Company: CPSS
Filing Date: 2025-08-11
Form Type: 10-Q
Source: 0001683168-25-005901
Chunk: 21

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-08-11
Form: 10-Q
Item: Part I, Item 8
Chunk 21
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 have been recognized in the financial statements. A valuation allowance
is recognized to reduce a deferred tax asset if, based on the weight of all available evidence, it is more likely than not that some or
all of the deferred tax asset will not be realized. When making this judgment, both positive and negative evidence is considered, with
the most weight given to evidence that can be objectively verified. The recognition of deferred tax liabilities, however, does not require
a similar more likely than not test for realization. They are recognized with the expectation that they will be settled in future periods
when the related taxable temporary differences reverse. As of June 30, 2025, we have a net deferred tax liabilities of $90,000. Our net
deferred tax liabilities of $90,000 consists of approximately $378,000 of net U.S. federal deferred tax liabilities and $288,000 of net
state deferred tax assets.

Income tax expense was $2.2
million for the three months and $4.3 million six months ended June 30, 2025, representing effective income tax rates of 31%, compared
to income tax expense of $2.0 million and 4.0 million for the three months and six months ended June 30, 2024, and representing effective
income tax rates of 30% respectively.

(8) Legal Proceedings

Consumer
Litigation. We are routinely involved in various legal proceedings resulting from our consumer finance
activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law
applicable to collection of receivables, and such lawsuits sometimes allege that resolution as a class action is appropriate. For the
most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending
on the particular circumstances of each case.

Following
our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim
on October 16, 2019, alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class
of Connecticut obligors whose vehicles we had repossessed. The complaint seeks primarily damages, injunctive relief, waiver of contract
deficiencies, and attorney fees and interest. The defendant’s contract provided for resolution of disputes exclusively by arbitration,
and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021,