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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
13.
Income Taxes

Income before income taxes was generated in the United States and globally as follows:

(in thousands)

 

2024

 

 

2023

 

 

2022

 

Domestic

 

$

8,222

 

 

$

7,444

 

 

$

11,971

 

Foreign

 

 

9,469

 

 

 

14,081

 

 

 

11,718

 

Total income before income taxes

 

$

17,691

 

 

$

21,525

 

 

$

23,689

 

Certain of the Company’s undistributed earnings of its foreign subsidiaries are not permanently reinvested, as management intends to repatriate foreign-held cash as needed to meet domestic cash needs for operating, investing, and financing activities. A liability of $0.9 million has been recorded for the deferred taxes on such undistributed foreign earnings as of December 31, 2024. The deferred taxes are attributable primarily to the foreign withholding taxes that would become payable should the Company repatriate cash held in its foreign operations.

Income tax expense consisted of the following for the years ended December 31:

(in thousands)

 

2024

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

2,829

 

 

$

3,939

 

 

$

5,009

 

State

 

 

754

 

 

 

1,100

 

 

 

836

 

Foreign

 

 

3,359

 

 

 

2,107

 

 

 

1,755

 

Total current tax expense

 

 

6,942

 

 

 

7,147

 

 

 

7,600

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

$

(1,905

)

 

 

(495

)

 

 

(3,001

)

State

 

 

(295

)

 

 

(208

)

 

 

(231

)

Foreign

 

 

(1,472

)

 

 

580

 

 

 

1,058

 

Total deferred tax expense

 

 

(3,672

)

 

 

(123

)

 

 

(2,174

)

Total tax expense

 

$

3,270

 

 

$

7,024

 

 

$

5,426

 

 

The income tax expense differs from the statutory rate due to the following:

(in thousands)

 

2024

 

 

2023

 

 

2022

 

Tax expense at statutory rate

 

$

3,715

 

 

$

4,488

 

 

$

4,975

 

Increase (decrease) in tax resulting from:

 

 

 

 

 

 

 

 

 

State income tax, net of federal benefit

 

 

296

 

 

 

541

 

 

 

340

 

Capital loss carryforward

 

 

(618

)

 

 

—

 

 

 

—

 

Other permanent differences

 

 

961

 

 

 

290

 

 

 

383

 

Impact of rate differences and adjustments

 

 

1,438

 

 

 

(1,046

)

 

 

565

 

United States tax credits and incentives

 

 

(534

)

 

 

(532

)

 

 

(626

)

Foreign tax credits and incentives

 

 

(3,142

)

 

 

(812

)

 

 

(895

)

Change in valuation allowance

 

 

(1,508

)

 

 

1,782

 

 

 

(526

)

Foreign withholding taxes on repatriation of foreign earnings

 

 

253

 

 

 

(592

)

 

 

139

 

Earnout expense (income)

 

 

28

 

 

 

85

 

 

 

(48

)

Equity compensation

 

 

(82

)

 

 

460

 

 

 

339

 

Excess compensation

 

 

859

 

 

 

360

 

 

 

11

 

Provision-to-return adjustments

 

 

(468

)

 

 

528

 

 

 

(189

)

Investment in joint venture

 

 

(371

)

 

 

(155

)

 

 

375

 

Net effect GILTI and FDII

 

 

2,871

 

 

 

1,400

 

 

 

565

 

Other

 

 

(428

)

 

 

227

 

 

 

18

 

Total tax expense

 

$

3,270

 

 

$

7,024

 

 

$

5,426

 

Deferred income taxes reflect the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carry forwards. The net deferred tax liabilities consisted of the following at December 31:

(in thousands)

 

2024

 

 

2023

 

Gross deferred tax assets:

 

 

 

 

 

 

Accrued expenses

 

$

3,135

 

 

$

729

 

Reserves on assets

 

 

2,370

 

 

 

2,769

 

Share-based compensation awards

 

 

731

 

 

 

372

 

Minimum pension

 

 

-

 

 

 

920

 

Net operating loss carry-forwards

 

 

3,437

 

 

 

3,785

 

Tax credit carry-forwards

 

 

2,461

 

 

 

2,302

 

Investment in joint venture

 

 

1,333

 

 

 

926

 

Leases

 

 

6,020

 

 

 

3,699

 

Research and development costs

 

 

4,549

 

 

 

3,857

 

Total gross deferred tax assets

 

 

24,036

 

 

 

19,359

 

Valuation allowances

 

 

(5,415

)

 

 

(6,545

)

 

 

$

18,621

 

 

$

12,814

 

 

 

 

 

 

 

 

Gross deferred tax liabilities:

 

 

 

 

 

 

Depreciation

 

 

(2,099

)

 

 

(1,809

)

Goodwill and intangibles

 

 

(19,652

)

 

 

(14,299

)

Prepaid expenses and inventory

 

 

(45

)

 

 

(95

)

Withholding tax on unremitted foreign earnings

 

 

(915

)

 

 

(662

)

Leases

 

 

(5,883

)

 

 

(3,571

)

Revenue recognition

 

 

(407

)

 

 

(694

)

Minimum pension

 

 

(106

)

 

 

—

 

Other

 

 

130

 

 

 

(218

)

Total gross deferred tax liabilities

 

 

(28,977

)

 

 

(21,348

)

Net deferred tax liabilities

 

$

(10,356

)

 

$

(8,534

)

As of December 31, 2024, federal net operating loss carry forwards total $3.7 million, which expire from 2029 to 2034. As of December 31, 2024, state and local net operating loss carry forwards total $28.3 million, which expire from 2025 to 2044. The Company has recorded a valuation allowance on certain of these net operating loss carry forwards to reflect expected realization. The

Company also has net operating loss carry forwards in foreign jurisdictions totaling $7.3 million. As of December 31, 2024 and 2023, the Company has recorded a valuation reserve, including but not limited to net operating losses, in the amount of $5.4 million and $6.5 million, respectively. The changes in the valuation allowance resulted in additional income tax expense (benefit) of $(1.1) million, $1.5 million, and $(0.5) million in 2024, 2023, and 2022, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry forward periods), projected future taxable income, and tax-planning strategies in making this assessment. Based on this assessment, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2024. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company accounts for uncertain tax positions pursuant to FASB ASC Topic 740. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. A reconciliation of the beginning and ending amount of uncertain tax position reserves included in Other liabilities on the Consolidated Balance Sheets is as follows:

(in thousands)

 

2024

 

 

2023

 

Balance as of January 1,

 

$

151

 

 

$

144

 

Additions for tax positions of acquired companies

 

 

927

 

 

 

—

 

Additions for tax positions taken in prior years

 

 

6

 

 

 

7

 

Balance as of December 31,

 

$

1,084

 

 

$

151

 

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The reserve for uncertain tax positions includes $0.1 million of interest and penalties as of both December 31, 2024 and 2023. The favorable settlement of all uncertain tax positions would impact the Company’s effective income tax rate. Tax years going back to 2019 remain open for examination by all significant federal, state and foreign authorities.

The Organization for Economic Co-operation and Development/G20 Inclusive Framework on Base Erosion and Profit Shifting published the Pillar Two model rules designed to address the tax challenges arising from the digitalization of the global economy which introduces a 15% global minimum corporate tax for companies with revenues above €750 million calculated on a country-by-country basis. On February 1, 2023, the FASB indicated that it believes the minimum tax imposed under Pillar Two is an alternative minimum tax, and, accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred. Aspects of Pillar Two legislation have been enacted in certain jurisdictions in which the Company operates effective for accounting periods commencing on or after January 1, 2024. However, based on the current revenue threshold, the Company is currently not subject to Pillar Two taxes.