XML 27 R16.htm IDEA: XBRL DOCUMENT v3.25.3
Income taxes
 9 Months Ended
Sep. 30, 2025
Income taxes [Abstract]  
Income taxes
9. Income taxes

We recorded income tax expense in the third quarter of 2025 of $25 thousand at an effective tax rate of 62.5% compared to an income tax benefit in the third quarter of 2024 of $148 thousand at an effective tax rate of (21.2%). For the nine months ended September 30, 2025, we recorded income tax expense of $116 thousand (on pre-tax income of $7 thousand) compared to an income tax benefit of $511 thousand at an effective rate of (21.1%) for the nine months ended September 30, 2024.

The effective tax rates for the third quarter of 2025 and the nine months ended September 30, 2025 were unusually high because (1) pre-tax income was at near-breakeven levels of $40 thousand and $7 thousand, respectively, and (2) tax expense only included taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States. As discussed below, we provided for a full valuation allowance against our U.S. deferred taxes in the fourth quarter of 2024 and continue to believe this allowance is required as of September 30, 2025.  As such, the Company has not recorded any U.S. federal tax expense associated with pre-tax income recorded in the third quarter of 2025 and the nine months ended September 30, 2025.

As of September 30, 2025 and December 31, 2024, we had $8.4 million and $8.1 million, respectively, of valuation allowance against our net deferred income tax assets in multiple global tax jurisdictions.  Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized.  In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, income from tax planning strategies, as well as all available positive and negative evidence.  Positive evidence includes factors such as a history of profitable operations and projections of future profitability within the carryforward period, including any potential tax planning strategies.  Negative evidence includes items such as cumulative losses and projections of future losses.  Upon changes in facts and circumstances, management may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a charge to establish a valuation allowance.  Existing valuation allowances are re-examined on a quarterly basis under the same standards of positive and negative evidence.

In the fourth quarter of 2024, TransAct recognized a $7.3 million discrete income tax charge for a valuation allowance on the full value of the net deferred tax assets in the United States.  These deferred tax assets have varying lives (for federal net operating losses, state net operating losses and capitalized R&D expenses). The need for this valuation allowance has been assessed as of September 30, 2025 and management continues to believe that the negative evidence, as discussed above, continues to support our valuation allowance.

We are subject to U.S. federal income tax, as well as income tax in certain U.S. state and foreign jurisdictions.  We have substantially concluded all U.S. federal, state and local income tax, and foreign tax regulatory examination matters through 2020.  However, our federal tax returns for the years 2021 through 2024 remain open to examination. Various U.S. state and foreign tax jurisdiction tax years remain open to examination as well, but we believe that any additional assessment would be immaterial to the Condensed Consolidated Financial Statements.