Energy Services of America CORP Income Taxes Disclosure
16. | INCOME TAXES |
The components of income taxes are as follows:
| Year Ended September 30, | |||||
| | 2025 | | 2024 | ||
| ||||||
Federal | ||||||
Current | $ | — | $ | 7,218,772 | ||
Deferred |
| (10,255) |
| (364,036) | ||
Total |
| (10,255) |
| 6,854,736 | ||
|
|
|
| |||
State |
|
|
|
| ||
Current |
| 222,535 |
| 1,576,518 | ||
Deferred |
| 272,894 |
| (15,587) | ||
Total |
| 495,429 |
| 1,560,931 | ||
|
|
|
| |||
Total income tax expense | $ | 485,174 | $ | 8,415,667 | ||
The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid. Significant judgments and estimates are required in the determination of the consolidated income tax expense. The Company’s provision for income taxes is computed by applying a federal rate of 21.0% and a blended state rate of approximately 5.0% to 6.0% to taxable income or loss after consideration of non-taxable and non-deductible items.
The income tax expense for the fiscal year ended September 30, 2025 was $485,000 as compared to $8.4 million for the fiscal year ended September 30, 2024. The decrease was due to a decrease in taxable income for the fiscal year ended September 30, 2025, as compared to the fiscal year ended September 30, 2024.
The effective income tax rate for the fiscal year ended September 30, 2025 was 56.1%, as compared to an effective income tax rate of 25.1% for the fiscal year ended September 30, 2024. Effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income or loss, non-taxable and non-deductible expenses.
Twelve Months Ended | |||||
| | September 30, 2025 | | September 30, 2024 |
|
| |||||
Statutory rate |
| 21.0 | % | 21.0 | % |
Permanent difference |
| 35.7 | % | — | |
State income taxes |
| 13.4 | % | 4.7 | % |
Meals and other | (14.0) | % | (0.6) | % | |
Effective tax rate |
| 56.1 | % | 25.1 | % |
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company had $1.5 million and $0 million of federal net operating loss carryforwards at September 30, 2025 and 2024, respectively. The Company had $16.7 million and $20.5 million of state net operating loss carryforwards at September 30, 2025 and 2024, respectively. The state net operating loss carryforwards begin to expire in 2026.
The income tax effects of temporary differences giving rise to the deferred tax assets and liabilities are as follows:
| September 30, | September 30, | ||||
| | 2025 | | 2024 | ||
Deferred tax liabilities | ||||||
Property and equipment | $ | 10,057,004 | $ | 7,437,645 | ||
Other | 1,483,362 | 1,509,487 | ||||
Total deferred tax liabilities | $ | 11,540,366 | $ | 8,947,132 | ||
Deferred income tax assets |
| |
| | ||
Accruals and other | $ | 3,215,102 | $ | 2,325,671 | ||
Net operating loss carryforward-Federal | 1,451,126 | - | ||||
Net operating loss carryforward-States |
| 824,539 |
| 663,548 | ||
Net operating loss valuation allowance-States | (703,928) | (532,975) | ||||
Total deferred tax assets | $ | 4,786,839 | $ | 2,456,244 | ||
Total net deferred tax liabilities | $ | 6,753,527 | $ | 6,490,888 | ||
The Company does not believe that it has any unrecognized tax benefits included in its consolidated financial statements that require recognition. The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations. The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in general and administrative expenses.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 15, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Jan 16, 2024 | |
| 2022 | Dec 22, 2022 | |
| 2021 | Dec 29, 2021 | |
| 2020 | Jan 5, 2021 | |
| 2019 | Dec 20, 2019 | |
| 2018 | Dec 28, 2018 | |
| 2017 | Dec 15, 2017 | |
| 2016 | Dec 15, 2016 | |
| 2015 | Dec 17, 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.