NeoVolta Inc. Income Taxes Disclosure
| (4) | Income Taxes |
The Company is subject to United States federal income taxes at an approximate rate of 21%. The reconciliation of the provision for income taxes at the federal statutory rate, compared to the Company’s income tax expense as reported, is as follows (rounded to nearest $00):
| Year Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Income tax benefit computed at statutory rate | $ | 747,900 | $ | 279,400 | ||||
| Change in valuation allowance | (747,900 | ) | (279,400 | ) | ||||
| Provision for income taxes | $ | – | $ | – | ||||
Significant components of the Company’s deferred tax assets at the currently enacted corporate income tax rate are as follows (rounded to nearest $00):
| June 30, 2025 | June 30, 2024 | |||||||
| Deferred income tax assets: | ||||||||
| Net operating losses | $ | 1,570,100 | $ | 824,300 | ||||
| Valuation allowance | (1,570,000 | ) | (824,300 | ) | ||||
| Net deferred income tax assets | $ | – | $ | – | ||||
The Company has a cumulative tax operating loss carry forward as of June 30, 2025 of approximately $7,477,000, with an indefinite expiration period.
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.