SurgePays, Inc. Income Taxes Disclosure

Note 11 – Income Taxes

 

Provision (benefit) for Income Taxes and Effective Income Tax Rate

 Schedule of Income Taxes and Effective Income Tax Rate

		December 31, 2025				December 31, 2024
Federal
Current		$	-			$	-
Deferred			-				2,835,000
Total provision (benefit)		$	-			$	2,835,000
State
Current		$	-			$	35,000
Deferred			-				-
Total provision (benefit)		$	-			$	35,000

 

 

SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2025 AND 2024

 

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes for the years ended December 31, 2025 and 2024, respectively, is approximately as follows:

 Schedule of Components of Income Tax Expense (Benefit)

		December 31, 2025				December 31, 2024
Federal income tax expense (benefit) – 21.00%		$	(7,575,000	)		$	(9,044,000	)
State income tax expense (benefit) – 5.13% - net of federal effect			(1,220,000	)			(1,489,000	)
Non-deductible items			111,000				1,392,000
Other			-				163,000
Subtotal			(8,683,000)	)			(8,978,000	)
Change in valuation allowance			8,683,000				11,848,000
Income tax (expense) benefit		$	-			$	(2,870,000	)
Effective tax rate			0.0	%			-6.7	%

 

Deferred Tax Assets and Liabilities

 

As of December 31, 2025 and 2024, respectively, the significant components of deferred tax assets and liabilities are approximately as follows:

 Schedule of Deferred Tax Assets and Liabilities

		December 31, 2025				December 31, 2024
Deferred Tax Assets
Reserve for uncollectible accounts		$	-			$	-
Investment - Centercom			-				45,000
Stock based compensation			402,000				204,000
Lease liabilities			78,000				144,000
Intangible assets			(15,000	)			37,000
Goodwill			751,000				15,000
Note receivable impairment			43,000				-
Accrued liabilities			78,000				-
Debt discount amortization			185,000				-
Net operating loss carryforwards			19,605,000				12,425,000
Total deferred tax assets			21,127,000				12,870,000
Less: valuation allowance			(21,127,000	)			(12,638,000	)
Net deferred tax assets			(116,000	)			232,000
Deferred Tax Liabilities
Depreciation			(40,000	)			89,000
Right-of-use assets			(76,000	)			143,000
Net deferred tax liabilities			(116,000	)			232,000
Deferred income taxes - net		$	-			$	-

 

 

SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2025 AND 2024

 

Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carryforwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse. As a result of historic losses, the Company has recorded a full valuation allowance as of December 31, 2025.

 

As of December 31, 2025, the Company had federal and state net operating loss carryforwards of approximately $80,415,000 and $39,568,000, respectively. The federal net operating losses carry forward indefinitely, and accordingly have been reserved. The state net operating losses will expire between the years ending December 31, 2036 and 2038. The state net operating losses have been fully reserved as management does not believe that it is probable that the losses will be utilized before their expiration.

 

During the year ended December 31, 2025, the valuation allowance increased by approximately $8,489,000. The total valuation allowance results from the Company’s estimate of its future recoverability of its net deferred tax assets.

 

The Company is in the process of analyzing their NOL and has not determined if the Company has had any change of control issues that could limit the future use of these NOL’s. As of December 31, 2025, all federal NOL carryforwards that were generated after 2017 may only be used to offset 80% of taxable income and are carried forward indefinitely.

 

The Company follows the provisions of ASC 740, which requires the computations of current and deferred income tax assets and liabilities only consider tax positions that are more likely than not (defined as greater than 50% chance) to be sustained if the taxing authorities examined the positions. There are no significant differences between the tax provisions represented in the accompanying consolidated financial statements and that reported in the Company’s income tax returns.

 

The Company files corporate income tax returns in the United States and several state jurisdictions. Due to the Company’s net operating loss posture, all tax years are open and subject to income tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At December 31, 2025 and 2024, respectively, there are no unrecognized tax benefits, and there were no accruals for interest related to unrecognized tax benefits or tax penalties.

 

 

SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2025 AND 2024