NextBoat Inc. Income Taxes Disclosure

NOTE 16. INCOME TAXES

 

OTHYS (a Limited liability company (“LLC”) since inception), Boat Center (an LLC since inception) and Azure (an LLC since inception) had elected to be taxed as a partnership under the provisions of the Internal Revenue Code (the “Code”). Under this Code, OTHYS, Boat Center and Azure does not pay federal corporate income taxes on its taxable income. Instead, the member is liable for individual federal income taxes on the Operating Entity’s taxable income. Therefore, no provision or liability for federal income taxes has been included in the accompanying financial statements.

 

OTH incorporated on January 3, 2025 and taxed as C corporation under the Code. AYG was incorporated in the State of Florida on August 8, 2025 and taxed as C corporation under the Code. The income tax liability as of December 31, 2025 and December 31, 2024 was $956 and zero, respectively. OTH and AYG are subject to both U.S. federal and state income tax in certain jurisdictions.

 

The Company is an Emerging Growth Company and has elected to use the extended transition period for complying with new or revised accounting standards. Accordingly, the Company has not yet adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.

 

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

 SCHEDULE OF INCOME TAX PROVISION

		For the year ended December 31, 2025				For the year ended December 31, 2024
Computed “Expected” Income Taxes		$	-			$	208,439
Non C-Corporation Income			-				(208,439	)
Entity Level State Income Tax on LLC Income			956				-
Income tax payable			956				-

 

		For the year ended December 31,2025				For the year ended December 31,2024
Current
Federal			-				-
State			956				-
Total current income tax provision			956				-
Deferred
Federal			(132,911	)			-
State			-				-
Total deferred taxes			(132,911	)			-
Total provision for income taxes		$	(131,955	)		$	-

 

 

The tax effect of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases that give rise to deferred tax assets and liabilities is as follows:

 SCHEDULE OF DEFERRED TAX ASSETS

		December 31, 2025				December 31, 2024
Deferred tax assets:		$				$
Interest deduction limitation			10,678				-
Net operating loss carry forward			310,414				-
Accruals and reserves			1,163				-
Stock based compensation			242,535				-
Operating lease liabilities			1,710,130				-
Other assets			58,631				-
Less: valuation allowance			(509,525	)			-
Total deferred tax assets		$	1,824,026			$	-
Goodwill and identifiable intangible assets*			(139,102	)			-
Operating lease, right-of-use assets			(1,684,924	)			-
Total deferred tax liabilities		$	(1,824,026	)		$	-
Net deferred tax asset (liability)		$	-			$	-

 

*

In connection with the Company’s 2025 incorporation and related acquisition/accounting, the Company recorded deferred tax liabilities associated with purchase accounting adjustments (primarily identifiable intangible assets). These deferred tax liabilities were recorded as part of acquisition accounting and did not affect the current-year income tax provision.

 

The following table summarizes the Company’s effective tax rate:

 SCHEDULE OF COMPANY’S EFFECTIVE TAX RATE

		For the year ended December 31, 2025				For the year ended December 31, 2024
Statutory tax rate
Federal			21.00	%			21.00	%
State and local taxes (net of federal tax benefit)			6.83	%			0.00	%
Income not subject to corporate tax			9.59	%			(21.00	)%
Change in valuation allowance			(31.77	)%			0.00	%
Tax Rate Change			(1.92	)%			0.00	%
Deferred Tax Adjustments			4.65	%			0.00	%
Other			(0.16	)%			0.00	%
Effective tax rate			8.22	%			0.00	%

 

Prior to 2025, the Company was an LLC and therefore it had no net operating loss carryforwards. Net operating losses and tax credit carryforwards as of December 31, 2025 were as follows:

 SCHEDULE OF NET OPERATING LOSSES AND TAX CREDIT CARRYFORWARDS

		Amount				Expiration Year
		As of December 31, 2025
		Amount				Expiration Year
Net operating losses, federal		$	1,220,368				Do not expire
Net operating losses, state			1,238,366				Various, starting in 15 years
Tax credits, federal			-				-
Tax credits, state			-				-

 

Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), annual use of the Company’s net operating losses (“NOLs”) and research and development (“R&D”) credit carryforwards may be limited in the event that a cumulative change in ownership of more than 50.0% occurs within a three-year period. The Company has not undergone an analysis to determine whether this limitation would apply to the utilization of the NOL carryforward. However, as the federal NOLs do not expire, the Company does not believe that any potential limitations to federal or state NOLs, or federal credit carryforwards, if applicable, would be material to the financial statements.

 

Uncertain tax positions

 

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2025 and 2024, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income taxes for the years ended December 31, 2025 and in 2024. The Company also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from December 31, 2025.

 

As of December 31, 2025, there were no active taxing authority examinations in any of the Company’s major tax jurisdictions.

 

On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. While the OBBBA did not have a significant impact on the Company’s total tax provision as of December 2025, the Company is still evaluating the Company’s position on the elective provisions of the law and the potential impacts of those elections on the consolidated financial statements.

 

For the year ended December 31, 2025, there was no cash paid for federal or state taxes.