Research Solutions, Inc. Income Taxes Disclosure
Note 8. Income Taxes
The components of income (loss) before provision of income taxes are as follows:
Years Ended | ||||||
June 30, | ||||||
|
| 2025 |
| 2024 | ||
United States | $ | 1,299,850 | $ | (3,819,973) | ||
Foreign |
| 48,514 |
| 146,447 | ||
Total income (loss) before provision for income taxes | $ | 1,348,364 | $ | (3,673,526) | ||
The provision for income taxes consists of the following for the years ended June 30, 2025 and 2024:
Years Ended | ||||||
June 30, | ||||||
|
| 2025 |
| 2024 | ||
Current |
|
|
|
| ||
Federal | $ | — | $ | — | ||
State |
| 33,613 |
| 21,143 | ||
Foreign |
| 49,198 |
| 91,928 | ||
Deferred |
|
|
|
| ||
Federal |
| — |
| — | ||
State |
| — |
| — | ||
Foreign |
| — |
| — | ||
Provision for income tax expense | $ | 82,811 | $ | 113,071 | ||
The reconciliation of the effective income tax rate to the federal statutory rate is as follows:
Years Ended |
| ||||
June 30, | |||||
|
| 2025 |
| 2024 |
|
Federal income tax rate |
| 21.0 | % | 21.0 | % |
State tax, net of federal benefit |
| 2.4 | % | 1.7 | % |
Change in earnout | 22.9 | % | — | % | |
Adjustment to prior year | (157.2) | % | — | % | |
Executive compensation | (11.6) | % | — | % | |
Other permanent differences |
| 3.1 | % | (70.5) | % |
Foreign rate differential | 2.9 | % | — | % | |
Tax credits | (15.3) | % | — | % | |
Change in valuation allowance |
| 137.9 | % | 44.9 | % |
Effective income tax rate |
| 6.1 | % | (2.9) | % |
For the year ended June 30, 2025, the majority of the adjustment to the prior year, primarily offset by the change in valuation allowance, was due to recording additional federal and state net operating losses (“NOL”) from stock acquisitions in prior years. This was precipitated by the finalization of a study to determine the amount of NOLs available after the change in ownership under Internal Revenue Code Section 382.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at June 30, 2025 and 2024 are as follows:
|
| June 30, |
| June 30, | ||
2025 | 2024 | |||||
Deferred tax assets: |
|
|
|
| ||
Federal net operating loss carryforward | $ | 3,475,943 | $ | 3,512,478 | ||
State net operating loss carryforward |
| 479,222 |
| 531,098 | ||
Stock based compensation |
| 1,164,121 |
| 1,440,562 | ||
Tax attributes | 196,809 | — | ||||
Research costs | 1,713,966 | — | ||||
Other |
| 63,948 |
| 34,571 | ||
Total deferred tax assets |
| 7,094,009 |
| 5,518,709 | ||
Deferred tax liability: |
|
| ||||
Depreciation and amortization |
| (2,102,792) |
| (2,386,241) | ||
Net deferred tax assets |
| 4,991,217 |
| 3,132,468 | ||
Less valuation allowance |
| (4,991,217) |
| (3,132,468) | ||
$ | — | $ | — | |||
The Company has provided a valuation allowance on the deferred tax assets at June 30, 2025 and 2024 to reduce such assets to zero, since it is not deemed more likely than not that the Company will generate future taxable income to utilize such assets. Management will review this valuation allowance requirement periodically and adjust as warranted. The net change in the valuation allowance for the years ended June 30, 2025 and 2024 was an increase of $1,858,749 and a decrease of $1,649,876, respectively.
At June 30, 2025 and 2024, the Company had federal NOL carryforwards of approximately $16,552,000 and $16,726,000, respectively, and state NOL carryforwards of approximately $7,502,000 and $7,748,000, respectively. Federal NOLs generated after 2018 can be carried forward indefinitely with some limitations. Federal NOLs generated prior to that have a 20-year carryforward period. At June 30, 2025, approximately $1,300,000 of federal NOLs are subject to the 20-year carryforward period and expire in . The remaining federal NOLs at June 30, 2025 can be carried forward indefinitely; however, of these NOLs, approximately $11,808,000 relate to companies acquired in prior years and are subject to annual limitations under IRC Section 382. State NOLs will begin to expire in .
The Company is subject to taxation in the United States, various states and Mexico. The Company is subject to United States federal or state income tax examinations by certain tax authorities for fiscal year 2015 and forward, in part due to utilization of NOLs in the current fiscal year. The Company is currently not under examination in any jurisdiction.
As of June 30, 2025 and 2024, the Company had no uncertain tax positions.
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2025 and 2024, the Company has no accrued interest or penalties related to uncertain tax positions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 19, 2025 | Showing above |
| 2024 | Sep 20, 2024 | |
| 2023 | Sep 15, 2023 | |
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.