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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES We are subject to taxation in the United States and various states. The provision for income taxes consisted of the following (in thousands):
| Years Ended December 31,
| 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
U.S. federal provision | $ | 13,902 |  |  | $ | 7,862 |  |  | $ | 9,490 |
State provision | 3,923 |  |  | 1,847 |  |  | 3,287 |
Total current provision | $ | 17,825 |  |  | $ | 9,709 |  |  | $ | 12,777 |
Deferred: |  |  |  |  |
U.S. federal (benefit) provision | $ | (1,338) |  |  | $ | 2,117 |  |  | $ | 1,723 |
State provision | 640 |  |  | 1,190 |  |  | 1,313 |
Total deferred (benefit) provision | $ | (698) |  |  | $ | 3,307 |  |  | $ | 3,036 |
Total income tax provision | $ | 17,127 |  |  | $ | 13,016 |  |  | $ | 15,813 |
A reconciliation of income taxes calculated at the U.S. federal statutory rate to those reflected in the Consolidated Statements of Operations is as follows (dollars in thousands):
| Years Ended December 31, |
| 2024 |  | 2023 |  | 2022 |
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent |
Federal statutory rate | $ | 10,517 |  |  | 21.0 | % |  | $ | 9,750 |  |  | 21.0 | % |  | $ | 12,000 |  |  | 21.0 | % |
Effect of state income taxes, net of federal benefit | 3,656 |  |  | 7.3 |  |  | 2,421 |  |  | 5.2 |  |  | 3,630 |  |  | 6.3 |  |
Effect of 162(m) officer's compensation limitation | 1,717 |  |  | 3.4 |  |  | — |  |  | — |  |  | — |  |  | — |  |
Effect of non-deductible expenses and other, net | 1,019 |  |  | 2.0 |  |  | 864 |  |  | 1.8 |  |  | 59 |  |  | 0.1 |  |
Effect of divestitures and impairment of businesses | 219 |  |  | 0.5 |  |  | — |  |  | — |  |  | 138 |  |  | 0.2 |  |
Change in valuation allowance, net of federal benefit | (1) |  |  | — |  |  | (19) |  |  | — |  |  | (14) |  |  | — |  |
Total | $ | 17,127 |  |  | 34.2 | % |  | $ | 13,016 |  |  | 28.0 | % |  | $ | 15,813 |  |  | 27.6 | % |
The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities are as follows (in thousands):
| Years Ended December 31, |
| 2024 |  | 2023 |
Deferred income tax assets: |  |  |  |
Net operating loss carryforwards | $ | 483 |  |  | $ | 694 |  |
Interest expense limitation | 7,350 |  |  | 6,981 |  |
Tax credit carryforwards | 51 |  |  | 63 |  |
State depreciation | 1,096 |  |  | 1,310 |  |
Accrued and other liabilities | 9,787 |  |  | 6,707 |  |
Amortization of non-compete agreements | 875 |  |  | 855 |  |
Preneed assets, net | 312 |  |  | — |  |
Lease liabilities | 4,135 |  |  | 4,347 |  |
Total deferred income tax assets | 24,089 |  |  | 20,957 |  |
Less: valuation allowance | (156) |  |  | (156) |  |
Total deferred income tax assets | $ | 23,933 |  |  | $ | 20,801 |  |
Deferred income tax liabilities: |  |  |  |
Depreciation and amortization | $ | (69,730) |  |  | $ | (66,863) |  |
Preneed liabilities | — |  |  | (1,070) |  |
Right-of-use assets | (3,670) |  |  | (3,806) |  |
Prepaid assets and other | (1,962) |  |  | (1,189) |  |
Total deferred income tax liabilities | (75,362) |  |  | (72,928) |  |
Total net deferred tax liabilities | $ | (51,429) |  |  | $ | (52,127) |  |
Our deferred tax assets and liabilities, along with related valuation allowances, are classified as non-current on our Consolidated Balance Sheets at December 31, 2024 and 2023. We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain. Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more-likely-than not that the tax benefits will be realized. We recognized an immaterial net decrease in our valuation allowance during the years ended December 31, 2024 and 2023. For state reporting purposes, we have $10.1 million of net operating loss carryforwards that will expire between 2025 and 2043, if not utilized. Based on management’s assessment of the various state net operating losses, it was determined that it is more-likely-than not that we will be able to realize tax benefits on some portion of the amount of the state losses. The valuation allowance at December 31, 2024 was attributable to the deferred tax asset related to a portion of the state operating losses. We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheets. The deferred tax assets recognized for those net operating losses (“NOLs”) are presented net of these unrecognized tax benefits. At December 31, 2024, the Company’s unrecognized tax benefit (“UTB”) reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property for the benefit derived from carrying back losses generated in 2018 to tax years with a higher effective tax rate than the current 21.0% rate. Our UTB reserve for the years ended December 31, 2024 and 2023 was $3.5 million and $3.4 million, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| Years Ended December 31, |
| 2024 |  | 2023 |  | 2022 |
Unrecognized tax benefit at beginning of year | $ | 3,382 |  |  | $ | 3,294 |  |  | $ | 3,761 |  |
Gross decreases - tax positions in prior period | — |  |  | — |  |  | (533) |  |
Gross increases - tax positions in prior period | — |  |  | 88 |  |  | 66 |  |
Gross increases - tax positions in current period | 89 |  |  | — |  |  | — |  |
Unrecognized tax benefit at end of year | $ | 3,471 |  |  | $ | 3,382 |  |  | $ | 3,294 |  |
At December 31, 2024, we expect that the $3.5 million of UTB will be recognized in the next twelve months. We accrued interest of $0.1 million during 2024 and in total, as of December 31, 2024, recognized a liability related to the UTB's noted above for interest of $0.4 million. During 2023, we accrued interest of $0.1 million and in total, as of December 31, 2023, recognized a liability for interest of $0.3 million. In 2017, we filed amended returns for the tax years ending December 31, 2013, 2014, 2015, resulting in $1.9 million in refunds. These amended returns were selected for a limited scope audit. Additionally, losses incurred in the tax years ending December 31, 2018, and 2019 were carried back to the tax years 2015 and 2016, generating refunds exceeding $5.0 million, which require Joint Committee approval. During the year ended December 31, 2024, the refunds for the tax years 2013, 2014, and 2015 were received; however, the Joint Committee review is still pending. At December 31, 2024, Carriage had not received final correspondence from the Internal Revenue Service indicating the completion of the audits. As of December 31, 2024, tax years 2013 to 2023 remain subject to examination by taxing authorities.

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