Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income from continuing operations before provision (benefit) for income taxes consisted of the following (in thousands):
Years Ended December 31,
2025 2024 2023
United States $ 6,396  $ (14,396) $ (39,708)
Foreign (3,376) 1,368  (693)
$ 3,020  $ (13,028) $ (40,401)
The provision (benefit) for income taxes consisted of the following (in thousands):
Years Ended December 31,
2025 2024 2023
Federal:
Current $ 1,190  $ 138  $ (220)
Deferred 3,338  (84) (5,342)
4,528  54  (5,562)
State:
Current 601  595  277 
Deferred (206) (1,331) (1,087)
395  (736) (810)
Foreign:
Current —  —  — 
Deferred 6  16  6 
6  16  6 
$ 4,929  $ (666) $ (6,366)
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
December 31,
2025 2024
Deferred Tax Assets:    
Accrued expenses and bonuses $ 4,670  $ 3,984 
Advances and loans and other reserves 21,712  16,611 
Deferred compensation and commissions 8,728  12,088 
Operating lease liabilities 21,760  22,834 
Stock-based compensation 7,125  7,682 
Net operating and capital loss carryforwards 6,358  11,341 
Other comprehensive income —  306 
Amortizable intangibles and other 4,569  4,526 
Other 192  — 
Deferred tax assets before valuation allowance 75,114  79,372 
Valuation allowance (5,813) (4,959)
Deferred Tax Assets 69,301  74,413 
Deferred Tax Liabilities:    
Property and equipment (1,271) (2,744)
Operating lease ROU assets, net (18,346) (19,236)
Prepaid expenses (1,056) (895)
State taxes (1,562) (1,535)
Other comprehensive income (37) — 
Goodwill and other (2,443) (1,923)
Deferred Tax Liabilities (24,715) (26,333)
Deferred Tax Assets, Net $ 44,586  $ 48,080 
As of December 31, 2025, the Company had $9.0 million ($1.9 million tax effected) of net operating loss carryforwards, which are available to reduce future federal income taxes, and have no expiration date. Under the Coronavirus Aid Relief and Economic Security Act (CARES Act) and Tax Cuts and Jobs Act (2017 Tax Act), federal net operating losses incurred after December 31,2017 carried forward indefinitely and can offset up to 80% of future taxable income for tax years after December 31, 2020. State net operating loss carryforwards of $12.6 million ($0.8 million tax effected) are also available to reduce future state income taxes and will expire between 2034 and 2044. As of December 31, 2025, the Company had Canadian net operating loss carryforwards of approximately $14.0 million ($3.7 million tax effected), principally all of which will begin to expire in 2035.
A valuation allowance is required when it is more-likely-than not that all or a portion of a deferred tax asset will not be realized. Realization of a deferred tax asset is dependent upon taxable income in prior carryback years as appropriate, depending on jurisdiction, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. The Company determined that as of December 31, 2025 and 2024, $5.8 million and $5.0 million, respectively, of the deferred tax assets related to Canadian losses do not satisfy the recognition criteria. The Company has therefore recorded a valuation allowance for this amount. The valuation allowance for deferred tax assets increased by $854,000 during 2025, decreased by $337,000 during 2024 and increased by $361,000 during 2023. The changes are primarily related to the Company’s Canadian operations.
As further described in Note 2, Accounting Policies and Recent Accounting Pronouncements, the Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Disclosures, or ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory tax rate of 21% to the Company's effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09 (in thousands).
Year Ended December 31,
2025
Amount Rate
Income before provision for income taxes $ 3,020  100.0  %
Income taxes at the federal statutory rate 634  21.0  %
State taxes, net of federal benefit(1)
312  10.3  %
Foreign tax effects:
Statutory rate difference between Canada and US (186) (6.2) %
Changes in valuation allowances 854  28.3  %
Other 46  1.5  %
Effect of cross-border tax laws (16) (0.5) %
Nontaxable/nondeductible items:
Travel and entertainment 739  24.5  %
Officers' compensation 2,053  68.0  %
Parking expense 130  4.3  %
Life insurance investment income (298) (9.9) %
Dividend on unvested awards (209) (6.9) %
Stock based compensation 745  24.7  %
Business gifts 76  2.5  %
Other 49  1.6  %
Provision for income taxes and effective income tax rate $ 4,929  163.2  %
(1)State taxes in California and Texas made up the majority of the tax effect in this category.
The following table is a reconciliation of the U.S federal statutory rate of 21% to the Company's effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 (in thousands):
Years Ended December 31,
2024 2023
Amount Rate Amount Rate
Income tax (benefit) expense at the federal statutory rate $ (2,736) 21.0  % $ (8,484) 21.0  %
State income tax (benefit) expense, net of federal benefit (582) 4.5  % (602) 1.5  %
Shortfall (windfall) tax benefits, net related to stock-based compensation 1,014  (7.8) % 1,260  (3.1) %
Change in valuation allowance (337) 2.6  % 388  (0.9) %
Permanent and other items (1)
1,975  (15.2) % 1,072  (2.7) %
(Benefit) provision for income taxes $ (666) 5.1  % $ (6,366) 15.8  %
(1)Permanent items relate principally to compensation charges (6.8% – 2024), meals and entertainment (5.5% – 2024), qualified transportation fringe benefits, and other items.
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2025, 2024 and 2023.
The Company is subject to tax in various jurisdictions and, as a matter of ordinary course, the Company may be subject to income tax examinations by the federal, state and foreign taxing authorities for the tax years 2021 to 2025. The Company is not currently under income tax examination by any taxing authority, and the income tax examination by the state of Illinois was closed without any assessment.
During the year ended December 31, 2025, the Company paid no federal income taxes and received a federal income tax refund of $2.0 million related to prior overpayments in prior periods. State income taxes of $0.4 million were paid during the year ended December 31, 2025, and the Company received state income tax refunds of $0.6 million. No foreign income taxes were paid. Net of income taxes paid and refunds received, cash income tax activity for the year ended December 31, 2025 resulted in a net refund of $2.2 million.
The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as this subsidiary is operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative translation adjustments.