Professional Diversity Network, Inc. Income Taxes Disclosure

15. Income Taxes

 

The Company has the following net deferred tax assets and liabilities:

 

		December 31,
		2025				2024
Goodwill and intangible assets		$	283,993			$	425,865
Developed technology			(14,838	)			2,866
Property and equipment			(7,246	)			(12,565	)
Other deferred tax assets			414,021				320,815
Settlements			121,950				121,950
Stock based compensation			195,978				103,551
Net operating loss			11,863,418				10,365,248
Valuation allowance			(12,857,276	)			(11,327,730	)
Net deferred tax liability		$	-			$	-

 

The benefit for income taxes for the years ended December 31, 2025, and 2024, consists of the following:

 

		Year Ended December 31,
		2025				2024
Federal:
Current provision		$	-			$	-
Deferred tax benefit			-				-
		$	-			$	-
State:
Current provision		$	-			$	6,321
Deferred tax benefit			-				-
		$	-			$	6,321
Foreign:
Current provision		$	-			$	-
Deferred provision (benefit)			-				-
		$	-			$	-
Income tax expense benefit		$	-			$	6,321

 

A reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025, and 2024 is as follows (in thousands, except for percentages):

 

		Year Ended December 31,
		2025				2024
Expected federal statutory rate			21.0	%			21.0	%
State income taxes, net of federal benefit			6.1	%			6.1	%
Valuation allowance			(23.5	)%			(21.9	)%
Permanent items			(0.4	)%			(1.0	)%
Other			(3.2	)%			(4.2	)%
			0.0	%			(0.0	)%

 

		Year Ended December 31,
		2025				2024
Expected federal statutory amount		$	(1,366	)		$	(546	)
State income taxes, net of federal benefit			(397	)			(159	)
Valuation allowance			1,530				570
Permanent items			24				27
Other			209				108
		$	-			$	-

 

The valuation allowance at December 31, 2025 was $12,857,276. The net change in the valuation allowance during the year ended December 31, 2025 was an increase of $1,529,546. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income 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 income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of December 31, 2025.

 

At December 31, 2025, the Company had U.S. federal, Illinois, and New York net operating loss carryforwards of approximately $45,149,000, $26,698,000, and $11,995,000 respectively. Of the federal amount, $19,304,000 expires between 2034 and 2038, and $25,845,000 has an indefinite carryforward period. The Illinois losses may be carried forward 12 years and begin to expire in 2026. The New York losses may be carried forward 20 year and begin to expire in 2035. Certain tax attributes are subject to an annual limitation as a result of changes in ownership as defined under Internal Revenue Code Section 382. The Company files tax returns in multiple jurisdictions and is subject to examination in these jurisdictions. Significant jurisdictions in the U.S. include New York and Illinois.