CO2 Energy Transition Corp. Income Taxes Disclosure

NOTE 9. INCOME TAXES

 

The Company’s net deferred tax assets are as follows: 

 

		December 31,				December 31,
		2025				2024
Deferred tax assets
Net operating loss carryforward		$	-			$	-
Startup Costs			248,509				137,879
Total deferred tax assets			248,509				137,879
Valuation allowance			(248,509	)			(137,879	)
Deferred tax assets, net of allowance		$	-			$	-

 

The income tax provision for the years ended December 31, 2025 and 2024 consists of the following:

 

		December 31,				December 31,
		2025				2024
Federal
Current		$	579,272			$	61,039
Deferred			(110,630	)			(47,668	)
State
Current		$	—			$	—
Deferred			—				—
Change in valuation allowance			110,630				47,668
Income tax provision		$	579,272			$	61,039

 

As of December 31, 2025 and 2024, the Company had a total of $0 and $0, respectively, of U.S. federal net operating loss carryovers available to offset future taxable income. The federal net operating loss can be carried forward indefinitely.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended December 31, 2025 and 2024, the change in the valuation allowance was $110,630 and $47,668 respectively.

 

A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:

 

		December 31,				December 31,
		2025				2024
Statutory federal income tax rate			21.0	%			21.0	%
State taxes, net of federal tax benefit			0.0	%			0.0	%
Change in fair value of warrants			0.0	%			0.0	%
Change in valuation allowance			5.0	%			74.9	%
Income tax provision			26.0	%			95.9	%

 

The Company’s effective tax rates for the periods presented differ from the expected (statutory) rates due to changes in fair value in warrants, transaction costs associated with warrants and the recording of full valuation allowances on deferred tax assets.

 

The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities.