Company: CPSS
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001683168-25-003436
Chunk: 24

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 1
Chunk 24
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 unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits
will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

The Company and its subsidiaries
file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the
asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences
attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.

Deferred tax assets are recognized
subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax
asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not
be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization
is not assured, we believe that the realization of the recognized net deferred tax asset of $826,000 as of March 31, 2025, is more likely
than not based on forecasted future net earnings. Our net deferred tax asset of $826,000 consists of approximately $338,000 of net U.S.
federal deferred tax assets and $488,000 of net state deferred tax assets.

Income tax expense was $2.1
million for the three months ended March 31, 2025, representing effective income tax rates of 31%, compared to income tax expense of $2.0
million for the three months ended March 31, 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