Quest Resource Holding Corp Income Taxes Disclosure
10. Income Taxes
We compute income taxes using the asset and liability method in accordance with FASB ASC Topic 740, Income Taxes. Under the asset and liability method, we determine deferred income tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities and measure those using currently enacted tax rates and laws. We provide a valuation allowance for the amount of deferred tax assets that, based on available evidence, are more likely than not to be realized. Realization of our net operating loss carryforward was not reasonably assured as of December 31, 2024 and 2023, and we have recorded a valuation allowance of $21.4 million and $17.4 million, respectively against deferred tax assets in excess of deferred tax liabilities in the accompanying consolidated financial statements.
The components of net deferred taxes are as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Deferred tax assets (liabilities): |
|
|
|
|
|
|
||
Net operating loss |
|
$ |
1,258 |
|
|
$ |
1,531 |
|
Depreciation and amortization |
|
|
9,271 |
|
|
|
7,336 |
|
Stock-based compensation |
|
|
4,637 |
|
|
|
4,780 |
|
Interest expense |
|
|
6,005 |
|
|
|
2,952 |
|
Capitalized software costs |
|
|
(21 |
) |
|
|
(53 |
) |
Bonus accrual |
|
|
131 |
|
|
|
210 |
|
Allowance for doubtful accounts |
|
|
218 |
|
|
|
412 |
|
Other |
|
|
(98 |
) |
|
|
245 |
|
Total deferred tax assets, net |
|
|
21,401 |
|
|
|
17,413 |
|
Less: valuation allowance |
|
|
(21,401 |
) |
|
|
(17,413 |
) |
Net deferred taxes |
|
$ |
— |
|
|
$ |
— |
|
Our statutory income tax rate is expected to be approximately 26%. We had income tax expense of $291 thousand and $387 thousand for the years ended December 31, 2024 and 2023, respectively, which is attributable to state obligations for states with no net
operating loss carryforwards, the continued reserve against the benefit of the net operating losses at the federal level, and other timing differences. The provision for income taxes consisted of the following (in thousands):
|
|
Years Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Current |
|
$ |
291 |
|
|
$ |
387 |
|
Deferred |
|
|
— |
|
|
|
— |
|
Total |
|
$ |
291 |
|
|
$ |
387 |
|
The reconciliation between the income tax expense calculated by applying statutory rates to net loss and the income tax expense reported in the accompanying consolidated financial statements is as follows (in thousands):
|
|
Years Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
U.S. federal statutory rate applied to pretax loss |
|
$ |
(3,102 |
) |
|
$ |
(1,450 |
) |
State taxes - current, net of federal benefit |
|
|
291 |
|
|
|
387 |
|
State taxes - deferred |
|
|
(808 |
) |
|
|
(428 |
) |
Permanent differences |
|
|
(171 |
) |
|
|
(306 |
) |
Benefit of federal operating loss carryforwards |
|
|
63 |
|
|
|
(332 |
) |
Change in state tax rates and other |
|
|
30 |
|
|
|
(898 |
) |
Change in valuation allowance |
|
|
3,988 |
|
|
|
3,414 |
|
|
|
$ |
291 |
|
|
$ |
387 |
|
As of December 31, 2024 and 2023, we had federal income tax net operating loss carryforwards of approximately $4.8 million and $5.9 million, respectively, which primarily expire at various dates ranging from 2036 through 2037 and $300 thousand which can be carried forward indefinitely. We are subject to limitations existing under Internal Revenue Code Section 382 (Change of Control) relating to the availability of the operating loss, therefore utilization of a portion of the Company's net operating loss may be limited in future years.
As of December 31, 2024 and 2023, we did not recognize any assets or liabilities relative to uncertain tax positions, nor do we anticipate any significant unrecognized tax benefits will be recorded during 2025. It is our policy to classify interest and penalties on income taxes as interest expense or penalties expense, should any be incurred.
Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the financial statements. Tax positions include the following:
Want the next Quest Resource Holding Corp income taxes disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment Quest Resource Holding Corp's next filing hits EDGAR. No credit card, your email never gets sold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 12, 2025 | Showing above |
| 2018 | Mar 14, 2019 | |
| 2016 | Mar 31, 2017 | |
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.