Stablecoin Development Corp Income Taxes Disclosure

NOTE 19. INCOME TAXES

 

For the years ended December 31, 2024 and 2023, loss before provision for income taxes consisted of the following (in thousands):

 

		For the Years Ended December 31,
		2024				2023
United States		$	(7,223	)		$	(9,640	)
International			—				—
		$	(7,223	)		$	(9,640	)

 

For the years ended December 31, 2024 and 2023, the federal and state income tax provision is summarized as follows (in thousands):

 

		For the Years Ended December 31,
		2024				2023
Current
Federal		$	—			$	—
State			—				—
Other			—				—
Total current tax expense		$	—			$	—
Deferred
Federal			—				—
State			—				—
Other			—				—
Total deferred tax expense		$	—			$	—
Income tax provision		$	—			$	—

 

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

 

The tax effects of significant items comprising the Company's deferred taxes as of December 31, 2024 and 2023 are as follows (in thousands):

 

		For the Years Ended December 31,
		2024				2023
Deferred tax assets:
Net operating losses		$	40,689			$	36,943
Stock options			573				665
Research and development credits			641				641
Accruals			311				477
Operating lease liabilities			245				368
Property and equipment			18				28
Acquisition assets			-				2,257
Other deferred tax assets			6				6
Total deferred tax assets			42,483				41,385
Deferred tax liabilities:
Operating lease right-of-use assets			(245	)			(337	)
Total deferred tax liabilities			(245	)			(337	)
Valuation allowance			(42,238	)			(41,048	)
Net deferred taxes		$	—			$	—

 

ASC 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

 

The valuation allowance increased by $1.2 million and $3.6 million during the years ended December 31, 2024 and 2023, respectively.

 

Net operating loss and tax credit carryforwards as of December 31, 2024, are as follows (in thousands):

 

					Expiration
		Amount			Years
Net operating losses, federal (Post December 31, 2017)		$	59,595		Does Not Expire
Net operating losses, federal (Pre January 1, 2018)		$	94,140		Beginning in 2025
Net operating losses, state		$	128,588		Beginning in 2028
Tax credits, federal		$	542		Beginning in 2031
Tax credits, state		$	125		Indefinite

 

A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the below years are as follows (in thousands):

 

		For the Years Ended December 31,
		2024				2023
Unrecognized benefit - beginning of period		$	974			$	974
Change during the period			—				—
Unrecognized benefit - end of period		$	974			$	974

 

The entire amount of the unrecognized tax benefits would not impact our effective tax rate if recognized. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial for the years ended December 31, 2024 and 2023. The Company files income tax returns in the United States and in California. Other jurisdictions are not significant. The tax years 2005 - 2024 (except 2007 and 2009) remain open in the federal and California jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

 

The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows:

 

		For the Years Ended December 31,
		2024				2023
Statutory rate			21.0	%			21.0	%
State tax			3.1	%			4.5	%
Stock-based compensation expense			(1.4	%)			(1.4	%)
Change in valuation allowance			(16.5	%)			(19.5	%)
Warrant/equity expenses			(4.0	%)			(3.7	%)
Expiration of tax attributes			(2.2	%)			—	%
Impairment of assets			-	%			(0.9	%)
Other			-	%			(0.1	%)
Total			0.0	%			0.0	%