Sidus Space Inc. Income Taxes Disclosure
Note 15. Income tax
The Company has not made a provision for income taxes for the years ended December 31, 2025 and 2024, since the Company has the benefit of net operating losses in these periods and the Company changed from a limited liability partnership to a C corporation during 2021.
Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize deferred income tax assets arising as a result of net operating losses carried forward, the Company has not recorded any deferred income tax assets as of December 31, 2025. The Company has incurred a net operating loss of $20,563,749. The net operating loss carry forwards can offset 80 percent of future taxable income and carryforward indefinitely as determined by respective tax regulating authorities. The Company’s net operating loss carry forwards may be subject to annual limitations, which could eliminate, reduce or defer the utilization of the losses because of an ownership change as defined in Section 382 of the Internal Revenue Code U.S. federal tax returns are closed by statute for years through 2014. The status of state and non-U.S. tax examinations varies due to the numerous legal entities and jurisdictions in which the Company operates.
A reconciliation between expected income taxes, computed at the federal income tax rate of 21% applied to the pretax accounting loss, and our blended state income tax rate of 5.5% in 2025 and 2024, and the income tax net expense included in the consolidated statements of operations for the years ended December 31, 2025 and 2024 is as follows:
| Years Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Loss for the year | $ | (29,474,304 | ) | $ | (17,524,056 | ) | ||||||||||
| Income tax (recovery) at statutory rate | $ | (6,189,600 | ) | 21 | % | $ | (3,680,100 | ) | 21 | % | ||||||
| State income tax recovery, net of federal tax effect | (1,621,100 | ) | 6 | % | (963,800 | ) | 5 | % | ||||||||
| Change in valuation allowance | 7,810,700 | -27 | % | 4,643,900 | -26 | % | ||||||||||
| Income tax expense per books | $ | - | 0 | % | $ | - | 0 | % | ||||||||
Net deferred tax assets consist of the following components as of:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Net operating loss carryforward | $ | 20,563,749 | $ | 12,753,049 | ||||
| Valuation allowance | (20,563,749 | ) | (12,753,049 | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 1, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 27, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Apr 5, 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.