SHF Holdings, Inc. Income Taxes Disclosure

Note 18. Tax

 

The major components of income tax expense (benefit) for the years ended December 31, 2024 and December 31, 2023:

 

Schedule of Major Components of Income Tax

For year ended December 31,		2024				2023
Current income tax:
Current tax on profits		$	30,665			$	-
Deferred tax:
Deferred taxation - current year		$	43,829,019			$	(1,829,701	)
Income tax expense (benefit)		$	43,859,686			$	(1,829,701	)

 

A reconciliation follows between tax expense (benefit) and the product of accounting loss multiplied by the United States domestic tax rate for the years ended December 31, 2024 and December 31, 2023:

 

  Schedule of Effective Income Tax Rate Reconciliation

For year ended December 31,		2024				2023
Accounting loss before tax from continuing operations		$	(4,459,789)			$	(19,109,548	)
Accounting loss before income tax			(4,459,789)				(19,109,548	)
At federal statutory income tax rate of 21%			(936,555)				(4,013,005	)
State income tax benefit, net of federal benefit			(8,418	)			(253,649	)
Permanent differences, net			583,678				2,207,439
Valuation allowance charges affecting the provision for income taxes			44,277,923				-
Other			(56,942	)			229,514
Total			43,859,686			$	(1,829,701	)

 

Deferred Tax Assets and Liabilities

 

As of December 31, 2024 and December 31, 2023, the significant component of the Company’s deferred tax assets and liabilities:  

 

Schedule of Deferred Tax Assets and Liabilities

		December 31, 2024				December 31, 2023				Change
Deferred tax assets:
Loan loss reserve		$	-			$	340,982			$	(340,982	)
Capital loss carryover			70,627				72,914				(2,287	)
Stock option expense			1,674,554				1,322,890				351,664
Deferred revenue			6,935				5,366				1,569
Property plant and equipment’s			23,992				20,866				3,126	)
Transaction costs			942,062				1,014,922				(72,860	)
Change in Forward Purchase Contract			8,155,953				8,155,953				-
Goodwill			28,404,108				30,631,880				(2,227,772	)
NOL carryforward			5,030,672				3,210,838				1,819,834
Lease liabilities			214,125				246,716				(32,591	)
Total deferred tax assets (A)			44,523,028				45,023,327				(500,299	)
Deferred tax liabilities:
Right of use assets			(172,195	)			(210,460	)			38,265
Intangible assets			-				(910,934	)			910,934
Total deferred tax liabilities (B)			(172,195	)			(1,121,394	)			949,199
Deferred tax assets (C=A-B)			44,350,833				43,901,933				448,900
Valuation allowance (D)			(44,350,833	)			(72,914	)			(44,277,919	)
Deferred tax assets, net (C-D)			-				43,829,019				(43,829,019	)

  

 

 Reconciliation of deferred tax asset, net:

 

Schedule of Deferred Tax Liabilities Net

		Year on year change				December 31, 2023
Opening balance		$	43,829,019			$	51,593,302
Tax (expense)/ income during the period recognized in the statement of operations			(43,829,019	)			1,829,701
Acquisitions			-				(9,593,985	)
Closing balance		$	-			$	43,829,019

 

The Company offsets tax assets and liabilities only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. The Company does not consider their deferred tax assets to be realizable and has established full valuation allowance during the year ending December 31, 2024. The Company has US federal tax loss carryovers totaling $20.4 million arising from 2020 through 2022 which have an unlimited carryover period. The Company has State of Colorado loss carryovers arising in 2022 of $21.4 million which begin to expire in 2042. The Company currently has no tax examinations in progress. The Company has open years for examination from Federal and State of Arkansas for the years ending December 31, 2020 and forward and from State of Colorado from December 31, 2021 and forward. The Company does not have any uncertain tax positions as of December 31, 2023.