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Note 4 - Income Taxes
 12 Months Ended
Mar. 29, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 4 – INCOME TAXES

 

Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands):

 

  

FY 2025

  

FY 2024

  

FY 2023

 

United States

 $16,983  $15,064  $9,879 

Foreign

  1,343   3,375   3,608 

Total

 $18,326  $18,439  $13,487 

 

The provision for income taxes for fiscal years 2025, 2024 and 2023 is as follows:

 

  

FY 2025

  

FY 2024

  

FY 2023

 

Current Tax Provision:

            

Federal

 $2,437  $4,099  $1,938 

State

  971   1,067   652 

Foreign

  383   1,185   395 
  $3,791  $6,351  $2,985 

Deferred Tax (Benefit) Provision:

            

Federal

 $182  $(809) $(334)

State

  (173)  (316)  (258)

Foreign

  11   (434)  406 
  $20  $(1,559) $(186)

Provision for Income Taxes

 $3,811  $4,792  $2,799 

 

A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the income tax provision reflected in the Consolidated Statements of Income is as follows (amounts in thousands):

 

  

FY 2025

  

Effective Tax Rate

  

FY 2024

  

FY 2023

 

Federal Income Tax at Statutory Rate

 $3,848   21.0% $3,872  $2,832 

State Income Taxes, net of federal benefit

  630   3.4%  593   311 

Federal, State and Foreign Tax Credits

  -   0.0%  (87)  (99)

Foreign Rate Differential

  110   0.6%  41   43 

Tax Impact of Equity Awards

  (1,130)  -6.1%  (634)  (416)

162(m) Limitation

  276   1.5%  805   - 

Non-Deductible Acquisition Costs

  -   0.0%  71   6 

GILTI and 78 Gross Up

  (30)  -0.2%  112   83 

Other, net

  107   0.6%  19   39 

Total

 $3,811   20.8% $4,792  $2,799 

 

  

March 29,

  

March 30,

 
  

2025

  

2024

 

Deferred Tax Assets:

        

Accrued Liabilities

 $423  $399 

Lease Liabilities

  5,707   3,623 

Performance-Based Stock Award Grants

  1,053   1,094 

Inventory Reserves

  61   68 

Net Operating losses

  337   - 

Non-Qualified Deferred Compensation Plan

  24   12 

Post-Retirement Health Care Plans

  262   303 

Stock-Based Compensation

  870   897 

Capitalized Inventory Costs

  183   185 

Capitalized Acquisition Costs

  361   97 

Other

  468   173 

Total Deferred Tax Assets

 $9,749  $6,851 
         

Deferred Tax Liabilities:

        

Goodwill and Intangible Assets

 $(5,701) $(5,945)

Right of Use Assets

  (5,635)  (3,636)

Depreciation

  (7,667)  (6,498)

Other

  (32)  (63)

Total Deferred Tax Liabilities

 $(19,035) $(16,142)
         

Net Deferred Tax Liabilities

 $(9,286) $(9,291)

 

The Company files income tax returns with the U.S. government and various states as well as foreign governments. Open fiscal years subject to U.S. Government federal examination are 2022 through 2024. Open fiscal years subject to state examination are 2021 through 2024. The Company also files in Canada and Ireland.  Open fiscal years subject to examination for Canada are 2021 through 2024; open fiscal years subject to examination for Ireland are 2021 to 2024. There are no income tax years currently under examination by the Internal Revenue Service, states, Canadian and Irish tax authorities. The Company's foreign subsidiary undistributed earnings are considered to be permanently reinvested.  At  March 29, 2025, the Company had net operating loss (NOL) carryforwards of $1.2 million in the U.S. and $0.3 million in Ireland, which could be used to offset future taxable income and reduce income tax expense. These NOL carryforwards will not expire.  

 

The Company’s policy regarding interest and/or penalties related to income tax matters is to recognize such items as a component of the income tax provision. The Company recognized no interest expense or penalties associated with uncertain tax benefits accrued for fiscal years 2025, 2024 and 2023. In accordance with applicable accounting guidance, the amount of unrecognized tax liability from uncertain positions was $0 at year-end fiscal years 2025, 2024 and 2023.

 

The Company assesses its deferred tax assets annually for expected utilization. If deemed necessary, valuation allowances are established to reduce the deferred tax assets to their net realizable value to the extent it is more likely than not that some portion or all of the deferred tax assets will not be realized based on the character of the carryforward item, the associated taxing jurisdiction, the relevant history for the particular item, the applicable expiration dates, and identified actions under the control of the Company in realizing such assets. The Company assesses the available positive and negative evidence surrounding the recoverability of the deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary. The Company has determined that a valuation allowance of $0 is appropriate for fiscal years 2025, 2024 and 2023.