XCel Brands, Inc. Income Taxes Disclosure
10. Income Taxes
The provision for income taxes in the consolidated statements of operations consists of the following:
Years Ended December 31, | ||||||
($ in thousands) | | 2025 | | 2024 | ||
Current: |
| |
| | ||
Federal | $ | (52) | $ | 21 | ||
State and local |
| 127 |
| 199 | ||
Total current |
| 75 |
| 220 | ||
Deferred: |
| |
| | ||
Federal |
| — |
| — | ||
State and local |
| — |
| — | ||
Total deferred |
| — |
| — | ||
Total provision | $ | 75 | $ | 220 | ||
The reconciliation of the federal statutory income tax rate to the Company’s effective tax rate reflected in the income tax provision shown in the consolidated statements of operations is as follows:
Years Ended December 31, | |||||||||
| 2025 | 2024 | |||||||
Amount | Percent | Percent | |||||||
| $ | (3,651) | 21.00 | % | 21.00 | % | |||
State and Local Income Taxes, Net of Federal Income Tax Effect |
| (1,302) | 7.49 |
| 7.34 |
| |||
Changes in Valuation Allowances |
| 5,049 | (29.04) |
| (28.60) |
| |||
Nontaxable or Nondeductible Items | |||||||||
Stock compensation |
| — | — |
| (0.02) |
| |||
Life insurance |
| 11 | (0.06) |
| (0.10) |
| |||
Other Adjustments | |||||||||
Federal true-ups |
| (32) | 0.18 |
| (0.61) |
| |||
Effective Tax Rate |
| $ | 75 | (0.43) | % | (0.99) | % | ||
In the table presented above, taxes related to the state and city of New York made up the majority (greater than 50%) of the tax effect in the “State and local rate, net of federal tax benefit” category.
The significant components of net deferred tax assets (liabilities) of the Company consist of the following:
December 31, | ||||||
($ in thousands) | | 2025 | | 2024 | ||
Deferred tax assets |
| |
| | ||
Federal, state and local net operating loss carryforwards | $ | 17,115 | $ | 12,847 | ||
Stock-based compensation | 638 | 594 | ||||
Accrued compensation and other accrued expenses |
| 742 |
| 958 | ||
Allowance for doubtful accounts |
| 9 |
| — | ||
Charitable contribution carryover |
| 2 |
| 1 | ||
Property and equipment |
| 257 |
| 273 | ||
Interest expense |
| 842 |
| 176 | ||
Total deferred tax assets | 19,605 | 14,849 | ||||
Valuation allowance | (17,930) | (12,881) | ||||
Total deferred tax assets, net of valuation allowance | 1,675 | 1,968 | ||||
Deferred tax liabilities | ||||||
Basis difference arising from intangible assets of acquisition |
| (1,675) |
| (1,968) | ||
Total deferred tax liabilities |
| (1,675) |
| (1,968) | ||
Net deferred tax assets | $ | — | $ | — | ||
In assessing the realizability of deferred tax assets, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time.
As of December 31, 2025 and 2024, the Company had approximately $59.1 million and $44.4 million, respectively, of federal net operating loss carryforwards ("NOLs") available to offset future taxable income. The federal NOL as of December 31, 2017 of $0.3 million has an expiration period through 2037. The federal NOLs generated during tax years beginning after December 31, 2017 of $58.8 million have an indefinite life and do not expire. The Company has approximately $72.7 million and $54.1 million of state NOLs as of December 31, 2025 and December 31, 2024, respectively. The state NOLs expire at various times between 2035 and 2045.
As of December 31, 2025 and 2024, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its consolidated financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its consolidated financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.
Want the next XCel Brands, Inc. income taxes disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment XCel Brands, Inc.'s next filing hits EDGAR. No credit card, your email never gets sold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 15, 2026 | Showing above |
| 2024 | May 28, 2025 | |
| 2023 | Apr 19, 2024 | |
| 2022 | Apr 17, 2023 | |
| 2021 | Apr 15, 2022 | |
| 2020 | Apr 23, 2021 | |
| 2019 | Apr 14, 2020 | |
| 2018 | Apr 1, 2019 | |
| 2017 | Mar 30, 2018 | |
| 2016 | Mar 24, 2017 | |
| 2015 | Mar 17, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.