FLEXIBLE SOLUTIONS INTERNATIONAL INC Income Taxes Disclosure

12. INCOME TAXES

 

The provision for income tax expense (benefit) is comprised of the following:

 SCHEDULE OF PROVISION FOR INCOME TAX EXPENSE (BENEFIT) 

		2024				2023
Current tax, federal		$	763,471			$	753,683
Current tax, state			345,380				340,952
Current tax, foreign			217,552				151,236
Current tax expense			1,326,403				1,245,871
Income tax benefit			(621,959	)			(1,127,689	)
Current tax, total expense			704,444				118,182
Deferred income tax, federal			101,053				(172,763	)
Deferred income tax, state			45,714				(78,154	)
Deferred income tax, foreign			-				-
Deferred income tax, total expense (benefit)			146,767				(250,917	)
Total		$	851,211			$	(132,735	)

 

The following table reconciles the income tax expense at the U.S. Federal statutory rate to income tax expense at the Company’s effective tax rates.

 SCHEDULE OF RECONCILIATION OF INCOME TAXES

		2024				2023
Income before income tax - United States		$	4,472,950			$	3,249,901
Income before income tax - Canada			479,850				373,349
Income before income tax			4,952,800				3,623,250
US federal statutory tax rate			21.00	%			21.00	%
Expected income tax expense			1,040,088				760,883
State income tax expense, net of federal tax benefit			371,708				344,208
Non-deductible items			64,857				362,554
Change in estimates and other			(194,142	)			(1,585,427	)
Foreign tax rate differential			(35,952	)			(92,379	)
Change in valuation allowance			(395,348	)			77,426
Total income taxes expense (benefit)		$	851,211			$	(132,735	)

 

Included in current income tax expense for the year ended December 31, 2024 is a recovery of $621,959 (2023 - $1,127,689) for a revision of estimated current taxes payable for previous years.

 

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at December 31, 2024 and 2023 are comprised of the following:

 SCHEDULE OF DEFERRED TAX ASSETS (LIABILITIES) 

		2024				2023
Canada
Non-capital loss carryforwards		$	1,059,468			$	855,176
Share issuance costs			1,024				-
Property, equipment and leaseholds			27,995				30,916
Deferred tax assets gross			1,088,487				886,092
Valuation allowance			(1,088,487	)			(886,092	)
Net deferred tax asset		$	-			$	-

 

 

			2024				2023
United States
Net operating loss carryforwards		$	190,024			$	-
Property, equipment and leaseholds			502,646				36,093
Deferred tax asset			692,670				36,093
Valuation allowance			(192,953	)			-
Net deferred tax asset		$	499,717			$	36,093
Intangible assets		$	(516,414	)		$	(11,346	)
Investments			(105,322	)			-
Deferred tax liability			(621,736	)			(11,346	)
Net deferred tax asset (liability)		$	(122,019	)		$	24,747

 

The Company has non-capital loss carryforwards of approximately $4,606,383 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

 SCHEDULE OF NON OPERATING LOSS CARRYFORWARDS 

		Loss
2030		$	249,807
2031			865,746
2032			566,109
2037			1,555,780
2039			134,471
2040			396,186
2041			301,063
2042			315,157
2043			222,064
Total		$	4,606,383

 

As at December 31, 2024, the Company has federal and state income tax net operating loss carryforwards of $623,028 available for US tax purposes. The NOLs carry forward indefinitely, with utilization limited to offsetting up to 80% of taxable income in any given year.

 

Accounting for Uncertainty for Income Tax

 

The Company recognizes income tax liabilities from uncertain tax positions where there is uncertainty as to a tax position being sustainable using the more-likely-than-not threshold. During the years ended December 31, 2024 and 2023, the total liability for uncertain tax positions increased by $419,214 and $464,185 respectively, primarily due to increased liabilities based on existing tax positions. As of December 31, 2024 and 2023, the Company has recognized liabilities for uncertain tax positions of $2,754,007 and $2,334,793, respectively, which is included in income taxes payable on the consolidated balance sheets. All recorded uncertain tax positions impact the Company’s effective tax rate. The timing of any future settlements or payments related to uncertain tax positions is uncertain.

 

Additionally, the Company has accrued interest and penalties related to these unrecognized tax benefits and other items, which are recorded as a component of income tax expense (benefit). As of December 31, 2024 and 2023, the Company recorded an additional $333,086 and $193,551 in accrued interest and penalties. At December 31, 2024 and 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of $1,237,637 and $904,549 respectively, which is included in income taxes payable on the consolidated balance sheets.