22nd Century Group, Inc. Income Taxes Disclosure

NOTE 13. – INCOME TAXES

Pre-tax earnings from continuing operations consisted of the following for the years ended December 31:

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The following is a summary of the components giving rise to the (benefit) provision for income taxes from continuing operations for the years ended December 31:

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The provision for income tax from continuing operations varies from that which would be expected based on applying the statutory federal rate to pre-tax book loss, including the effect of the change in the U.S. corporate income tax rates, as follows:

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Individual components of deferred taxes consist of the following as of December 31:

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The Company has US federal net operating loss (“NOL”) carryforwards of approximately $228,923 as of December 31, 2025 that do not expire. The Company also accumulated US federal NOL carryforward of approximately $46,920 through December 31, 2017 and these NOL carryforwards begins to expire in 2030. In addition to the US federal NOL carryforward, the Company has state NOL carryforwards of approximately $104,844 in various jurisdictions in which it files that will begin to expire in 2031. As of December 31, 2025, the Company has a research and development credit carryforward of approximately $1,654 that begins to expire in 2030. The Company has a capital loss carryover of approximately $11,188 as of December 31, 2025, that begins to expire in 2026. Utilization of these carryforwards may be subject to an annual limitation in the case of equity ownership changes, as defined by law. Due to the uncertainty of the Company’s ability to generate sufficient taxable income in the future, the Company has recorded a valuation allowance to reduce the net deferred tax asset associated with the definite lived assets to zero. These carryforwards are included in the net deferred tax asset that has been fully offset by the valuation allowance. The valuation allowance increased for continuing operations by $2,982 and $3,305 for the years ended December 31, 2025 and 2024, respectively, and changed by ($1,537) and $922 due to tax attributes that were generated as a part of discontinued operations but remain on a prospective basis with continuing operations due to the Company filing a consolidated U.S. federal return for the years ended December 31, 2025 and 2024.

ASC 740 provides guidance on the financial statement recognition and measurement for uncertain income tax positions that are taken or expected to be taken in a company’s income tax return. The Company has evaluated its tax positions and believes there are no uncertain tax positions as of December 31, 2025 and 2024.

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The following tax payments and received refunds during the years ended December 31, 2025 and 2024, were as follows:

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The One Big Beautiful Bill Act ("OBBB") was signed into law on July 4, 2025. The OBBB makes changes to the U.S. corporate income tax, including immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025; reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025; permanent reinstatement of the EBITDA-based limitation for the business interest deduction under IRC Section 163(j); and international tax provisions modifying global intangible low-taxed income ("GILTI"), foreign-derived intangible income ("FDII"), and base erosion and anti-abuse tax ("BEAT"). The impact of the OBBB on the Company is accelerating the expensing of the domestic research and development costs.