Newsmax Inc.NMAX
Newsmax Inc. Income Taxes Disclosure
NOTE 8. INCOME TAXES
The components of income tax expense related to its operations are as follows at December 31:
| 2025 | 2024 | ||||||||||
| Current income tax: | |||||||||||
| Federal | $ | - | $ | - | |||||||
| State | - | - | |||||||||
| Deferred income tax: | |||||||||||
| Federal | - | - | |||||||||
| State | - | - | |||||||||
| Total income tax expense | $ | - | $ | - | |||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| 2025 | 2025 | 2024 | 2024 | ||||||||||||||||||||
| Tax at U.S. statutory rate | $ | (20,785,360) | 21.00 | % | $ | (15,172,056) | 21.00 | % | |||||||||||||||
| State and Local Income Taxes | — | — | |||||||||||||||||||||
| Tax Credits | — | — | |||||||||||||||||||||
| Changes in Valuation Allowance | 20,912,277 | (21.13) | 14,376,965 | (19.90) | |||||||||||||||||||
| Nontaxable and Nondeductible items | |||||||||||||||||||||||
| Share-based payment awards | (2,452,942) | 2.48 | — | — | |||||||||||||||||||
| Derivative liability revaluation | 1,281,888 | (1.30) | 499,800 | (0.69) | |||||||||||||||||||
| Warrant liability revaluation | 383,077 | (0.39) | — | — | |||||||||||||||||||
| Others | 676,996 | (0.68) | 203,842 | (0.28) | |||||||||||||||||||
| Other Adjustments | (15,936) | 0.02 | 91,449 | (0.13) | |||||||||||||||||||
| Total | $ | — | — | % | $ | — | — | % | |||||||||||||||
The components of deferred income tax assets and liabilities in the Company’s consolidated financial statements are as follows at December 31:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net Operating Loss Carryover | $ | 62,316,225 | $ | 41,404,850 | |||||||
| Settlement Liability | 18,090,737 | 15,445,497 | |||||||||
| Lease Liabilities | 2,367,408 | 2,215,587 | |||||||||
| Stock Compensation | 1,905,693 | - | |||||||||
| Returns and Allowances | 1,000,758 | 1,219,183 | |||||||||
| Accrued Expenses | 88,935 | 1,702,715 | |||||||||
| Inventory | 211,585 | 211,426 | |||||||||
| Deferred Revenue | - | 139,669 | |||||||||
| Unrealized Gain On Marketable Securities | - | 12,887 | |||||||||
| Charitable Contribution Carryover | 207,836 | 95,182 | |||||||||
| Intangible Assets | 135,788 | 201,044 | |||||||||
| Retention Credit | 43,490 | 43,490 | |||||||||
| Total deferred tax assets | $ | 86,368,455 | $ | 62,691,530 | |||||||
| Deferred tax liabilities: | |||||||||||
| Carriage Fee | $ | (3,130,954) | $ | (3,891,538) | |||||||
| Right of Use Asset | (2,292,203) | (2,034,573) | |||||||||
| Property and Equipment | (295,820) | (723,793) | |||||||||
| Unrealized Loss On Marketable Securities | (518,264) | - | |||||||||
| Deferred Revenue | (33,768) | - | |||||||||
| Total deferred tax liabilities | (6,271,009) | (6,649,904) | |||||||||
| Valuation allowance | 80,097,446 | 56,041,626 | |||||||||
| Net deferred tax assets | $ | - | $ | - | |||||||
The Company anticipates that it is more likely than not that most of its net deferred tax assets will not be realized and we have recorded a valuation allowance against such net deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, we considered all available positive and negative evidence, including our past operating results, forecasted earnings, frequency and severity of current and cumulative losses, duration of statutory carryforward periods, future taxable income and prudent and feasible tax planning strategies. The realization of our NOLs and certain other deferred tax assets may be further limited due to the application of IRC Section 382 and state equivalent statutes.
As of December 31, 2025, we had U.S. Federal NOL carryforwards of $240.7 million generated in tax years 2011 through 2025, of which $20.8 million will expire from 2031 to 2037 and $219.9 million, will carryforward indefinitely. We have state NOL carryforwards of $209.0 million generated in tax years 2009 through 2025. The state NOL carryforwards of $132.3 million will expire from 2025 to 2044 and $76.7 million will carry forward indefinitely.
As of December 31, 2025 we have recorded a valuation allowance of $80.1 million for the portion of the deferred tax asset that did not meet the more-likely-than-not realization criteria. We increased the valuation allowance on our net deferred taxes by $24.1 million during 2025.
We do not have any unrecorded unrecognized tax positions (“UTPs”) as of December 31, 2025. While we currently do not have any UTPs, it is foreseeable that the calculation of our tax liabilities may involve dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
Upon identification of a UTP, we would (1) record the UTP as a liability in accordance with ASC 740 and (2) adjust these liabilities if/when management’s judgment changes as a result of the evaluation of new information not previously available. Ultimate resolution of UTPs may produce a result that is materially different from an entity’s estimate of the potential liability. In accordance with ASC 740, we would reflect these differences as increases or decreases to income tax expense in the period in which new information is available. If any, we recognize and include interest and penalties accrued on uncertain tax positions as a component of income tax expense.
On July 4, 2025, U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBBA”) which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, many of which are generally not effective until January 1, 2026. The OBBBA did not have a material effect on the Company’s consolidated financial statements for the fiscal year ended December 31, 2025. The Company is currently evaluating the future impact of the OBBBA, but does not expect it will have a material impact on its consolidated financial statements.
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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.