NEPHROS INC Income Taxes Disclosure

Note 11 - Income Taxes

 

The components of the provision for income taxes for the years ended December 31, 2025 and 2024 consisted of the following:

 Schedule of Components of Provision (Benefit) for Income Taxes 

(in thousands)		2025				2024
		Year Ended December 31,
(in thousands)		2025				2024
Current
Federal			-				-
State and local		$	12				15
Total Current		$	12				15
Deferred:
Federal			-				-
State and local			-				-
Total Deferred			-				-
Total provision (benefit) for income taxes		$	12				15

 

 

A reconciliation of the income tax benefit computed at the statutory tax rate to the Company’s effective tax rate for the years ended December 31, 2025, and 2024 is as follows:

 Schedule of Effective Income Tax Rate Reconciliation 

		$ in thousands				Percent				$ in thousands				Percent
		Years Ended December 31,
		2025								2024
		$ in thousands				Percent				$ in thousands				Percent
U.S. Federal Statutory Rate		$	253				21.00	%		$	19				21.00	%
State income tax expense, net of federal income tax effect*			187				15.52	%			49				55.78	%
Tax Credits			88				7.26	%			107				121.37	%
Expired NOLs			390				32.30	%			829				940.83	%
Stock-based Compensation			215				17.84	%			56				63.65	%
Other Nontaxable or Nondeductible Items			1				0.03	%			-				0.09	%
Valuation Allowance			(1,122	)			-92.96	%			(1,045	)			-1186.05	%
Effective Tax Rate		$	12.00				0.99	%		$	15				16.67	%

 

The majority of the state tax expense relates to operations in New Jersey, Arizona, and California.

 

 

Significant components of the Company’s deferred tax assets (liabilities) as of December 31, 2025 and 2024 are as follows (in thousands):

 Schedule of Deferred Tax Assets 

		December 31,
		2025				2024
Deferred tax assets:
Net operating loss carry forwards		$	15,082			$	15,628
Research and development credits			893				980
Nonqualified stock option compensation expense			395				601
Lease liabilities			255				348
Capital loss carryforwards			2,035				2,090
Fixed and intangible basis difference			-				-
Other temporary book - tax differences			652				857
Total deferred tax assets			19,312				20,504
Deferred tax liabilities:
Lease right-of-use assets			(245	)			(339	)
Fixed and intangible asset basis difference			(158	)			(134	)
Total deferred tax liabilities			(403	)			(473	)
Deferred tax assets, net			18,909				20,031
Valuation allowance for deferred tax assets			(18,909	)			(20,031	)
Net deferred tax assets after valuation allowance		$	-			$	-

 

A valuation allowance has been recognized to offset the Company’s net deferred tax asset as it is more likely than not that such net asset will not be realized. The Company primarily considered its historical loss and potential Internal Revenue Code Section 382 limitations to arrive at its conclusion that a valuation allowance was required. The Company’s valuation allowance decreased approximately $1.1 million from December 31, 2024 to December 31, 2025.

 

At December 31, 2025, the Company had Federal income tax net operating loss carryforwards of $70 million and State income tax net operating loss carryforwards of $5.3 million. The Company had Federal research and development tax credit carryforwards of $0.90 million at December 31, 2025. The Company’s net operating losses and research and development tax credits may ultimately be limited by Section 382 of the Internal Revenue Code and, as a result, the Company may be unable to offset future taxable income (if any) with losses, or its tax liability with credits, before such losses and credits expire. Included in the Federal net operating loss carryforwards are $14 million of losses generated from 2018 onward that have an indefinite carryover period. The remaining Federal and State net operating loss carryforwards and Federal and State tax credit carryforwards will expire at various times between 2025 and 2044 unless utilized.

 

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions. The Company is subject to income tax examinations by major taxing authorities for all tax years subsequent to 2021 and does not anticipate a change in its uncertain tax positions within the next twelve months. The Company’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

 

Income taxes paid, net of refunds received during the year were not material. Such payments primarily related to U.S State jurisdictions. The total tax paid, net of refunds, during the year ended on December 31, 2025, was $2,000.