New Concept Energy, Inc. Income Taxes Disclosure

6: INCOME TAXES

 

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

 

Deferred tax assets are recognized to the extent that it is considered more likely than not that they will be realized. In assessing the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including the scheduling of reversal of deferred tax liabilities, projected future taxable income, recent operating results, and tax planning strategies. If it is determined that deferred tax assets can be realized in the future in excess of their net recorded amount, the valuation allowance would be adjusted, and the provision for income taxes would be reduced in the period such determination is made.

Income tax expense

 

The components of income tax expense (benefit) for the years ended December 31, 2025 and 2024 were as follows (amounts in thousands):

 

Schedule of income tax expense benefit
			2025				2024
Current:
Federal		$	-			$	-
State			-				-
Total current			-				-
Deferred:
Federal			-				-
State			-				-
Total deferred			-				-
Total income tax expense (benefit)		$	-			$	-

 

The Company incurred net losses of $46 and $18 for the years ended December 31, 2025 and 2024, respectively. No income tax expense or benefit has been recorded for either period, primarily as a result of the Company’s net operating loss carryforwards and the full valuation allowance recorded against its deferred tax assets.

 

Rate reconciliation
A reconciliation between income taxes computed at the U.S. federal statutory corporate income tax rate and the Company’s effective income tax rate for the years ended December 31, 2025 and 2024 is summarized as follows:

 

Schedule of federal statutory corporate income tax rate
(In thousands)		2025				%				2024				%
Pretax book income (loss)		$	(46	)						$	(18	)
Expected income tax (recovery) at statutory tax rates			(10	)			21				(4	)			21
Adjustment to deferred tax assets			148				-322				105				-582
Change in valuation allowance			(138	)			301				(101	)			561
Total Income tax expense (recovery)/ETR		$	-				-			$	-				-

 

For both 2025 and 2024, the Company’s effective income tax rate was 0%, as the expected federal tax benefit of pre-tax losses was fully offset by increases in the valuation allowance on deferred tax assets.

 

 

Deferred taxes

 

Deferred tax assets and liabilities are comprised primarily of the tax effects of net operating loss carryforwards. As of December 31, 2025 and 2024, the components of the Company’s deferred tax assets and valuation allowance were as follows (amounts in thousands):

 

Schedule of deferred tax assets
		2025				2024
Deferred tax asset:
Net operating loss carryforwards		$	1,224			$	1,362
Gross deferred tax asset			1,224				1,362
Less: valuation allowance			(1,224	)			(1,362	)
Net deferred tax asset		$	-			$	-

 

The Company has recorded a full valuation allowance against its net deferred tax assets because, based on its evaluation of all available evidence, including a history of recent losses, it is not considered more likely than not that the deferred tax assets will be realized.

 

As of December 31, 2025 and 2024, the Company had federal net operating loss carryforwards of $6,525,544 and $6,465,544, respectively. A portion of these net operating loss carryforwards, totaling approximately $4.8 million at December 31, 2025, will expire at various dates from 2025 through 2036. The remaining approximately $1.7 million of federal net operating loss carryforwards may be carried forward indefinitely. Utilization of the Company’s net operating loss carryforwards may be subject to annual limitations under Internal Revenue Code Section 382 and similar state provisions in the event of certain changes in ownership of the Company.

 

Due to the Company’s recent operating results and uncertainty regarding the timing and amount of future taxable income, the Company has not recognized any benefit from these net operating loss carryforwards and has recorded a full valuation allowance against the related deferred tax assets.

 

The Company files U.S. federal income tax returns and applicable state income tax returns. The Company’s U.S. federal income tax returns for the years ended December 31, 2025 and 2024 remain subject to examination by the Internal Revenue Service, generally for three years from the date the returns are filed. State jurisdictions remain open to examination for periods consistent with the applicable statutes of limitations in those jurisdictions.