Loop Industries, Inc. Income Taxes Disclosure

22. Income Taxes

 

The components of the Company’s loss before taxes are summarized below:

 

		February 28,				February 28,
		2026				2025
U.S. operations		$	(5,500	)		$	(6,049	)
Foreign operations			(6,799	)			(9,008	)
Loss before taxes		$	(12,299	)		$	(15,057	)

 

A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows:

 

		February 28,								February 28,
		2026								2025
		Rate				Amount				Rate				Amount
Federal income tax at statutory rate		%				$	(2,583)			%				$	(3,162	)
Effect of Canadian foreign jurisdiction taxed at a different rate			2				(294)				3				(410	)
Non-deductible expenses - Accretion expenses and other			-				27				(1)				77
Non-deductible expenses - Stock-based compensation			(2	)			216				(1)				207
Non-deductible expenses - Imputed interest income from intercompany loan			(9	)			1,130				(9)				1,357
Non-deductible expenses - Loss pick-up from equity method investments			(1	)			160				-				-
Tax credits related to research and development expenditures - Current year			2				(216)				2				(255	)
Tax credits related to research and development expenditures - True up prior year			-				(39)				1				(85)
Non-Cash dividend related to the Series B CPS			(2	)			296				-				-
Effect of prior year true-up			(2	)			261				-				45
Change in valuation allowance			(8	)			1,041				(15)				2,226
Effective income tax expense		%	-			$	-			%	-			$	-
Current		%	-			$	-			%	-			$	-
Deferred		%	-			$	-			%	-			$	-

 

The state and local taxes are not included within the rate reconciliation or the current and deferred breakdown above as the amounts relating to the year ended February 28, 2026 are nil (2025-nil).

 

The Company has net operating loss carry forwards of approximately $32,689 (2025 – $36,285) for U.S. Federal income tax purposes expiring between 2035 and 2038, post 2018 net operating losses may be carried forward indefinitely. The Company has net operating loss carry forwards for Canadian Federal and Québec tax purposes of approximately $84,610 (CDN$114,712), 2025 - $80,560 (CDN$109,168), and $91,006 (CDN$123,386), 2025 - $86,816 (CDN$117,651), respectively, expiring between 2037 and 2046. Realization of future tax assets is dependent on future earnings, the timing and amount of which are uncertain. Accordingly, the net future tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $1,848 and $1,260, respectively, for the years ended February 28, 2026 and February 28, 2025. The Company has provided a full valuation allowance on the deferred tax assets as a result of the uncertainty regarding the probability of its realization.

 

The Company has approximately $12,378 (CDN$16,943), 2025 - $10,517 (CDN$15,185) of research and development expenditures for Canadian Federal and Québec provincial purposes that are available to reduce taxable income in future years and have an unlimited carry forward period, the benefit of which has not been reflected in these financial statements. Research and development expenditures are subject to audit by the taxation authorities and accordingly, these amounts may vary.

 

The tax effect of temporary differences between US GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

 

		As at
		February 28,				February 28,
		2026				2025
Deferred tax assets
Canada net operating loss carry forward		$	22,974			$	20,703
U.S. net operating loss carry forward			6,865				7,620
Accrual and reserves			879				691
Intangibles			336				357
Property, plant and equipment			4,379				4,115
Research and development expenditures and credits			5,531				4,745
Basis in partnership			235				235
Other			959				1,828
Deferred tax assets			42,158				40,294
Deferred tax liabilities
Intangibles			(469	)			(453	)
Deferred tax liabilities		$	(469	)		$	(453	)
Deferred tax assets, net			41,689				39,841
Valuation allowance			(41,689	)			(39,841	)
Deferred tax assets, net		$	-			$	-

 

Assessment of the amount of value assigned to the Company's deferred tax assets under the applicable accounting rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of the Company's deferred tax assets is dependent on generating sufficient taxable income in future periods. Management does not believe that it is more likely than not that future taxable income will be sufficient to allow it to recover substantially all of the value assigned to its deferred tax assets. Accordingly, the Company has provided for a valuation allowance of the Company's deferred tax asset.

 

The income taxes paid for federal, state, and Canadian foreign jurisdiction for the year ended February 28, 2026 were nil (2025:nil).

 

The tax years subject to examination by major tax jurisdiction include the years ending 2021 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2021 and forward for the Canadian jurisdiction.