MNTN, Inc.MNTN
MNTN, Inc. Income Taxes Disclosure
Income Taxes
The components of the income tax provision were as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current | |||||||||||
| Federal | $ | (1,657) | $ | 3,461 | |||||||
| State | 1,607 | 2,289 | |||||||||
| (50) | 5,750 | ||||||||||
| Deferred | |||||||||||
| Federal | (4,039) | 36 | |||||||||
| State | (5,485) | — | |||||||||
| (9,524) | 36 | ||||||||||
Total income tax provision | $ | (9,574) | $ | 5,786 | |||||||
A reconciliation of the income tax provision to the amount computed at the federal statutory rate is as follows:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Tax provision at U.S. Federal statutory rates | 21.0 | % | 21.0 | % | |||||||
State income taxes net of Federal benefit | (40.7) | 12.1 | |||||||||
General business credits | 18.5 | 11.6 | |||||||||
| Non-deductible permanent items | (6.1) | 2.9 | |||||||||
| FIN 48 | (4.6) | (2.0) | |||||||||
| Stock options | (53.6) | (3.5) | |||||||||
| Embedded derivative liability | (38.9) | (14.9) | |||||||||
| Loss on debt extinguishment | (34.7) | 0.0 | |||||||||
| Section 162(m) limitation | (102.9) | 0.0 | |||||||||
| Change in valuation allowance | 301.8 | (48.6) | |||||||||
| Effective income tax rate | 59.8 | % | (21.4) | % | |||||||
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Allowance for expected credit losses and customer credits | $ | 411 | $ | 375 | |||||||
| Accrued liabilities | 107 | 3,317 | |||||||||
| Net operating loss carryforwards | 10,519 | 6,084 | |||||||||
| Stock-based compensation | 3,531 | 27,947 | |||||||||
| Fixed assets | — | 1 | |||||||||
| Capitalized costs under Section 174 | 1,830 | 14,019 | |||||||||
| Intangible assets | 43 | — | |||||||||
| Research and development credits | 3,726 | 675 | |||||||||
Charitable contributions | 59 | — | |||||||||
| Other | 744 | 400 | |||||||||
| Total gross deferred tax assets | 20,970 | 52,818 | |||||||||
| Valuation allowance | (716) | (49,035) | |||||||||
| Deferred tax assets net of valuation allowance | 20,254 | 3,783 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets | — | (20) | |||||||||
| Intangible assets | (10,854) | (3,887) | |||||||||
| Total gross deferred tax liabilities | (10,854) | (3,907) | |||||||||
| Net deferred income taxes | $ | 9,400 | $ | (124) | |||||||
ASC 740, Income Taxes requires that a valuation allowance be established to reduce a deferred tax asset to its realizable value when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all positive and negative evidence needs to be considered, including the utilization of past tax credits and length of carryback and carryforward periods, reversal of temporary differences, tax planning strategies, current and past performance, the market environment in which the Company operates, and the evaluation of tax planning strategies to generate future taxable income.
The Company regularly assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of its deferred tax assets will not be realized. The Company evaluates and weighs all available positive and negative evidence such as historical results, future reversals of existing deferred tax liabilities and projected future taxable income. The assessment requires significant judgment and is performed in each of the applicable jurisdictions. The Company concluded that, it is more likely than not that it will realize the benefit of its deferred tax assets. Release of the valuation allowance resulted in the recognition of certain deferred tax assets and income tax benefit for the period.
The Company determined that it is more likely than not that a portion of the deferred tax assets will not be realized and therefore maintained a valuation allowance of $0.7 million on certain deferred tax assets as of December 31, 2025.
As of December 31, 2025 and 2024, the Company had Federal net operating loss carryforwards of approximately $33.9 million and $13.0 million, respectively. As of December 31, 2025 and 2024, the Company had state net operating loss carryforwards of approximately $49.8 million and $41.1 million, respectively. Federal net operating losses generated before 2018 begin to expire in 2032 and state net operating losses will begin to expire in 2035. The Company has approximately $31.8 million of federal net operating losses with an unlimited carryforward period. As a result of prior ownership changes, the utilization of certain net operating loss carryforwards are subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state provisions. Any net operating losses or credits that would expire unutilized as a result of Section 382 and 383 limitations have been removed from the table of deferred tax assets and the accompanying disclosures of net operating loss and research and development carryforwards.
As of December 31, 2025 and 2024, the Company has recorded unrecognized tax liabilities of $7.9 million and $3.6 million, respectively, related to state income tax matters and the Company’s research and development credits. Of the total unrecognized tax liability as of December 31, 2025, $7.9 million could result in a reduction of the Company’s effective tax rate if recognized. This includes estimated accrued interest and penalties related to unrecognized tax benefits recorded within the income tax provision. The Company expects $2.0 million of its uncertain tax positions to reverse in the next twelve months.
A reconciliation of the Company’s unrecognized tax liabilities is as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Uncertain tax liabilities, beginning of year | $ | 3,351 | $ | 1,171 | |||||||
| Gross increases related to prior period tax positions | 1,747 | 480 | |||||||||
| Gross increases related to current year tax positions | 2,781 | 1,700 | |||||||||
| Uncertain tax liabilities, end of year | $ | 7,879 | 3,351 | ||||||||
Total unrecognized tax benefits recorded on the Company’s consolidated balance sheets were as follows (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Total unrecognized tax liability balance | $ | 7,879 | $ | 3,351 | |||||||
| Amounts netted against related deferred tax assets | (4,000) | — | |||||||||
| Unrecognized tax payable recorded on balance sheet | $ | 3,879 | $ | 3,351 | |||||||
The Company recognizes interest and/or penalties related to income tax matters as a component of the income tax provision. During the year ended December 31, 2025, the Company recognized $0.1 million of interest and penalties in income tax provision. As of December 31, 2025, the Company had $0.5 million of interest and $0.4 million penalties included in uncertain tax positions.
The Company is subject to U.S. federal income tax as well as income tax in multiple state tax jurisdictions. The Company’s federal income tax return is open to audit under the statute of limitations for the years ended December 31, 2022 through 2025, and state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2021 through 2025. In addition, several years prior to 2022 for federal and 2021 for states remain open due to net operating loss utilization in 2021, 2023 and 2024.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. This legislation introduces several provisions impacting corporate taxes including (i) the permanent extension of certain expiring or expired elements of the Tax Cuts and Jobs Act such as 100% bonus depreciation and favorable modifications related to deductibility of interest, and (ii) expensing of research and experimental expenses. The OBBBA contains multiple effective dates, with some provisions applicable beginning in 2025. The Company expects the most impactful provision to be the reinstatement of expensing of domestic research and experimental expenses, which has changed the Company's position from taxable income to taxable loss in the current year. Most states have not confirmed whether they will conform to the federal changes or not, and the provision has been prepared based on states' guidance based on prior law changes.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.