JFB Construction Holdings Income Taxes Disclosure
Note 6 – Income Taxes
Effective January 1, 2025 the Company revoked its election to be taxed as an "S" Corporation and elected to be taxed as a C Corporation under the provision of the Internal Revenue Code. As a result of this change in tax status, the Company is now subsequent to federal corporate income taxes on its taxable income.
Prior to the revocation of its S-Corporation election, the Company was not subject to federal corporate income taxes, and its taxable income for the year ended December 31, 2024 was reportable by its shareholder.
The Company is subject to taxation in the United States.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025, the Company has not accrued any penalties or interest related to uncertain tax positions.
Since converting to a C corporation, the Company has incurred losses and consequently recorded no provision for federal income tax for the year ended December 31,2025. As of December 31, 2025 the Company had net operating loss ("NOL") carryforwards for federal income tax purposes. Federal NOL's generated may be carried forward indefinitely, subject to an annual limitation equal to 80% of taxable income in any future year under the Tax Cuts and Jobs Act.
Pursuant to the provisions of the Accounting Standards Codification (“ASC”) 740-10, the Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of the years ended December 31, 2025, and 2024, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
YEAR ENDED DECEMBER 31, 2025
Federal statutory tax rate |
(21.0)% |
Impact of 70,000 NQSO Issuances (ASC 718 expense) |
(21.1)% |
Change in Valuation Allowance |
21.0% |
Effective Tax Rate |
(21.1)% |
YEAR ENDED DECEMBER 31, 2025
Net Operating Loss |
21% |
1,107,236 |
Stock-based compensation |
21% |
253,845 |
Depreciation |
21% |
52,902 |
Total Deferred Tax Assets |
|
1,413,983 |
Deferred Tax Liabilities |
- |
- |
Net Deferred Tax Asset |
- |
1,361,081 |
Less: Valuation Allowance |
- |
(1,361,081) |
Deferred Tax Asset (Liability), Net |
- |
- |
The Company’s federal income tax returns for 2025 and 2024 are subject to examination by the IRS, generally for three years after they were filed. There are no ongoing examinations by taxing authority at this time.
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.