MILESTONE SCIENTIFIC INC. Income Taxes Disclosure

NOTE K — INCOME TAXES

 

Milestone Scientific accounts for income taxes under the asset and liability method which requires deferred tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

At December 31, 2025 and 2024, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. No Interest and penalties are present for periods open. The statute of limitations remains open on the Company’s federal tax returns for calendar year 2022 and subsequent years, and on the Company’s state tax returns for calendar year 2021 and subsequent years.

 

Due to Milestone Scientific’s history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific’s deferred tax assets. At December 31, 2025 and 2024, no recognition was given to the utilization of the remaining net operating loss carry forwards in each of these periods.

 

Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at December 31, 2025 and 2024 are as follows:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		2025				2024
Allowance for Doubtful Accounts			2,000				2,000
Capitalized Sec. 174 R&D			295,000				413,000
Inventory Reserve			238,000				253,000
Deferred Officer’s Compensation			687,000				688,000
Depreciation and Amortization			(19,000	)			(35,000	)
Right of Use Asset			(46,000	)			(72,000	)
Lease Liability			49,000				78,000
Net Operating Loss Carryforwards			15,314,000				15,416,000
Tax Credits			621,000				562,000
Other			221,000				423,000
Subtotal			17,362,000				17,728,000
Valuation Allowance			(17,362,000	)			(17,728,000	)
Non-Current Deferred Tax Asset			-				-

 

As of December 31, 2025 and 2024, federal net operating loss carry-forwards are approximately $64,100,000 and $65,000,000, respectively. As of December 31, 2025, Milestone Scientific has approximately $21,800,000 of net operating losses generated before December 31, 2017 that will be available to offset future income, if any, through December 2037. Additionally, as of December 31, 2025, Milestone Scientific has approximately $42,400,000 of net operating losses generated in 2018 or after that can be carried forward indefinitely.

 

State net operating losses were approximately $30,500,000 and $29,400,000 for the periods ended December 31, 2025 and 2024, respectively. As of December 31, 2025, $700,000 of the Company’s state net operating losses can be carried forward indefinitely to offset future income, and the remaining $29,800,000 of state net operating losses begin to expire in 2031.

 

The utilization of Milestone Scientific’s net operating losses may be subject to a substantial limitation due to the “change of ownership provisions” under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a 100% valuation allowance for all of its deferred tax assets due to uncertainty as to their future realization.

 

All taxable losses for years ended December 31, 2025 and 2024 were generated domestically.

 

The reconciliation of the Company’s statutory tax rate and effective tax rate is as follows December 31, 2025 and 2024:

 

SCHEDULE OF RECONCILIATION OF STATUTORY TAX RATE

		Amount				Percent
		Year Ended December 31,
		2025
		Amount				Percent
Pretax (Loss)		$	(5,722,216	)
US Federal Statutory Tax Rate			(1,201,665	)			21.0	%
State and Local Income Taxes, net of Fed Benefit			(66,486	)			1.2	%
Tax Credits			(11,968	)			0.2	%
Change in Valuation Allowance			(364,774	)			6.4	%
Non- Taxable or Non-Deductible items
Stock-Based Compensation			175,491				-3.1	%
Other Permanent Differences			10,151				-0.2	%
Return to Provision
Other Adjustments
Federal NOL Expirations			1,433,866				-25.1	%
NOL Expiration
Other			25,385				-0.4	%
Total		$	-				-	%

 

		2024
Statutory Rate			21.00	%
State Income Tax - All States			-55.10	%
Stock Compensation			-2.51	%
NOL Expiration			-54.08	%
Return to Provision			-1.98	%
Other			0.00	%
Subtotal			-92.67	%
Valuation Allowance			92.67	%

 

The Company’s effective tax rate includes the effects of state and local income taxes, net of the federal income tax benefit, which are primarily attributable to California, Florida, Illinois, and New Jersey, where the Company has significant business activities. These states have higher tax rates compared to other jurisdictions where the Company operates, and together, they account for more than half of the Company’s total state tax expense.

 

For the year ended December 31, 2025, the Company paid state and local income taxes of approximately $12,000, net of refunds received. No federal or foreign income taxes were paid during 2025. The following jurisdictions each individually represented more than 5% of total income taxes paid: California $3,000, Massachusetts $3,000, New Jersey $3,000, Georgia $1,640, and Texas $1,315.