Presidio Property Trust, Inc. Income Taxes Disclosure

14. INCOME TAX PROVISION

 

The Company is operated as, and has elected to be taxed as, a REIT under Sections 856 to 860 of the Code. As a REIT, the Company is generally not subject to corporate level income taxes on REIT taxable income that is distributed to its shareholders. The Company accounts for income taxes under the asset and liability method under which it recognizes deferred income taxes, net of valuation allowances, if any, for the estimated future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and its tax bases and net operating loss and tax credit carryforwards. The Company may, from time to time, be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results. In the event the Company has such an assessment from a taxing authority, it is its accounting policy to recognize any interest and penalties as a component of income tax. We, together with one of our entities, have elected to treat certain subsidiaries as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes. Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to federal and state income taxes. The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any tax jurisdictions.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The provision (benefit) for income taxes related to our TRS entities consists of the following for the years ended December 31, 2025 and 2024:

 

		December 31, 2025				December 31, 2024
Current income tax expense (benefit)
Federal		$	(25,778	)		$	(17,835	)
State			31,068				30,572
Total current income tax expense (benefit)			5,290				12,737
Deferred income tax expense
Federal			424,119				40,279
State			33,761				7,839
Total deferred income tax expense			457,880				48,118
Total income tax (benefit) expense		$	463,170			$	60,855

 

Income tax provision differed from the amount computed by applying the U.S. federal income tax rate of 21% to income (loss) before taxes, as follows:

 

		December 31, 2025								December 31, 2024
Taxes at federal statutory rate		$	4,979				21.0	%		$	103,369				21.0	%
State and local income tax, net of federal income tax effect			3,797				16.0	%			—				0.0	%
Re-rate of state deferreds			21,383				90.2	%			48,564				9.9	%
REIT minimum state and local income tax			20,468				86.3	%			—				0.0	%
Other - Other investment write off			382,622				1613.8	%			—				0.0	%
Other - True-up adjustments			7,115				30.0	%			—				0.0	%
Other - Partnership basis true-up			22,806				96.2	%			(91,078	)			-18.5	%
Total income tax expense		$	463,170				1954	%		$	60,855				12.4	%

 

The pretax income in our TRS for the years ended  December 31, 2025 and 2024 totaled approximately $24,000 and $492,000, respectively. 

 

The tax effects of temporary differences which give rise to significant portions of deferred tax assets are as follows as of December 31:

 

		For The Years Ended
		2025				2024
Deferred Tax Assets
Deferred Revenue		$	1,398			$	—
State Taxes			—				8
Fixed Asset			145,680				243,662
Basis difference in investments			9,027				54,974
Net operating loss			68,952				—
Total deferred tax asset			225,057				298,644
Deferred Tax Liabilities
State Taxes			(912	)			—
Prepaids			(757	)			—
Net deferred tax assets			223,388				298,644
Net deferred tax assets (liability)		$	223,388			$	298,644

 

As of December 31, 2025, the Company had net operating loss carryforwards of $321,111 for federal, $36,361 for state income tax purposes. The Company's state loss carryforwards will begin to expire starting in 2041 if not utilized.

 

Management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective positive evidence evaluated was the history of cumulative income for Model Homes Inc. incurred over the three-year period ended December 31, 2025. Such objective evidence provides support for no valuation allowance to be recorded for the year ended December 31, 2025.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves income tax disclosures through enhanced disaggregation within the rate reconciliation table and disaggregation of income taxes paid by jurisdiction. The amendment is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The amendments should be applied on a prospective basis, however, retrospective application is permitted. The adoption of this ASU only impacted disclosures with no impact on the Company's consolidated financial statements.

 

Cash Taxes Paid (net of refunds)
FEDERAL		$	29,009
STATE
AL			4,000
CA			20,452
TX			20,659
WI			3,581
OTHER			1,147
TOTAL		$	78,848