SIEBERT FINANCIAL CORP Income Taxes Disclosure

16. Income Taxes

 

The Company’s provision for (benefit from) income taxes is comprised of the following:

 

		Year Ended December 31,
		2025				2024
Current
Federal		$	(1,676,000	)		$	2,607,000
State and local			109,000				472,000
Total Current			(1,567,000	)			3,079,000
Deferred
Federal		$	1,845,000			$	520,000
State and local			167,000				566,000
Total Deferred			2,012,000				1,086,000
Total Provision for income taxes		$	445,000			$	4,165,000

 

The Company does not have pre-tax income from foreign operations and as such, does not have any foreign income tax expense.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

 

		Year Ended December 31, 2025
		Amount				Percent
Income tax at statutory federal tax rate			1,169,000				21.0	%
State and local income tax, net of federal income tax effect(1)			157,000				2.8	%
Change in valuation allowances			(612,000	)			(11.0	)%
Changes in unrecognized tax benefits			(293,000	)			(5.2	)%
Nontaxable or nondeductible items:
Amortization			(280,000	)			(5.0	)%
Section 162m limitation			247,000				4.4	%
Other nontaxable of nondeductible items			116,000				2.1	%
Other			(59,000	)			(1.1	)%
Effective tax rate			445,000				8.0	%

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

 

		Year Ended December 31,
		2024
Federal statutory income tax rate			21.0	%
Goodwill amortization			(1.6	)%
Permanent differences			0.4	%
State and local taxes, net of federal benefit			5.4	%
Change in valuation allowance			(0.8	)%
Other			(0.5	)%
Effective tax rate			23.9	%

 

State taxes in California, Florida, New York, and New York City made up the majority (greater than 50%) of the tax effect in this category.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

		Year Ended December 31,
		2025				2024
Deferred tax assets:
Net operating loss carryforward		$	1,970,000			$	2,971,000
Lease liabilities			637,000				676,000
Share-based compensation			219,000				31,000
Intangible assets			1,296,000				25,000
Investment in RISE			—				122,000
Investment in OpenHand			217,000				215,000
R&D cost capitalization			184,000				187,000
Settlement liability			209,000				649,000
Capital loss carryforward			105,000				719,000
Other			45,000				113,000
Less: valuation allowance			(337,000	)			(1,104,000	)
Total Deferred tax assets			4,545,000				4,604,000
Deferred tax liabilities:
Fixed assets			(2,010,000	)			(1,186,000	)
Total Deferred tax liabilities			(2,010,000	)			(1,186,000	)
Net Deferred tax assets		$	2,535,000			$	3,418,000

In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income.

 

Based on historical operating profitability, positive trend of earnings and projected future taxable income, the Company concluded as of December 31, 2025 that its U.S. deferred tax assets are realizable on a more-likely-than-not basis with the exception of capital loss carryforward and certain investments that will result in future capital losses. The amount of the Company’s valuation allowance decreased by $767,000 during 2025. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred income tax assets become realizable on a more-likely-than-not basis, the valuation allowance will be reduced accordingly.

 

As of December 31, 2025, the Company had U.S. federal net operating loss carryforwards of approximately $4.8 million of which $3.7 million will expire in varying amounts starting in 2035 to 2036 if not utilized and are available to offset 100% of future taxable income. However, these U.S. federal net operating loss carryforwards are subject to annual limitation under Section 382. The remaining $1.1 million not subject to limitation under Section 382 but may only be used to offset 80% of future taxable income and can be carried forward indefinitely. The Company had total state net operating loss carryforward of $20.9 million, which will begin to expire in varying amounts starting in 2034.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:

 

		Amount
Balance as of December 31, 2023		$	1,405,000
Additions for tax positions taken during current year			19,000
Additions for tax positions taken during prior year			—
Reductions for tax positions taken during prior years			—
Settlements			—
Expirations of statutes of limitations			(70,000	)
Balance as of December 31, 2024		$	1,354,000
Additions for tax positions taken during current year			2,000
Additions for tax positions taken during prior year			—
Reductions for tax positions taken during prior years			—
Settlements			—
Expirations of statutes of limitations			(1,293,000	)
Balance as of December 31, 2025		$	63,000

 

The unrecognized tax benefit of $63,000 and $1,354,000 as of December 31, 2025 and 2024, respectively, are recorded in the line item “Taxes payable” in the consolidated statements of financial condition. As of December 31, 2025, the entire amount of unrecognized tax benefit would reduce the Company’s effective tax rate if recognized. The Company records accrued interest and penalties related to income tax matters as part of the provision for income taxes. For the years ended December 31, 2025 and 2024, the accrued balance of interest and penalties on unrecognized tax benefits was $28,000 and $398,000, respectively.

 

The Company files a federal income tax return and income tax returns in various state tax jurisdictions. The Company is not currently under examination by the IRS or any state or local taxing authority for any tax year. The open tax years for the federal and state income tax filings are generally 2022 through 2025.

 

Income taxes paid, net of refunds received, consisted of the following:		Year Ended December 31, 2025
Federal		$	638,000
State and local
California			60,000
Other			59,000
Foreign			—
Income taxes paid, net of refunds received		$	757,000

 

The Company has certain other non-income taxes such as California LLC fees that are not included in the Company’s income tax provision and income taxes paid, net of refunds received schedule but are disclosed in the income taxes paid in the statements of cash flows.