5E Advanced Materials Inc

14. Income Taxes

The Company didnot record a U.S. federal or state income tax benefit for losses incurred during the years ended June 30, 2024 and 2023. The Company has concluded that it is more likely than not that its deferred tax assets will not be realized which resulted in the recording of a full valuation allowance during those periods.

Domestic and foreign components of loss before income taxes for the years ended June 30 are as follows.

The following table presents a reconciliation of the United States statutory income tax rate to the Company’s effective income tax rate for the periods presented.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred taxes as of each date presented below are as follows.

As of June 30, 2024, the Company had U.S. federal, state, and Australian net operating loss (“NOL”) carryforwards of$85.3 million,$74.0 million and$9.4 million, respectively. As of June 30, 2023, the Company had U.S. federal, state, and Australian NOL carryforwards of$59.0 million,$52.0 million and$9.2 million, respectively. U.S. net operating loss carryforwards for the periods arising before December 31, 2018 have a 20 year carryforward, the earliest of which could expire in 2037. The amount of the post-tax reform U.S. federal NOL generated after tax year 2017 of approximately$85.3 million, can be carried forward indefinitely. California net operating losses have a 20-year carryforward, the earliest of which could expire beginning in 2037. Australia net operating losses can be carryforward indefinitely.

The utilization of the Company’s net operating loss or tax attributes may be subject to annual limitations provided by the Internal Revenue Code and similar state provisions to the extent certain ownership changes are deemed to occur. Such an annual limitation could result in the expiration of the attributes before utilization. The tax attributes reflected above have not been reduced by any limitations. To the extent it is determined upon completion of the analysis that such limitations apply, the Company will adjust the tax attributes accordingly. The Company faces the risk that its ability to use its tax attributes will be substantially restricted if it undergoes an “ownership change” as defined in Section 382 of the U.S. Internal Revenue Code.

The Company evaluates both the positive and negative evidence available to determine the realizability of its deferred tax assets. As of June 30, 2024 and 2023, the Company had a valuation allowance of$39.4 million and$24.8 million, respectively, of which both primarily relate to net operating losses and exploration costs.

Changes in the balance of the Company’s deferred tax asset valuation allowance for the periods presented are as follows:

The Company hadno unrecognized tax benefits as of June 30, 2024 or 2023. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in its income tax provision, if applicable. The Company has not recognized any interest or penalties in the periods presented in these financial statements. The Company is subject to income tax in the U.S. federal jurisdiction, California and Australia. Tax years 2020 and forward remain subject to examination but there are currentlyno ongoing exams in any taxing jurisdictions.