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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the years ended December 31, 2024, 2023 and 2022, the Company recorded an income tax provision of $8.1 million, $10.7 million and $5.6 million, respectively. The effective income tax rate for the years ended December 31, 2024, 2023 and 2022 was 32.7 percent, 38.4 percent and (5.7) percent, respectively.
The effective tax rate decreased by 5.7 percent for the year ended December 31, 2024 when compared to 2023 primarily due to a release of tax reserves arising from a successful audit closure, and a reduction in deferred tax liabilities from being revalued at a lower state tax rate, partially offset by an increase in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances.
The provision for income taxes is based on income before income taxes reported for financial statement purposes. The components of income before income taxes are as follows:
Year Ended December 31,
(in thousands)202420232022
Domestic$39,386 $38,099 $33,731 
Foreign(14,714)(10,147)(131,608)
Total$24,672 $27,952 $(97,877)
Significant components of the provision for income taxes for the following periods are as follows:
Year Ended December 31,
(in thousands)202420232022
Current:
Federal$11,970 $15,717 $15,366 
State1,451 2,418 (393)
Foreign(165)34 (99)
Deferred
Federal(4,606)(8,202)(9,159)
State(1,291)(385)(723)
Foreign(3,736)1,379 (4,641)
Valuation Allowance4,456 (229)5,234 
Total$8,079 $10,732 $5,585 
A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:
Year Ended December 31,
202420232022
Federal tax statutory rate21.0 %21.0 %21.0 %
State tax (net of federal benefit)2.5 3.5 (0.8)
Share based compensation4.7 6.0 (2.1)
Valuation allowance against deferred tax assets16.6 (2.4)(5.0)
Goodwill impairment— — (24.4)
Research and development credit(4.1)(3.8)1.2 
Foreign rate differential(3.7)(1.6)2.9 
Tax reserves(0.2)1.9 1.0 
Provision to return difference(0.2)(0.2)— 
Unrealized foreign exchange losses— 2.9 — 
Revaluation of deferred tax liability(3.2)1.1 — 
Closure of Japan branch net operating loss reversal— 11.1 — 
Miscellaneous(0.7)(1.1)0.5 
Total32.7 %38.4 %(5.7 %)
Significant components of deferred tax assets and liabilities are as follows:
December 31,
(in thousands)20242023
Deferred tax assets:
Accrued expenses$1,658 $2,155 
Section 174 expenses15,058 13,084 
Leases897 1,186 
Stock options and other equity5,402 4,588 
Inventories216 275 
Research and development credit2,760 2,327 
Other assets1,212 1,094 
Net operating loss19,738 16,237 
Less valuation allowance(21,782)(17,667)
Total deferred tax assets25,159 23,279 
Deferred tax liabilities:  
Depreciation(21,505)(25,552)
Goodwill(14,449)(12,921)
Intangible assets(1,873)(2,362)
Leases(897)(1,186)
Total deferred tax liabilities(38,724)(42,021)
Net deferred tax liability$(13,565)$(18,742)
The Company has recorded no U.S. deferred taxes related to the undistributed earnings of its non-U.S. subsidiaries as of December 31, 2024. Such amounts are intended to be reinvested outside of the United States indefinitely. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings. As of December 31, 2024, the Company had accumulated undistributed earnings in non-U.S. subsidiaries of $2.0 million.
As of December 31, 2024, the Company had estimated net operating loss carry forwards of $19.7 million for tax purposes. The net operating losses relate to operations in the United Kingdom, Germany and Netherlands. The United Kingdom net operating losses may be carried forward without any time limitations, but are limited to £5 million, plus 50 percent of taxable income exceeding £5 million. Germany net operating losses may be carried forward without any time limitations but are limited to €1 million, plus 60 percent of taxable income exceeding €1 million. Netherlands net operating losses may be carried forward without any time limitations, but are limited to €1 million, plus 50 percent of taxable income exceeding €1 million.
The Company establishes valuation allowances for deferred tax assets when, after consideration of all positive and negative evidence, it is considered "more-likely-than-not" that a portion of the deferred tax assets will not be realized. The Company's valuation allowances of $21.8 million and $17.7 million at December 31, 2024 and 2023, respectively, reduce the carrying value of deferred tax assets associated with certain net operating loss carry forwards and other assets with insufficient positive evidence for recognition. The increase in the valuation allowance is primarily attributable to additional net operating losses generated in 2024.
The Company files a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state, or foreign income tax examinations by tax authorities for years before 2020.
The Company has liabilities related to unrecognized tax benefits totaling $3.4 million and $3.6 million at December 31, 2024 and 2023, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The
Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Year Ended December 31,
20242023
Balance at beginning of period$3,616 $3,236 
Additions for tax positions of current year533 632 
Additions for tax positions of prior years— 86 
Decrease related to the expiration of statutes of limitations(395)(338)
Reduction for tax positions of prior years(384)— 
Balance at period end$3,370 $3,616