California made up the majority (greater than 50 percent) of the tax effect in the State and local income taxes category. |
Below is a tabular rate reconciliation previously disclosed for the years ended December 31, 2024 and 2023:
Year Ended December 31, |
| ||||||||||
| 2024 | | 2023 |
| |||||||
Amount | Percent | Amount | Percent | ||||||||
U.S. statutory federal rate | $ | 4,342,478 | 21.00 | % | $ | 7,979,149 | 21.00 | % | |||
State taxes, net of federal effect |
| 149,323 | 0.72 | % | 1,093,433 | 2.88 | % | ||||
Foreign rate differential |
| (2,365,946) | (11.45) | % | (2,172,793) | (5.71) | % | ||||
Permanent items |
| 94,551 | 0.46 | % | (120,739) | (0.32) | % | ||||
Change in valuation allowance |
| (1,892) | — | % | (29,036) | (0.08) | % | ||||
Effective tax rate |
| $ | 2,218,514 | 10.73 | % | $ | 6,750,014 | 17.77 | % | ||
The tax effects of significant items comprising the Company’s net long-term deferred tax liability as of December 31, 2025 and 2024 were as follows:
December 31, | ||||||
| 2025 | | 2024 | |||
Continuing Operations | ||||||
Deferred tax assets: |
| |
| | ||
Net operating loss carryforwards | $ | 212,772 | $ | 80,285 | ||
Accruals and reserves | 220,343 | 209,549 | ||||
Operating lease liabilities | 439,254 | 425,797 | ||||
Capitalized research expenditures | — | 316,937 | ||||
Others | 156,196 | 88,750 | ||||
Valuation allowances |
| — |
| — | ||
| 1,028,565 |
| 1,121,318 | |||
Deferred tax liabilities: |
| |
| | ||
Property and equipment |
| 764,116 |
| 239,830 | ||
Intangible assets |
| 525,359 |
| 672,973 | ||
Operating lease right-of-use assets |
| 433,058 |
| 419,408 | ||
Others | 13,476 | — | ||||
| 1,736,009 |
| 1,332,211 | |||
| ||||||
Net deferred tax liabilities | $ | (707,444) | $ | (210,893) | ||
As of December 31, 2025, the Company’s continuing operations have a federal net loss carryforward of approximately $914,000 and a state net loss carryforward of approximately $552,000. The net operating losses (“NOLs”) generated in taxable years beginning before January 1, 2018, may be carried forward up to taxable years. The unused federal NOLs
will expire on various dates starting from 2030. For NOLs generated in taxable years beginning after December 31, 2017, they are carried forward indefinitely until used and never expire.
The Company made tax payments, net of refunds received during the year ended December 31, 2025, as follows:
December 31, | ||
2025 | ||
Jurisdiction | ||
United States | $ | 1,989,000 |
Florida |
| 203,000 |
Other States |
| 175,076 |
Net Payment | $ | 2,367,076 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 27, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 29, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 16, 2017 | |
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.