Forian Inc.FORA
Forian Inc. Income Taxes Disclosure
Note 15 INCOME TAXES
The Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
For financial reporting purposes, the Company’s consolidated loss from continuing operations before income taxes for the U.S. and foreign entities, in the aggregate, is as follows:
| For the Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| United States | $ | (2,646,070 | ) | $ | (3,704,487 | ) | ||
| Foreign | — | — | ||||||
| Total loss before provision for income taxes | $ | (2,646,070 | ) | $ | (3,704,487 | ) | ||
The income tax expense consisted of the following for the years ended December 31, 2025 and December 31, 2024:
| For the Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Current: | ||||||||
| Federal | $ | 74,978 | $ | 32,074 | ||||
| State | 152,994 | 34,509 | ||||||
| Foreign | — | — | ||||||
| $ | 227,972 | $ | 66,583 | |||||
| Deferred: | ||||||||
| Federal | — | — | ||||||
| State | — | — | ||||||
| Foreign | — | — | ||||||
| — | — | |||||||
| Total | $ | 227,972 | $ | 66,583 | ||||
The reconciliation between the Company’s effective tax rate on income from continuing operations and statutory tax rate for the years ended December 31, 2025 and 2024 is as follows:
| For the Year Ended December 31, 2025 | ||||||||
| Loss before income taxes | $ | (2,646,070 | ) | |||||
| U.S. statutory rate | 21 | % | ||||||
| Recovery based on statutory rate | (555,675 | ) | 21 | % | ||||
| Expense (recovery) resulting from: | ||||||||
| State and local income taxes | 155,682 | (5.88 | )% | |||||
| Tax credits: | ||||||||
| Research & development tax credit | (75,177 | ) | 2.84 | % | ||||
| Foreign tax credit | (69,375 | ) | 2.62 | % | ||||
| Changes in valuation allowance | (503,761 | ) | 19.04 | % | ||||
| Nondeductible/nontaxable items: | ||||||||
| Equity-based compensation | 820,530 | (31.01 | )% | |||||
| Other permanent differences | 53,916 | (2.04 | )% | |||||
| Other: | ||||||||
| 481(a) adjustment | 326,852 | (12.35 | )% | |||||
| Other, net | 74,980 | (2.84 | )% | |||||
| Income tax expense | $ | 227,972 | (8.62 | )% | ||||
For the year ended December 31, 2025, California made up the majority of the state income tax expense (greater than 50% of the tax effect).
As previously disclosed, prior to the adoption of ASU 2023-09, the reconciliation between the Company’s effective tax rate on income from continuing operations and statutory tax rate for the year ended December 31, 2024 was as follows:
| For the Year Ended December 31, | ||||
| 2024 | ||||
| Income tax expense at federal statutory rate | 21.00 | % | ||
| Nondeductible/nontaxable items | (0.08 | )% | ||
| Stock-based compensation | (40.66 | )% | ||
| State taxes | 0.99 | % | ||
| Rate change | 0.20 | % | ||
| True-up and other | 7.40 | % | ||
| Credits | 7.54 | % | ||
| Valuation allowance | 1.81 | % | ||
| Income tax expense | (1.80 | )% |
The following table presents supplemental cash flow information related to income taxes paid (net of refunds received), subsequent to the adoption of ASU 2023-09:
|
For the Year Ended December 31, 2025 | ||||
| U.S. Federal | $ | — | ||
| U.S. state and local: | ||||
| Colorado | (23,000 | ) | ||
| Florida | (35,000 | ) | ||
| Massachusetts | 34,930 | |||
| New York State | 98,426 | |||
| New York City | 108,417 | |||
| Other jurisdictions | 36,991 | |||
| Foreign | — | |||
| Total cash taxes paid, net of refunds received | $ | 220,764 |
For the year ended December 31, 2025, the Company performed an analysis based on available guidance and determined that the OBBBA results in a decrease in taxable income due to the ability to expense the prior year capitalized of R&E expenses. The Company will continue to monitor this issue for future developments and its impact on taxable income.
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of net deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
The following items comprise the Company’s net deferred tax assets and liabilities as of December 31, 2025 and December 31, 2024:
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax assets | ||||||||
| Allowance for credit losses | $ | 78,101 | $ | 61,884 | ||||
| Accrued expenses | 620,915 | 302,404 | ||||||
| Lease liability | 3,447 | 9,781 | ||||||
| Unrealized losses | 2,199 | — | ||||||
| Stock compensation | 1,395,576 | 1,770,521 | ||||||
| Capitalized Sec. 174 expenses | 803,148 | 1,210,970 | ||||||
| Net operating loss carry forwards | 4,713,356 | 4,747,030 | ||||||
| Credits (research and development and foreign) | 382,691 | 163,234 | ||||||
| Deferred income tax assets | 7,999,433 | 8,265,824 | ||||||
| Valuation allowance | (7,591,073 | ) | (8,049,891 | ) | ||||
| Total net deferred income tax assets | $ | 408,360 | $ | 215,933 | ||||
| Prepaid expenses | (39,555 | ) | (17,176 | ) | ||||
| Depreciation | (3,727 | ) | (6,328 | ) | ||||
| Amortization | (142,752 | ) | (178,855 | ) | ||||
| Right-of-use asset | (3,447 | ) | (9,781 | ) | ||||
| Other deferred tax liability | (218,879 | ) | (3,793 | ) | ||||
| Deferred income tax liability | (408,360 | ) | (215,933 | ) | ||||
| Net deferred taxes | $ | — | $ | — | ||||
As of December 31, 2025, the Company has federal and state net operating loss carryforwards of $17,008,113 and $27,807,223, respectively. Federal net operating loss carryforwards in the amount of $17,008,113 have an indefinite life. Federal NOL carryforwards generated after tax year 2021 are subject to an 80% limitation on taxable income, do not expire and will carryforward indefinitely.
State net operating loss carryforwards in the amount of $11,489,425 begin expiring in December and $16,317,798 have an indefinite life.
The utilization of the Company’s net operating losses may be subject to a U.S. federal limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions. Such limitations may result in a reduction of the amount of net operating loss carryforwards in future years and possibly the expiration of certain net operating loss carryforwards before their utilization.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company cannot rely on a history of earnings. Based on this assessment, management has established a full valuation allowance against all of the deferred tax assets because it is more likely than not that all of the deferred tax assets will not be realized.
As of December 31, 2025, deferred tax assets were offset by deferred tax liabilities and a valuation allowance on any remaining balance. A valuation allowance of $7,591,073 and $8,049,891 has been recorded for the years ended December 31, 2025 and December 31, 2024, respectively, to measure only the portion of the deferred tax asset that more likely than not will be realized. The valuation allowance changed by $458,818 and $69,601 during 2025 and 2024, respectively. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are improved or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth in the relevant jurisdictions.
As required by the uncertain tax position guidance in ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the uncertain tax position guidance in ASC 740 to all tax positions for which the statute of limitations remained open. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. No liability was recorded for uncertain tax positions as of December 31, 2025 and December 31, 2024.
The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, and state and local jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from 2019 to the present in the U.S. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period.
The Company is also subject to certain non-income taxes such as value added taxes, sales taxes, and property taxes. The Company has taken certain positions that management feels, although not free from doubt, should not result in a successful challenge by certain tax authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Apr 11, 2025 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 31, 2022 | |
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.