ReposiTrak, Inc. Income Taxes Disclosure

NOTE 10.

INCOME TAXES

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 

The provision for income taxes for the year ended June 30, 2025 and 2024 consists of the following:

 

		2025				2024
Current:
Federal		$	641,718			$	-
State			34,132				374,491
Total Current Provision			675,850				374,491
Total Provision		$	675,850			$	374,491

 

Net deferred tax liabilities consist of the following components at June 30:

 

		2025				2024
Deferred tax assets:
NOL carryover		$	1,029,290			$	1,825,300
Accrued bonus			98,278				127,800
Allowance for bad debts			63,034				59,200
Accrued expense			45,180				39,500
Capital loss carryover			38,622				38,600
Operating lease ROU			-				2,900
Total deferred tax assets			1,274,404				2,093,300
Deferred tax liabilities:
Amortization			(1,249,542	)			(1,075,600	)
Depreciation			(156,837	)			(120,000	)
Total deferred tax liabilities			(1,406,379	)			(1,195,600	)
Valuation allowance			-				(897,700	)
Net deferred tax liability		$	(131,975	)		$	-

 

The U.S. Federal Statutory Tax Rate for 2024 is 21%. The reconciliation of the expected income tax expense (benefit) and the actual income tax expense (benefit) is as follows:

 

		2025				2024
Expected income tax expense (benefit)		$	1,465,405			$	1,549,156
State income tax expense (benefit)			348,906				374,491
Federal tax credits			(1,109,000	)			-
Officer life insurance			46,249				51,239
Unrealized gain/loss			(19,923	)			(17,432	)
Meals and entertainment			6,329				1,961
Stock expenses			18,933				71,490
Officer salary (162m limit)			160,688				-
NOL expiry			509,109				-
Other permanent differences			279,256				-
Change in deferred tax asset/liability			(1,030,102	)			(1,656,414	)
Total income tax expense/benefit		$	675,850			$	374,491

 

At June 30, 2025, the Company had net operating loss carryforwards of approximately $7,020,239 that may be offset against past and future taxable income from the year 2025 forward. A significant portion of the net operating loss carryforwards began to expire in 2019. No tax benefit has been reported in the June 30, 2025 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. In January of 2009 the Company acquired Prescient Applied Intelligence, Inc. which had significant net operating loss carryforwards. Due to the change in ownership, Prescient’s (subsequently renamed Park City Group then ReposiTrak) net operating loss carryforwards may be limited as to use in future years. The limitation will be determined on a year-to-year basis. In June of 2015 the Company acquired ReposiTrak, which had significant net operating loss carryforwards. Due to the change in ownership, ReposiTrak's net operating loss carryforwards may be limited as to use in future years. In December of 2023 ReposiTrak was merged into the Park City Group subsidiary (subsequently named ReposiTrak) which caused the remaining original ReposiTrak entity net operating loss carryforwards to be lost.

 

The Company determines whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, the Company measures the tax position to determine the amount to recognize in the financial statements. The Company performed a review of its material tax positions in accordance with these recognition and measurement standards.

 

The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are not material amounts of unrecognized tax benefits. The Company engaged in a Research & Development Tax Study that is estimated to provide a tax benefit of between $1.1 million to $4.8 million in tax credits that will reduce the current and future taxes in accordance with the Section 41 of the U.S. Tax Code. In this current tax provision, we have estimated using the conservative amount of $1.1 million in tax credits. This process will be completed before the filing of the current tax return and it is expected that additional credits will be applied to the future taxes of the Company.

 

The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of June 30, 2025, the Company had no accrued interest or penalties related to uncertain tax positions.

 

The Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. With few exceptions, the Company is not longer subject to U.S. Federal, state and local income tax examinations by tax authorities for the years before June 30, 2022.