Eightco Holdings Inc. Income Taxes Disclosure

18. INCOME TAXES

 

Eightco Holdings Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income.

 

Forever 8 Fund, LLC, BlockHiro, LLC and Cryptyde Shared Services, LLC are limited liability companies which are disregarded entities for income tax purposes and are owned 100% by Eightco Holdings Inc. and Ferguson Containers, Inc., respectively. The Company pays corporate federal, state and local taxes on income allocated to it from BlockHiro, LLC and 8co Holdings Shared Services, LLC.

 

CW Machines, LLC is a limited liability company for income tax purposes and is owned 51% by Eightco Holdings Inc. The Company pays corporate federal, state and local taxes on income allocated to it from CW Machines, LLC.

 

Ferguson Containers is taxed as a corporation and pays corporate federal, state and local taxes on income.

 

Forever 8 UK Ltd. is taxed as a corporation and pays foreign taxes on income.

 

 

EIGHTCO HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31, 2024 and 2023

 

18. INCOME TAXES (continued)

 

F8 Fund EU Holdings BV is taxed as a corporation and pays foreign taxes on income.

 

Components of income before income taxes were as follows:

 SCHEDULE OF COMPONENTS OF INCOME BEFORE INCOME TAXES 

		2024				2023
United States		$	315,844			$	(67,719,971	)
Foreign			248,218				(600,443	)
Income (loss) before income tax expense		$	564,062			$	(68,320,414	)
Less: income before income tax expense – discontinued operations			(409,588	)			(736,701	)
Income before income tax expense – continuing operations			154,474				(69,057,115	)

 

The tax effects of temporary differences that give rise to deferred tax assets or liabilities are presented below:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 

		2024				2023
Deferred tax assets:
Stock-based compensation		$	(8,387	)		$	(8,387	)
Goodwill and intangibles			487,575				270,574
Leases			-				-
Reserves			117,600				140,143
Net operating loss carryforwards			8,118,656				8,755,550
Less: valuation allowance			(8,715,444	)			(9,157,880	)
Net deferred tax assets		$	-			$	-
Deferred tax liabilities:
Right of use assets		$	-				-
Property and equipment		$	-				(82,104	)
Net deferred tax liabilities		$	-			$	(82,104	)
Net deferred taxes		$	-			$	(82,104	)

 

The income tax provision consists of the following:

 SCHEDULE OF INCOME TAX PROVISION 

		2024				2023
Current:
Federal		$	-			$	-
State			72,976				-
Foreign			(135,337	)			-
Total current			(62,361	)			-
Deferred:
Federal			(55,816	)			(4,415,124	)
State			(26,287	)			-
Foreign			-				(114,084
Less: change in valuation allowance			-				4,529,208
Total deferred			(82,103	)			-
Total income tax provision (benefit)		$	(144,464	)		$	-
Less: income tax provision (benefit) – discontinued operations			(9,127	)			-
Total income tax provision (benefit) – continuing operations			(135,337	)			-

 

 

EIGHTCO HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31, 2024 and 2023

 

18. INCOME TAXES (continued)

 

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

 SCHEDULE OF RECONCILIATION OF STATUTORY FEDERAL INCOME TAX 

		2024				2023
Tax at federal statutory rate			21.0	%			21.0	%
Income from pass-through entities taxable to noncontrolling interests			0.0	%			0.0	%
Warrant valuation			0.0	%			-14.5	%
Nondeductible expenses			-1.7	%			-0.1	%
State and local income taxes			12.9	%			0.0	%
Foreign income not subject to U.S. federal taxes			-24.0	%			-0.2	%
U.S. income taxes subject to valuation allowance			0.0	%			-6.2	%
Change in valuation allowance			-33.8	%			0.0	%
Total income tax provision			-25.6	%			0.0	%
Less: adjustment for discontinued operations			-62.0	%			0.0	%
Income tax provision (benefit) from continuing operations			-87.6	%			0.0	%

 

The Company recorded an income tax benefit of approximately $(135,337) and $0 for the years ended December 31, 2024 and 2023, respectively. This benefit reflects the release of certain foreign tax obligations and changes in deferred tax balances, including adjustments for valuation allowances. The Company recorded a full valuation allowance against its deferred tax assets in both 2024 and 2023 due to cumulative losses and the lack of objectively verifiable positive evidence. A separate tax benefit of approximately $(9,127) related to the discontinued operations of Ferguson Containers is presented within discontinued operations on the consolidated statements of operations.

 

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2024, the Company had $0 unrecognized tax benefits and $0 charges during 2024, and accordingly, the Company did not recognize any interest or penalties during 2024 related to unrecognized tax benefits. There is $0 accrual for uncertain tax positions as of December 31, 2024.

 

The Company files U.S. income tax returns and a state income tax return. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2021 and thereafter are subject to examination by the relevant taxing authorities.

 

As of December 31, 2024, the Company had a net operating loss carryforward for federal income tax purposes of approximately $8,118,656. These carryforwards were generated in 2022 and later, and therefore do not expire, but are subject to annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions, and may be utilized to offset up to 80% of taxable income in any future period.