iPower Inc. Income Taxes Disclosure

Note 12 – Income taxes

 

In addition to corporate income taxes in the United States, upon completion of the acquisition of Anivia in February 2022, the Company is subject to corporate income taxes in the People’s Republic of China (“PRC”). Anivia and its subsidiaries were subject to BVI or Hong Kong income taxes but did not have any operations for the year ended June 30, 2025 and 2024. DHS, the operating VIE of Anivia, is considered a Controlled Foreign Corporation (CFC) defined under IRC Sec. 957(a) since the Company indirectly owns more than 50% voting control of DHS as a result of the Transfer Agreement. Therefore, DHS is subject to the Global Intangible Low-Taxed Income Tax (“GILTI”). DHS is subject to 5% tax rate in PRC until December 31, 2027. Since DHS had tested losses during the year ended June 30, 2025 and 2024 and no GILTI tax was recorded for as of June 30, 2025 and 2024, the Company is not eligible for the GILTI high-tax exclusion. In addition, as a result of the acquisition, the Company booked a $6,094,144 of goodwill. Since the acquisition was a stock acquisition, the Goodwill is not deductible for tax purposes.

 

The income tax provision for the years ended June 30, 2025 and 2024 consisted of the following:

Schedule of income tax provision
		June 30, 2025				June 30, 2024
Current:
Federal		$	–			$	–
State			24,367				40,739
Foreign			–				–
Total current income tax provision			24,367				40,739
Deferred:
Federal			(1,023,623	)			(317,134	)
State			(255,233	)			(47,305	)
Foreign			–				72,335
Total deferred taxes			(1,278,856	)			(292,104	)
Total provision for income taxes		$	(1,254,489	)		$	(251,365	)

 

The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2019 to 2023 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates:

Schedule of reconciliation of effective income tax rate
		June 30, 2025				June 30, 2024
Statutory tax rate
Federal			21.00	%			21.00	%
State (net of federal benefit)			5.63	%			5.54	%
Foreign tax			(3.73	)%			(4.94	)%
Prior year adjustment and permanent differences			–	%			(2.66	)%
Others			(2.77	)%			(4.92	)%
Effective tax rate			20.13	%			14.02	%

 

As of June 30, 2025, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $19,073 and $280,155, respectively. As of June 30, 2024, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $31,496 and $276,158, respectively.

 

The tax effects of temporary differences which give rise to significant portions of the deferred taxes are summarized as follows:

Schedule of deferred taxes
		June 30,
		2025				2024
Deferred tax assets
263A calculation		$	256,568			$	291,354
Inventory reserve			83,180				171,942
State taxes			4,844				4,840
Accrued expenses			21,750				155,860
ROU assets / liabilities			95,711				110,391
Net Operation loss			3,081,145				2,190,589
Disallowed interest expense			311,662				258,352
Stock-based compensation			336,394				341,591
Valuation allowance			(118,191	)			(64,897	)
Others			512,289				40,067
Total deferred tax assets			4,585,352				3,500,089
Deferred tax liabilities
Depreciation			(56,648	)			(77,287	)
Intangible assets acquired			(804,242	)			(977,197	)
Total deferred tax liabilities			(860,890	)			(1,054,484	)
Net deferred tax assets		$	3,724,462			$	2,445,605