Lifeway Foods, Inc. Income Taxes Disclosure

Note 10 – Income taxes

 

The provision for income taxes consists of the following:

Schedule of provision for income taxes
		For the Years Ended December 31,
		2025				2024
Current:
Federal		$	4,333			$	3,371
State and local			1,764				1,512
Total current			6,097				4,883
Deferred			(270)				61
Provision for income taxes		$	5,827			$	4,944

 

The following is a reconciliation of income tax expense computed at the U.S. federal statutory tax rate to income tax expense reported in the consolidated statement of operations:

Schedule of reconciliation to effective rate for income taxes
		2025								2024
		Amount				Percentage				Amount				Percentage
Federal income tax at statutory rate		$	4,137				21.0%			$	2,933				21.0%
State and local income tax, net (a)			1,135				5.8%				737				5.3%
Section 162m			479				2.4%				1,074				7.7%
Stock based compensation			46				0.2%				167				1.2%
Other permanent differences			31				0.2%				29				0.2%
Change in tax laws or rates			(1)				0.0%				2				0.0%
Other			–				0.0%				2				0.0%
Provision for income taxes		$	5,827				29.6%			$	4,944				35.4%

  

(a)

State taxes in Illinois made up the majority (greater than 50 percent) of this category.

 

The income taxes paid (net of refunds) to a jurisdiction that represent greater than 5% of the total income taxes paid are as follows:

Schedule of income paid (net of refunds) to a jurisdiction
		December 31,
		2025				2024
Federal		$	3,846			$	4,151
State
Illinois			1,087				1,134
California			–				338
Other (individually below 5% of total income taxes paid)			655				364
		$	5,588			$	5,987

 

The tax effects of temporary differences giving rise to deferred income tax assets and liabilities were:

Schedule of deferred tax assets and liabilities
		December 31,
		2025				2024
Deferred tax liabilities attributable to:
Accumulated depreciation and amortization		$	(4,196	)		$	(3,829	)
Unrealized gains			–				(467	)
Total deferred tax liabilities			(4,196	)			(4,296	)
Deferred tax assets attributable to:
Net operating losses			6				6
Unrealized loss			23				–
Accrued compensation			480				454
Incentive compensation			550				499
Inventory			349				279
Allowances for doubtful accounts and discounts			2				2
Other			(6	)			(6	)
Total net deferred tax assets			1,404				1,234
Net deferred tax liabilities		$	(2,792	)		$	(3,062	)

 

The following table details the Company’s tax attributes related to net operating losses for which it has recorded deferred tax assets.

Schedule of tax attributes related to net operating losses
Tax Attributes		Gross Amount				Net Amount				Expiration Years
State net operating losses		$	116			$	6			2035
						$	6

 

Lifeway is subject to U.S. federal income tax as well as income tax in multiple state and city jurisdictions. With limited exceptions, Lifeway’s calendar year 2022 and subsequent federal and state tax years remain open by statute. As of December 31, 2025, the unrecognized tax benefit is $0.

 

The amount of interest and penalties recognized in the consolidated statements of operations was $0 during 2025 and 2024, respectively. The amount of accrued interest and penalties recognized in the consolidated balance sheets was $0 at December 31, 2025 and 2024, respectively.

 

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, which includes a broad range of tax reform provisions that may affect the Company’s financial results. The OBBBA changes to corporate taxation include, but are not limited to, 100% bonus depreciation for purchases of qualified property, an elective deduction for domestic research and experimental expenditures, changes to the definition of adjusted taxable income for purposes of determining the interest deduction limitation under Internal Revenue Code Section 163(j), and a more favorable tax rate on Foreign-Derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income). The OBBBA does not have a material impact on our estimated annual effective tax rate or cash flows in the current fiscal year.