ENERGY FOCUS, INC/DEEFOI
ENERGY FOCUS, INC/DE Income Taxes Disclosure
INCOME TAXES
We file income tax returns in the U.S. federal jurisdiction, as well as in various state and local jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2021. Our practice is to recognize interest and penalties related to income tax matters in income tax expense when and if they become applicable. At December 31, 2025 and 2024, respectively, there were no accrued interest and penalties related to uncertain tax positions.
The following table shows the components of the provision for income taxes (in thousands):
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current: | |||||||||||
| U.S. federal | $ | — | $ | — | |||||||
| State | — | — | |||||||||
| Foreign | — | — | |||||||||
| Total current | $ | — | $ | — | |||||||
| Deferred: | |||||||||||
| U.S. Federal | — | — | |||||||||
| State | — | — | |||||||||
| Foreign | — | — | |||||||||
| Total deferred | $ | — | $ | — | |||||||
| Provision for income taxes | $ | — | $ | — | |||||||
Certain amounts in the 2024 consolidated statement of operations have been revised to correct an immaterial classification error. Approximately $2 thousand previously reported within provision for income taxes has been reclassified to selling, general, and administrative expenses. The correction had no impact on previously reported net loss, loss per share, or any balance sheet amounts for the year ended December 31, 2024.
The following table presents cash income taxes paid, net of refunds (in thousands):
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. federal | $ | — | $ | — | |||||||
| State | 3 | 5 | |||||||||
| Foreign | — | — | |||||||||
| Total cash income taxes paid, net of refunds | $ | 3 | $ | 5 | |||||||
The following table shows the pre-tax loss (in thousands):
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Pre-tax Loss: | |||||||||||
| Domestic | $ | (1,027) | $ | (1,582) | |||||||
| Foreign | — | — | |||||||||
| Total pre-tax loss | $ | (1,027) | $ | (1,582) | |||||||
The principal items accounting for the difference between income taxes computed at the U.S. statutory rate and the (benefit from) provision for income taxes reflected in our Consolidated Statements of Operations in both dollar (in thousands) and percentage are as follows:
| For the year ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| U.S. statutory rate | $ | (230) | 21.0 | % | $ | (710) | 21.0 | % | |||||||||||||||
| State taxes (net of federal tax benefit) | (36) | 3.3 | (152) | 4.5 | |||||||||||||||||||
| Valuation allowance | (718) | 65.5 | (622) | 18.4 | |||||||||||||||||||
| Federal NOLs write off | 287 | (26.2) | 399 | (11.8) | |||||||||||||||||||
| Federal temporary | 19 | (1.7) | 409 | (12.1) | |||||||||||||||||||
| State NOLs write off | 663 | (60.5) | 656 | (19.4) | |||||||||||||||||||
| State temporary | 15 | (1.4) | 20 | (0.6) | |||||||||||||||||||
| $ | — | 0.0 | % | $ | — | 0.0 | % | ||||||||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are as follows (in thousands):
| At December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Accrued expenses and other reserves | $ | 694 | $ | 684 | |||||||
| Right-of-use asset | (45) | (82) | |||||||||
| Lease liabilities | 47 | 86 | |||||||||
| Tax credits, deferred R&D, and other | 536 | 579 | |||||||||
| Net operating loss | 20,056 | 20,739 | |||||||||
| Valuation allowance | (21,288) | (22,006) | |||||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
In 2025 and 2024, our effective tax rate was lower than the statutory rate due to a full valuation allowance as a result of the $1.1 million and $3.4 million additional federal net operating loss we recognized for the year.
At December 31, 2025, we had federal and state net operating loss carry-forwards (“NOLs”) of approximately $141.2 million for federal income tax purposes ($28.3 million for state and local income tax purposes). However, due to changes in our capital structure, approximately $86.8 million of the $141.2 million is available after the application of IRC Section 382 limitations. As a result of the Tax Cuts and Job Act of 2017 (the “Tax Act”), NOLs generated in tax years beginning after December 31, 2017 can only offset 80% of taxable income. These NOLs can no longer be carried back, but they can be carried forward indefinitely. The $1.1 million and $3.4 million in federal net operating losses generated in 2025 and 2024 will be subject to the new limitations under the Tax Act. If not utilized, the NOLs generated prior to December 31, 2017 of $7.3 million will begin to expire in 2026 for federal purposes and have begun to expire for state and local purposes.
Since we believe it is more likely than not that the benefit from NOLs will not be realized, we have provided a full valuation allowance against our deferred tax assets at December 31, 2025 and 2024, respectively. We had no net deferred tax liabilities at December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 24, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2023 | Mar 22, 2024 | |
| 2022 | Mar 23, 2023 | |
| 2021 | Mar 17, 2022 | |
| 2020 | Mar 25, 2021 | |
| 2019 | Mar 24, 2020 | |
| 2018 | Apr 1, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Mar 10, 2016 | |
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.