GrowGeneration Corp.GRWG

GrowGeneration Corp. Income Taxes Disclosure

10-KFiled Mar 13, 20253 min read
7. INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31, 2024, 2023, and 2022 consisted of the following:
Year Ended December 31,
202420232022
Current tax expense (benefit):
Federal$— $(115)$(471)
State158 147 (55)
Deferred tax (benefit):
Federal— — (2,179)
State— — (180)
Provision (benefit) for income taxes$158 $32 $(2,885)
The tax effects of temporary differences that gave rise to the Company's deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows:
December 31,
20242023
Deferred tax assets:
Net operating losses and attributes carryovers$24,897 $15,097 
Deferred right-of-use lease liabilities9,750 10,874 
Share-based compensation586 1,249 
Accumulated depreciation and amortization31,804 30,101 
Capitalized research costs397 — 
Accruals and other2,039 2,421 
Total deferred tax assets69,473 59,742 
Deferred tax liabilities:
Deferred right-of-use lease assets(9,071)(10,224)
Total deferred tax liabilities(9,071)(10,224)
Net deferred tax asset60,402 49,518 
Valuation allowance(60,402)(49,518)
Net deferred tax asset after valuation allowance$— $— 
As of December 31, 2024, the Company had cumulative federal net operating losses of $98.9 million, which have an indefinite carryforward period. As of December 31, 2024 and 2023, the Company had cumulative state net operating loss carryforwards of $81.6 million and $53.3 million, respectively. State net operating loss carryforwards will begin to expire in calendar year 2035.
Net operating loss carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. The Company has completed an analysis of any limitations on its tax attributes and has assigned a full valuation allowance against them as of December 31, 2024.
A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended December 31, 2024 and 2023, and 2022:
Years Ended December 31,
202420232022
Federal statutory income tax rate21 %21 %21 %
State and local income taxes (net of federal tax benefit)3 %4 %5 %
Share-based compensation— %(1)%(1)%
Valuation allowance(22)%(24)%(23)%
Other(2)%— %— %
Effective income tax rate— %— %2 %
Uncertain Tax Benefits
The Company has not identified any uncertain tax positions as of December 31, 2024. The Company recognizes interest and penalties accrued related to uncertain tax benefits in the income tax provision. There were no interest and penalties included in other long-term liabilities on the accompanying Consolidated Balance Sheets for years ended December 31, 2024 and 2023. The Company does not expect any significant changes in its unrecognized tax benefits within 12 months of the reporting date. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. No tax years for the Company are currently under examination by the IRS or state and local tax authorities for income tax purposes. Generally, the Company's 2021 through 2023 fiscal years remain open for examination and assessment. For various states, the examination and assessment remain open for 2020 through 2023. Years prior to 2020 remain open solely for purpose of examination of the Company's loss and credit carryforwards.
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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.

Other Available Disclosures

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