Sky Harbour Group Corp Income Taxes Disclosure

15.	Income Taxes

 

We are subject to taxation in all jurisdictions in which we operate that impose an income tax on our business activities. The current and deferred federal and state income tax expense was $0 for each of the years ended December 31, 2025 and 2024.

 

We adopted ASU 2023-09 Income Taxes (Topic 740): Improvements To Income Tax Disclosures on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our actual global effective amount and rate for the year ended December 31, 2025:

 

		Year Ended December 31,
		2025
		Amount				Tax Rate
Income tax at federal statutory rate		$	7,102				21.0	%
State income tax, net of federal taxes			-				0.0	%
Nontaxable or nondeductible items
Unrealized gain on warrants			(7,530	)			(22.3	)%
Stock-based compensation			370				1.1	%
Change in valuation allowance			175				0.5	%
Other adjustments
Difference between book and tax capital accounts			(518	)			(1.5	)%
Provision to return adjustments			399				1.2	%
Effective tax rate		$	-				0.0	%

A reconciliation of the statutory federal income tax expense to the income tax expense (benefit) prior to income (loss) attributable to non-controlling interests from continuing operations at December 31, 2024 is as follows:

 

		For the Year Ended December 31,
		2024
Income tax benefit at the federal statutory rate of 21%		$	(11,273	)
State income tax benefit, net of federal benefit			(183	)
Unrealized loss on warrants			7,248
Stock-based compensation			(384	)
Income taxed to non-controlling interests			1,465
Other, net			(379	)
Change in valuation allowance			3,506
Total income tax benefit		$	-

 

The Company recorded income tax expense of $0 and the effective tax rate was 0.0% for the years ended December 31, 2025 and 2024. The effective income tax rate for the year ended December 31, 2025 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against net deferred tax assets as it is more likely than not that the deferred tax assets will not be realized.

 

Components of the Company’s deferred tax assets at December 31, 2025 and December 31, 2024 are as follows:

 

			For the Year Ended December 31,
			2025				2024
Deferred tax assets:
Amortization		$	22			$	22
Difference between book and tax capital accounts			95				495
Accounts receivable, prepaid expenses, and other assets			-				140
Lease liability			26				9
Net operating loss carryforwards			8,266				7,058
Valuation allowance			(7,441	)			(7,187	)
Total deferred tax assets		$	968			$	537
Deferred tax liabilities:
Long-lived assets			(920	)			(529	)
Right-of-use assets			(40	)			(8	)
Other			(8	)			-
Total deferred tax liabilities		$	(968	)		$	(537	)
Total		$	-			$	-

 

The realization of deferred tax assets, including net operating loss carryforwards ("NOLs"), is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards, and credits. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. For the year ended December 31, 2025, we recorded a full valuation allowance due to historical losses before income taxes which reduced management's ability to rely on future expectations of income.

 

As of December 31, 2025, we have available federal tax operating loss carryforwards of approximately $33.4 million, including approximately $1.7 million generated by our legal predecessor prior to the Yellowstone Transaction and $7.1 million generated by our subsidiary, Stratus Building Systems. All federal tax operating loss carryforwards arose in tax years subsequent to 2017. Tax operating loss carryovers arising in years after 2017  may be carried forward indefinitely but are only available to offset 80% of future taxable income. We have available state tax operating loss carryforwards of approximately $33.4 million, which are available to reduce future state taxable income and would begin to expire in tax year 2040 in various amounts. Utilization of our net operating loss carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code, as amended, and similar state provisions.

 

Uncertain Tax Positions

 

We believe that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12 months of the reporting date.

 

The federal and state statutes of limitation for assessment of tax liability generally lapse within three years after the date the tax returns are filed. However, income tax attributes that are carried forward, such as net operating loss carryforwards, may be challenged and adjusted by taxing authorities at any time prior to the expiration of the statute of limitations for the tax year in which they are utilized. As of December 31, 2025, we do not have any open exams; however, all tax years, including those of our legal predecessor, are subject to examination by the Internal Revenue Service.  

 

Tax Receivable Agreement

 

Following closing of the Yellowstone Transaction, the Company, Sky, the LLC Interests, and the TRA Holder Representative, entered into a tax receivable agreement (the “Tax Receivable Agreement”). Pursuant to the Tax Receivable Agreement, the Company will generally be required to pay the LLC Interests 85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that the Company realizes, or is deemed to realize, as a result of certain tax attributes, including:

 

• existing tax basis in certain assets of Sky and certain of its direct or indirect subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service, attributable to Sky Common Units acquired by the Company from a TRA Holder, as determined at the time of the relevant acquisition;

 

• tax basis adjustments resulting from taxable exchanges of Sky Common Units (including any such adjustments resulting from certain payments made by the Company under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the terms of the A&R Operating Agreement; and

 

• tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement (each of the foregoing, collectively, the “Tax Attributes”).

 

As of December 31, 2025, no transactions occurred that would result in a cash tax savings benefit that would trigger the recording of a liability under the terms of the Tax Receivable Agreement.