La Rosa Holdings Corp. Income Taxes Disclosure

Note 11 — Income Taxes

 

The benefit from income taxes was as follows: 

 

		December 31,
		2024				2023
Current
U.S. Federal		$	—			$	—
State and local			—				—
		$	—			$	—
Deferred
U.S. Federal		$	(2,423,582	)		$	(1,496,475	)
State and local			(695,810	)			(435,450	)
Valuation Allowance			3,119,392				1,931,925
		$	—			$	—
Total
U.S. Federal		$	—			$	—
State and local			—				—
		$	—			$	—

 

A reconciliation of the provision for income taxes with the amounts computed by applying the Federal income tax rate to income from operations before the provision for income taxes is as follows for the years ended December 31, 2024 and 2023:

 

		2024				2023
U.S. federal statutory rate			21.00	%			21.00	%
State taxes, net of federal benefit			4.51				4.49
Permanent items			(1.97	)			(0.05	)
Prior year true-up			—				—
Valuation allowance			(21.74	)			(24.50	)
Other			(1.8	)			(0.94	)
Effective income tax rate			0	%			0	%

The components of deferred tax assets (liabilities) were as follows:

 

		December 31,
		2024				2023
Net operating loss carryforwards		$	3,085,132			$	1,251,958
Stock compensation			2,550,588				1,351,444
Basis adjustment on acquired assets			(1,157,639	)			(1,043,064	)
Right of use assets			(252,920	)			(174,299	)
Lease liability			258,441				178,362
Goodwill			51,036				—
Allowance for credit losses			33,356				5,374
Charitable contributions			14,126				7,528
Deferred tax assets, before valuation allowance			4,582,120				1,577,303
Valuation allowances			(4,582,120	)			(1,577,303	)
Deferred tax assets, net of valuation allowance		$	0			$	0

 

A reconciliation of the beginning and ending amount of deferred income tax valuation allowance were as follows:

 

		December 31,
		2024				2023
Beginning balance of deferred income tax valuation allowance		$	(1,577,303	)		$	(688,442	)
Increase in valuation allowance			(3,119,392	)			(1,931,925	)
Decrease in valuation allowance – purchase accounting			114,575				1,043,064
Ending balance of deferred income tax valuation allowance		$	(4,582,120	)			(1,577,303	)

 

As of December 31, 2024, the Company has federal net operating loss carryforwards of approximately $12.0 million and state net operating loss carryforwards of approximately $12.9 million which can be carried forward indefinitely. As of December 31, 2023, the Company had federal net operating loss carryforwards of approximately $5.1 million and state net operating loss carryforwards of approximately $5.3 million. Deferred tax assets for net operating loss carryforwards are fully offset by a valuation allowance.

 

We have taken current and potential future expirations into consideration when evaluating the need for valuation allowances against these deferred tax assets. A valuation allowance for deferred tax assets is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization is dependent upon the generation of future taxable income or the reversal of federal tax liabilities during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which our deferred tax assets are deductible, we believe it is more likely than not that we will not realize the benefits of these deductible differences. We have recorded a valuation allowance for deferred tax assets of $4,582,120 and $1,577,303 as of December 31, 2024 and 2023, respectively.

 

The Company applies the FASB’s provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense.

 

As of December 31, 2024, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.