Note 19. Income Taxes

The Company accounts for income taxes under ASC Topic 740: Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

The components of earnings before income taxes for the years ended December 31, 2024 and 2023 were as follows (in thousands):

Income tax provision consisted of the following for the years ended December 31, 2024 and 2023 (in thousands):

The Company’s wholly owned subsidiary, GTC, is a United Kingdom (“UK”) Limited Company and files tax returns in the UK. Its estimated tax liability for December 31, 2024 and 2023 is approximately $56,000 and $60,000, respectively.

A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to income (loss) before income taxes is as follows (in thousands):

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset is as follows (in thousands):

Nextplat Corp’s net operating loss carryforward (“NOL carryforward”) increased from approximately $17.8 million at  December 31, 2023 to $21.7 million at December 31, 2024. Out of the approximately $21.7 million NOL carryforward, approximately $2.9 million will begin to expire in 2032 and approximately $18.8 million will have an indefinite life. Progressive Care, LLC has an NOL carryforward of approximately $16.4 million. However, the Company has not performed an IRC Section 382 analysis of the Progressive Care NOL carryforward, so it is not known as this time the amount of the NOL carryforward available to offset NextPlat future taxable income. IRC Section 382 imposes a limitation on a company to use historical NOLs and certain other tax attributes in the event of an ownership change.

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2024 and 2023, due to the uncertainty of realizing the deferred income tax assets. The change in the valuation allowance for 2024 was an increase of approximately $5.4 million.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. U.S. federal income tax returns for 2021 and after remain open to examination. Generally, foreign income tax returns after 2020 remain open to examination. No income tax returns are currently under examination. As of December 31, 2024 and 2023, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2024 and 2023, there were no penalties or interest recorded in income tax expense.