PMGC Holdings Inc. Income Taxes Disclosure

18.

Income Tax

 

During the years ended December 31, 2025 and 2024, there is $Nil and $30,972 current and deferred income tax expense, respectively, reflected in the Statement of Operations and Comprehensive Loss.

 

The components of loss from continuing operations before provision for income taxes for the years ended December 31, 2025 and 2024 consist of the following:

 

		Year Ended December 31,
		2025				2024
Domestic			(8,353,923	)			(6,051,077	)
Foreign			597,827				(194,660	)
			(7,756,096	)			(6,245,737	)

There were no cash income taxes paid (refunded) during the years ended December 31, 2025 or 2024.

 

The components of income tax expense from continuing operations for the years ended December 31, 2025 and 2024 are as follows:

 

		Year Ended December 31,
		2025				2024
Current Taxes
Federal		-				-
State		-				-
Foreign		-				-
Total Current Taxes		-				-
Deferred Taxes
Federal			9,359				-
State			21,613				-
Foreign			-				-
Total Deferred Taxes			30,972				-
Total Tax Expense / (Benefit)			30,972				-

 

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective continuing operations income tax rate is as follows:

 

Rate Reconciliation		As at December 31, 2025
Income Taxes at Statutory Rates			(1,628,780	)			21.00	%
State Income Tax, Net of Federal Effect *			16,053				-0.22	%
Foreign Tax Effects			-				0.00	%
Canada
Foreign Rate Differential			(12,210	)			0.17	%
Permanent Items			(139,091	)			1.89	%
Write off deferrals due to dissolution			178,743				-2.43	%
Change in Valuation Allowance			(152,986	)			2.08	%
Effects of Changes in Tax Laws or Rates			-				0.00	%
Effects of Cross-Border Tax Laws			-				0.00	%
Tax Credits			-				0.00	%
Changes in Valuation Allowance			1,844,709				-23.98	%
Non-taxable or Non-deductible Items			-				0.00	%
Permanent Items			5,520				-0.08	%
Changes in Unrecognized Tax Benefits			-				0.00	%
Other			-				0.00	%
Other			(80,986	)			1.05	%
Provision for income taxes			30,972				-0.4	%

 

*	The state that contributed to the majority (greater than 50%) of the tax effect in this category for the year ended December 31, 2025 was California.

As previously disclosed prior to the adoption of ASU 2023-09, the difference between the provision (benefit) for income taxes and the amount computed by applying the U.S. federal income tax rate for the year ended December 31, 2024 is as follows:

 

		December 31, 2024
Net loss before income tax			(6,245,737	)
Effective tax rate			27.87	%
U.S. income tax at federal statutory rate			(1,740,687	)
State Income Tax, Net of Federal Benefits
Share-based compensation			27,083
Other non-deductible items			88,406
Foreign exchange			10,750
Tax rate differences			1,513
Change in Valuation Allowance			1,612,935
Tax expense (recovery)			-

 

The components of the Company’s deferred tax assets and liabilities related to continuing operations at December 31, 2025 and 2024, consisted of:

 

		December 31, 2025				December 31, 2024
Deferred tax assets:
Net operating loss carry forward			4,896,406				3,322,654
Lease Liability			341,533				-
Accruals and reserves			489,163				-
Other			322,394				-
			6,049,496				3,322,654
			(5,542,874	)			(3,322,654	)
Valuation allowance			506,622				-
Total deferred tax assets
Deferred tax liabilities:
Right of Use asset			(347,426	)			-
Other			(190,168	)			-
			(537,594	)			-
Total deferred tax liabilities			(30,972	)			-
Net deferred tax assets			-				-

 

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are composed principally of net operating loss carry forwards. Management has considered the Company’s history of cumulative net losses incurred since inception and has concluded that it is more likely than not that the Company will not realize the benefits of its federal and state net deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2025 and 2024. The Company reevaluates the positive and negative evidence at each reporting period. During the year ended December 31, 2025, the valuation allowance increased by approximately 2.1 million.

 

At December 31, 2025, the Company had U.S. federal and state net operating loss carryforwards of $17.7 million and $16.9 million, respectively. The federal net operating loss carryforwards were generated post January 1, 2018 and will carryforward indefinitely but are subject to an 80% taxable income limitation when utilized. The state net operating loss carryforwards will begin to expire in 2040.

 

The utilization of net operating losses and tax credit carryforwards may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. Under Sections 382 and 383 of the Internal Revenue Code (the Code), a corporation that undergoes and ownership change may be subject to limitations on its ability to utilize its pre-change net operating losses and other tax attributes otherwise available to offset future taxable income or tax liability. An ownership change is defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling 3-year period. The Company has not completed a formal study to determine if any ownership changes within the meaning of Code Section 382 and 383 have occurred. If such ownership change has occurred, the Company’s ability to use its net operating losses or tax credit carryforwards may be restricted, which could require the Company to pay federal or state income taxes earlier than would be required if such limitations were not in effect.

The Company recognizes the financial statement benefit of a tax position only when it determines that the position is more likely than not to be sustained upon examination by the relevant taxing authority. For tax positions that meet the more-likely-than-not threshold, the amount recognized in the financial statements is measured as the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority. The Company records interest related to uncertain tax positions as interest expense and penalties within general and administrative expenses.

 

As of December 31, 2025 and 2024, the Company had no unrecognized tax benefits.

 

The Company is subject to taxation in the United States and various state jurisdictions. The Company is no longer subject to taxation in Canada following the dissolution of its Canadian subsidiary. There are currently no ongoing examinations by taxing authorities.

 

The Company’s U.S. federal and state tax years 2021 through 2024 remain open for examination, generally for three and four years, respectively, from the date of utilization of any net operating loss carryforwards. The Company’s Canadian tax years remain open for examination by the Canadian tax authority for four years from the filing deadline.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, introducing several changes to U.S. tax laws affecting corporations. Key provisions include the expensing of domestic research expenditures, an increase in the limitation on the deduction of interest expense to 30% of EBITDA, and 100% bonus depreciation for eligible property acquired after January 19, 2025.

 

These provisions became effective for the Company during the three months ended September 30, 2025. The Company evaluated the impact of the new legislation and determined that it did not have a material effect on the Company’s current or future effective income tax rate or cash taxes paid.