Alliance Laundry Holdings Inc.ALH
Alliance Laundry Holdings Inc. Income Taxes Disclosure
Income Taxes
The Company uses the asset and liability method of accounting for income taxes whereby deferred income taxes are
recorded for the future tax consequences attributable to differences between the financial statement and tax bases of assets
and liabilities. Deferred income tax assets and liabilities are measured using tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and
liabilities are revalued to reflect new tax rates during the periods in which rate changes are enacted. Management believes,
based on the operating earnings in prior years, expected reversals of taxable temporary differences and reliance on future
earnings, that it is more likely than not that the majority of the recorded net deferred tax assets are fully realizable.
There are various factors that may cause the Company’s tax assumptions to change in the near term and as a result the
Company may have to increase or decrease its valuation allowance against net deferred income tax assets. The Company
assesses the impact of significant changes to the U.S. federal, foreign and state income tax laws and regulations on a
regular basis and updates the assumptions and estimates used to prepare its Consolidated Financial Statements when new
regulations and legislation are enacted.
Geographic sources of Income before taxes is as follows:
Year Ended December 31, | |||||
(in thousands) | 2025 | 2024 | 2023 | ||
Domestic | $75,457 | $61,941 | $53,071 | ||
Foreign | 62,577 | 61,508 | 51,384 | ||
$138,034 | $123,449 | $104,455 | |||
The Provision for income taxes consisted of the following:
(in thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | ||
Current: | |||||
Federal | $19,733 | $35,839 | $29,585 | ||
State | 6,570 | 7,142 | 6,732 | ||
Foreign | 16,585 | 13,790 | 9,238 | ||
Total current | 42,888 | 56,771 | 45,555 | ||
Deferred: | |||||
Federal | (1,327) | (23,948) | (18,757) | ||
State | (2,318) | (5,021) | (5,386) | ||
Foreign | (2,964) | (2,672) | (5,186) | ||
Total deferred | (6,609) | (31,641) | (29,329) | ||
Provision for income taxes | $36,279 | $25,130 | $16,226 |
ASU 2023-09, which has been adopted prospectively, requires the disaggregation of cash income tax payments. Our
cash income tax payments in 2025 were as follows:
(In thousands) | Year Ended December 31, 2025 |
U.S. federal | $24,850 |
State: | |
Other | 6,061 |
State subtotal | 6,061 |
Foreign: | |
Czech Republic | 13,211 |
Other | 4,603 |
Foreign subtotal | 17,814 |
Total income taxes paid | $48,725 |
The Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740):
Improvements to Income Taxes Disclosures. The following table presents the reconciliation between tax expense at the
U.S. federal statutory income tax rate and the effective income tax rate for income before taxes after the Company's
adoption of ASU 2023-09:
(In thousands) | Year Ended December 31, 2025 | ||
US Federal Statutory Income Tax Rate | $28,987 | 21.0% | |
Domestic State and Local Income Taxes, net of federal effect* | 2,950 | 2.1% | |
Domestic Federal | |||
Tax Credits | |||
Foreign Tax Credit | (3,006) | (2.2)% | |
Other | (775) | (0.6)% | |
Changes in valuation allowance - Foreign Tax Credit | 2,444 | 1.8% | |
Nontaxable and Nondeductible Items | |||
Excess tax benefits of stock-based payments | (3,054) | (2.2)% | |
Officers compensation limitation - IRC Section 162(m) | 5,150 | 3.7% | |
Other | 2,225 | 1.6% | |
Cross-Border Tax Laws | |||
Other | 83 | 0.1% | |
Other | 639 | 0.4% | |
Foreign Tax Effects | |||
Brazil | 1,041 | 0.8% | |
Czech Republic | 1,042 | 0.8% | |
Luxembourg | |||
Changes in valuation allowance | (3,785) | (2.7)% | |
Changes in net operating losses | 3,774 | 2.7% | |
Other | 14 | —% | |
Thailand | |||
Statutory income tax rate differential | (2,652) | (1.9)% | |
Other | 1,347 | 1.0% | |
Other Foreign Jurisdictions | (301) | (0.2)% | |
Worldwide Changes in Unrecognized Tax Benefits | 156 | 0.1% | |
Effective Tax Rate | $36,279 | 26.3% | |
*State taxes in California, Michigan, Florida, and Pennsylvania made up the majority (greater than 50 percent) of the
tax effect in this category.
The following table presents the reconciliation between tax expense at the U.S. federal statutory income tax rate and
the effective income tax rate for income before taxes, prior to the Company's adoption of ASU 2023-09:
December 31, 2024 | December 31, 2023 | |||
Statutory U.S. federal tax rate | 21.0% | 21.0% | ||
State taxes, net of federal benefit | 1.4% | 1.8% | ||
Foreign rate differential | (0.9)% | (1.9)% | ||
Change in unrecognized tax benefit | 0.3% | 0.9% | ||
Valuation allowance | (7.2)% | (0.2)% | ||
Rate change | (0.9)% | (1.9)% | ||
Foreign tax credit | (3.5)% | (2.7)% | ||
U.S. tax on foreign earnings | 5.1% | 5.2% | ||
Provision to Return | 5.9% | (4.1)% | ||
Research and development tax credit | (0.6)% | (0.9)% | ||
Stock-based compensation | (0.2)% | (0.1)% | ||
Foreign-derived intangible income deduction | (1.1%) | (1.3)% | ||
BEPS Pillar Two tax | 1.0% | —% | ||
Other, net | 0.1% | (0.3)% | ||
Effective income tax rate | 20.4% | 15.5% |
The following table presents the temporary differences which give rise to the deferred tax assets and liabilities.
(in thousands) | December 31, 2025 | December 31, 2024 | |
Deferred income tax liabilities: | |||
Goodwill | $(34,823) | $(35,022) | |
Intangible assets | (177,649) | (186,575) | |
Property, plant and equipment | (11,257) | (13,047) | |
Deferred financing costs | (2,297) | — | |
Unremitted Foreign Earnings | (3,307) | — | |
Other | (3,974) | (5,851) | |
Deferred income tax liabilities | (233,307) | (240,495) | |
Deferred income tax assets: | |||
Inventory | 1,464 | 1,808 | |
Debt issuance costs | — | 4,766 | |
Product warranties | 16,862 | 12,725 | |
Net operating loss and credit carry forwards | 21,373 | 22,608 | |
Other assets | 5,767 | 6,096 | |
Pensions and employee benefits | 5,890 | 5,626 | |
Interest limitation | 23,648 | 18,868 | |
Research and development costs | 654 | 13,627 | |
Unrealized Foreign Exchange Gain/Loss | 4,034 | — | |
Other | 1,249 | 505 | |
Gross deferred income tax assets | 80,941 | 86,629 | |
Less: valuation allowance | (13,820) | (14,017) | |
Deferred income tax assets | 67,121 | 72,612 | |
Net deferred income tax liability | $(166,186) | $(167,883) |
The Company has recorded valuation allowances for certain tax attributes and other net deferred tax assets. At this
time, sufficient uncertainty exists regarding the future realization of these net deferred tax assets. A valuation allowance in
the amount of $13.8 million has been recorded against the deferred tax assets for the US foreign tax credit and the losses in
various countries where future earnings are not assured. If, in the future, the Company believes that it is more likely than
not that these deferred tax benefits will be realized, the valuation allowances will be reversed and recognized in income.
At December 31, 2025, the Company does not have any U.S. federal and state net operating loss carryforwards. The
Company’s U.S. federal and state credit carryforwards were approximately $4.1 million and $6.0 million, respectively. The
federal credit carryforwards will expire in 6-10 years. The state credit carryforwards will expire in 1-15 years.
As of December 31, 2025, the Company has foreign net operating loss carryforwards of $49.7 million, of which $40.7
million has a valuation allowance reserve. The remaining foreign net operating loss carryforward of $9.0 million is
expected to be fully utilized prior to expiration. The foreign net operating loss carryforwards will expire in 1-12 years.
No income taxes have been provided on undistributed earnings of foreign subsidiaries that are deemed to be
permanently reinvested at December 31, 2025. In addition to the one-time transition tax imposed on all accumulated
foreign undistributed earnings through December 31, 2017, undistributed earnings of foreign subsidiaries as of
December 31, 2025 may still be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply.
We assert indefinite reinvestment on investments in certain foreign subsidiaries and do not in other foreign subsidiaries.
The Company has recorded deferred income taxes for related outside basis differences, including applicable foreign
withholding taxes and other taxes that would be due upon remittance. The related tax expense (benefit) is recognized in the
period the Company no longer meets (or cannot support) the indefinite reinvestment assertion.
The Company has approximately $4.5 million of unrecognized tax benefits as of December 31, 2025, which, if
recognized, would impact the effective tax rate. The Company’s policy is to accrue interest and penalties related to
unrecognized tax benefits in income tax expense. Accrued interest and penalties related to the reserve for uncertain tax
positions were $0.9 million at December 31, 2025, $0.8 million at December 31, 2024, and $0.5 million at December 31,
2023. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Tax
years which remain subject to examination by tax authorities for the Company’s significant tax jurisdictions include 2020
and after for the United States, 2022 and after for Belgium, 2022 and after for the Czech Republic, and 2020 and after for
Luxembourg.
The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits,
excluding interest and penalties:
Year Ended December 31, | |||||
(in thousands) | 2025 | 2024 | 2023 | ||
Beginning balance | $4,546 | $4,381 | $3,497 | ||
Additions based on tax positions related to the current year | 369 | 499 | 660 | ||
Subtractions based on lapse of statute | (438) | (279) | (105) | ||
(Subtractions)/additions based on tax positions related to the prior year | 50 | (55) | 329 | ||
Ending balance | $4,527 | $4,546 | $4,381 | ||
Tax Holidays
In Thailand, we have been granted a long-term tax holiday which is scheduled to expire in 2027. The tax benefit
related to the tax holiday is less due to the Qualified Domestic Minimum Top-up Tax enacted in Thailand in 2025. The
following table presents the effects of income tax expense exemptions available to the Company.
Year Ended December 31, | |||||
(in thousands, except per share amounts) | 2025 | 2024 | 2023 | ||
Tax benefit related to tax holidays | $1,125 | $2,917 | $3,547 | ||
Impact of tax holiday on basic net income per share | $0.01 | $0.02 | $0.02 | ||
Impact of tax holiday on diluted net income per share | $0.01 | $0.02 | $0.02 | ||
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.