Legacy Education Inc. Income Taxes Disclosure

Note 16 - Income Tax

 

The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities is principally dependent upon achievement of projected future taxable income.

 

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. The Company has no valuation allowance as of June 30, 2025.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. For businesses, the Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted though income tax expense.

 

The components of income tax expense (benefit) are as follows:

 

Schedule of Components of Income Tax Expense (Benefit)

		June 30, 2025				June 30, 2024
Current:
Federal		$	1,935,372			$	1,779,079
State			1,050,770				821,531
Current income tax expense			2,986,142				2,600,610
Deferred:
Federal			403,941				(513,740	)
State			98,514				(216,260	)
Deferred income tax expense			502,455				(730,000	)
Total income tax expense		$	3,488,597			$	1,870,610

 

Income tax expense differed from the amount computed using the U.S. federal income tax rate of 21% for June 30, 2025 and 2024 as follows:

 

Schedule of Federal Income Tax Expense

		June 30, 2025				June 30, 2024
Statutory U.S. federal income tax		$	2,314,794			$	1,466,947
Non-deductible items			(123,961	)			57,841
Change in deferred items			417,037				(303,187	)
Provision to return			-				(151,584	)
State income taxes, net of federal benefit			769,790				821,531
Other			110,937				(20,938	)
Income tax expense		$	3,488,597			$	1,870,610

 

Significant components of the Company’s deferred income tax assets included in deferred income taxes, non-current on the balance sheets are as follows:

 

Schedule of Deferred Income Tax Assets and Liabilities

		June 30, 2025				June 30, 2024
Deferred tax assets:
Lease liability and deferred rent		$	4,492,549			$	72,000
Allowance for doubtful accounts			503,900				206,000
Accrued bonuses and vacation			582,994				492,000
Non-cash compensation			109,633				562,000
Deferred tax assets gross			5,689,076				1,332,000
Valuation allowance			-				-
Deferred tax assets			5,689,076				1,332,000
Deferred tax liability:
Right of use asset			(4,503,369	)
Property and equipment and intangible assets			(790,161	)			(434,000	)
Deferred tax liability			(5,293,530	)			(434,000	)
Net deferred tax asset		$	395,546			$	898,000

 

The Company is subject to taxation in the United States and the state of California. As of June 30, 2024, the earliest tax year still subject to examination for federal purposes is the fiscal year ended June 30, 2022 and state purposes is the fiscal year ended June 30, 2021.

 

 

Legacy Education Inc.

Notes to Consolidated Financial Statements

For Fiscal Years ended June 30, 2025 and 2024