NOTE 9. INCOME TAXES

The following table presents domestic and foreign income before income taxes for the fiscal years ended March 31:


		2026			2025
Domestic		$	13,899,426		$	11,905,345
Foreign			(2,744,884)			(2,033,224)
Income before income taxes		$	11,154,542		$	9,872,121

The provision (benefit) for income taxes consists of the following for the fiscal years ended March 31:


		2026			2025
Current income taxes:
U.S. federal		$	42,518		$	1,550,803
State and local			30,976			29,563
Foreign			927,561			93,161
Total current			1,001,055			1,673,527
Deferred income taxes:
U.S. federal			3,492,532			1,358,671
State and local			29,332			61,661
Foreign			(1,194,892)			(953,135)
Total deferred			2,326,972			467,197
Income tax expense		$	3,328,027		$	2,140,724

The Company has determined that undistributed earnings of certain non-U.S. subsidiaries will be reinvested for an indefinite period of time. The Company has both the intent and ability to indefinitely reinvest these earnings. Given its intent to reinvest these earnings for an indefinite period of time, the Company has not accrued a deferred tax liability on these earnings. A determination of an unrecognized deferred tax liability related to these earnings is not practicable.

A reconciliation of the statutory tax rate to the effective rate is as follows for the fiscal year ended March 31, 2026:


		Amount			Percentage
Federal income tax at statutory rate		$	2,342,454		21.0	%
State and local income taxes, net of federal income tax effect⁽¹⁾			43,614		0.4	%
Foreign tax effects
United Kingdom			146,567		1.3	%
United Arab Emirates			129,506		1.2	%
Other			22,685		0.2	%
Effect of cross border tax laws			(24,633)		(0.2)	%
Nontaxable or nondeductible items
Executive compensation and share-based compensation			512,897		4.6	%
Other			15,197		0.1	%
Other adjustments
U.S. return to provision			129,944		1.2	%
Other			9,796		0.0	%
Actual income tax provision		$	3,328,027		29.8	%

⁽¹⁾State taxes in California and New York made up the majority (greater than 50 percent) of the tax effect in this category.

A reconciliation of the statutory tax rate to the effective rate is as follows for the fiscal year ended March 31, 2025:


Federal income tax statutory rate	21.0	%
State and local income taxes, net of federal income tax benefit	1.6	%
Foreign subsidiary earnings	0.1	%
Remeasurement of deferred tax balances	(0.9)	%
Return to provision	(5.9)	%
Executive compensation	6.7	%
Share-based compensation	(1.0)	%
Other, net	0.1	%
Effective income tax rate	21.7	%

On July 4, 2025, the reconciliation bill, commonly referred to as the “One Big Beautiful Bill Act” (“OBBBA”), was signed into law in the U.S., introducing a broad range of tax reform provisions, including changes to interest deductibility, bonus depreciation, and various international provisions with multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The impact of the OBBBA tax legislation did not have a material impact on the consolidated financial statements during the fiscal year ended March 31, 2026, and is not expected to have a material impact in future periods.

The Company’s effective tax rate also may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses. These same and other factors, including history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets.

Income tax payments by jurisdiction for the fiscal year ended March 31, 2026 were comprised of the following:


Income taxes paid:
U.S., federal	$	851,591
U.S., state and local		8,655
United Kingdom		376,358
Other		63,716
Total income taxes paid	$	1,300,320

Significant components of the Company’s deferred income tax liability as of March 31, 2026 and 2025 are as follows:


		2026			2025
Deferred tax assets:
Net operating loss carryforwards		$	2,126,553		$	683,621
Interest expense carryforwards			10,278,568			9,533,126
Lease liability			1,934,351			1,492,056
Compensation			220,045			318,789
Equity investments			153,994			155,027
Total deferred tax assets			14,713,511			12,182,619
Deferred tax liabilities:
Fixed assets and leasehold improvements			(105,337)			(68,074)
Intangible assets			(54,150,727)			(48,528,566)
Lease right of use			(1,761,331)			(1,322,937)
Fair value of swaps			(234,806)			(314,107)
Prepaid insurance			(47,907)			—
Unrealized foreign exchange gains			(174,780)			(82,866)
Branch earnings			(24,687)			(94,168)
Total deferred tax liabilities			(56,499,575)			(50,410,718)
Net deferred tax liabilities		$	(41,786,064)		$	(38,228,099)

As of March 31, 2026, the Company has income tax net operating loss carryforwards of $59,329,515. The Company has recorded a deferred tax asset of $2,126,553, reflecting the benefit of $59,329,515 in loss carryforwards. Such net operating loss carryforwards will expire as follows:


Federal	$	5,916,060	No expiration date
New York		46,917,852	2035-2046
California		3,421,549	2040-2046
Tennessee		1,203,036	2035-2041
United Arab Emirates		1,689,856	No expiration date
France		181,162	No expiration date

Tax Uncertainties

As of March 31, 2026, the Company has not recorded any unrecognized tax benefits.

Tax Audits

The Company and its eligible subsidiaries file a consolidated U.S. federal income tax return and applicable state and local income tax returns and non-U.S. income tax returns. The Company is subject to examination by federal, state and local, and foreign tax authorities. RMM’s Federal income tax returns for the years 2023 through 2025 are subject to examination by the Internal Revenue Service, and RMM’s state tax returns are subject to examination by the respective tax authorities for the years 2022 through 2025. Non-U.S. tax returns are subject to examination by the respective tax authorities for the years 2022 through 2025. The Company regularly assesses the likelihood of additional assessments by each jurisdiction and have established tax reserves that the Company believes are adequate in relation to the potential for additional assessments. Examination outcomes and the timing of examination settlements are subject to uncertainty. Although the results of such examinations may have an impact on the Company’s unrecognized tax benefits, the Company does not anticipate that such impact will be material to its consolidated financial position or results of operations. The Company does not expect to settle any material tax audits in the next twelve months.

Historical Timeline

Fiscal Year	Filed
2026	May 28, 2026	Showing above
2025	May 28, 2025

2024	May 30, 2024

2023	May 31, 2023

2022	Jun 21, 2022

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.

Reservoir Media, Inc. Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures