IMMUCELL CORP /DE/ Income Taxes Disclosure

15. INCOME TAXES

 

Our income tax expense aggregated $11,570 and $10,056 (amounting to 1% and less than 1% of our loss before income taxes) during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had federal net operating loss carryforwards of $17,496,754 of which $16,055,226 do not expire and of which $1,441,528 expire in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $7,670,528 of which $7,513,712 do not expire and of which $156,816 expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $901,466 that expire in 2028 through 2045 (if not utilized before then) and state tax credit carryforwards of $745,316 that expire in 2031 through 2039 (if not utilized before then).

 

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable.

 

During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates, or we adjust these estimates in future periods, we may need to adjust our valuation allowance. Currently, we adjust the valuation allowance at the end of each quarter to reduce the value of our deferred tax assets to zero.

 

Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined.

 

We file income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.

 

As described in Note 2, "Basis of Presentations and Use of Estimates and Significant Accounting Policies", additional disclosures below are presented pursuant to the requirements of ASU 2023-09. Amounts as of and for the year ended December 31, 2024, where applicable, were recast to conform with the year ended December 31, 2025, presentation.

 

The income tax expense consisted of the following:

 

		During the Years
		Ended December 31,
		2025				2024
Current
Federal		$	—			$	—
State			11,570				10,056
Current subtotal			11,570				10,056
Deferred
Federal			(220,758	)			(500,927	)
State			(111,888	)			(59,032	)
Deferred subtotal, gross			(332,646	)			(559,959	)
Valuation allowance			332,646				559,959
Deferred subtotal, net			—				—
Income tax expense		$	11,570			$	10,056

 

The components of loss before taxes are as follows:

 

		During the Years
		Ended December 31,
		2025				2024
Domestic		$	(1,028,457	)		$	(2,146,573	)
Foreign			—				—
Loss before income taxes		$	(1,028,457	)		$	(2,146,573	)

 

Income taxes paid, net of refunds received, by jurisdiction consists of the following:

 

		During the Years
		Ended December 31,
		2025				2024
Federal		$	—			$	—
State and Local — California			800				800
State and Local — Michigan			791				—
State and Local — Minnesota			—				1,000
State and Local — New York			4,000				2,403
State and Local — Pennsylvania			1,300				—
State and Local — Texas			3,687				3,010
State and Local — Other			113				80
State and Local			10,691				7,293
International — Other			—				—
International			—				—
Total income taxes paid		$	10,691			$	7,293

 

The following table reconciles income tax expense computed at the federal statutory rate with income tax expense as reported by category. Additionally, categories of at least 5% of the expected tax expense are disaggregated by nature or jurisdiction:

 

		During the Years Ended December 31,
		2025								2024
			Amount				Percent				Amount				Percent
Computed tax at Federal Statutory Rate (21%)		$	(215,976	)			(21.00	)%		$	(450,780	)			(21.00	)%
State and local income taxes, net of federal benefit(1)			(79,693	)			(7.75	)%			(36,681	)			(1.71	)%
Foreign tax effects			—				0.00	%			—				0.00	%
Effect of changes in tax laws/rates			—				0.00	%			—				0.00	%
Effect of cross-border tax laws			—				0.00	%			—				0.00	%
Research and experimental tax credits			(58,901	)			(5.73	)%			(116,091	)			(5.41	)%
Changes in valuation allowance			332,646				32.34	%			559,959				26.09	%
Nontaxable/nondeductible items			5,280				0.51	%			4,619				0.22	%
Share-based compensation			28,214				2.75	%			49,030				2.28	%
Changes in unrecognized tax benefits			—				0.00	%			—				0.00	%
Income tax expense		$	11,570				1.12	%		$	10,056				0.47	%

⁽¹⁾ State taxes in California, New York, Pennsylvania, and Minnesota made up the majority of the tax effect in this category.

 

The following table presents qualitative disclosure of state and local income taxes, net of federal benefit:

 

		During the Years Ended December 31,
		2025								2024
		Amount				Percent				Amount				Percent
California		$	(16,720	)			20.98	%		$	(17,422	)			47.50	%
Maine			—				0.00	%			(6,456	)			17.60	%
Michigan			(7,070	)			8.87	%			—				0.00	%
Minnesota			(15,018	)			18.85	%			(7,158	)			19.51	%
New York			(16,164	)			20.28	%			(5,364	)			14.62	%
Pennsylvania			(26,380	)			33.10	%			(6,187	)			16.87	%
Other			1,659				(2.08)	%			5,906				(16.10)	%
State and local income taxes, net of federal benefit		$	(79,693	)			100.00	%		$	(36,681	)			100.00	%

 

The significant components of our deferred tax assets, net, consisted of the following:

 

		As of
		December 31,
		2025				2024
Property, plant and equipment		$	(950,593	)		$	(1,833,727	)
Federal general business tax credits			901,466				842,565
Federal net operating loss carryforwards			3,674,316				3,705,923
State tax credits and net operating loss carryforwards			927,108				900,569
§174 R & D expenditures			39,034				727,410
Deferred compensation			52,872				82,370
Prepaid expenses and other			74,110				24,718
UNICAP			54,047				22,443
Incentive compensation			154,275				121,718
Valuation allowance			(4,926,635	)			(4,593,989	)
Deferred tax assets, net		$	—			$	—