ARTESIAN RESOURCES CORPARTNA
ARTESIAN RESOURCES CORP Income Taxes Disclosure
NOTE 5 – INCOME TAXES
Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated subsidiaries recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate. Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.
As of December 31, 2025, the Company has separate company state net operating loss carry-forwards aggregating approximately $17.9 million. Most of these net operating loss carry-forwards will not expire. The Company has recorded a valuation allowance to reflect the estimated amount of deferred tax assets that may not be realized in the future. The valuation allowance increased to approximately $1,174,000 in 2025 from approximately $1,084,000 in 2024. Management believes that it is more likely than not that the Company will realize the benefit of these deferred tax assets, net of the valuation allowance.
Components of Income Tax Expense
| In thousands | For the Year Ended December 31, | ||||||||||
| Federal income taxes | 2025 | 2024 | 2023 | ||||||||
| Current | $ | 4,499 | $ | 4,733 | $ | 1,946 | |||||
| Deferred | 510 | (104 | ) | 1,968 | |||||||
| Total federal income tax expense | $ | 5,009 | $ | 4,629 | $ | 3,914 | |||||
| For the Year Ended December 31, | |||||||||||
| State income taxes | 2025 | 2024 | 2023 | ||||||||
| Current | $ | 2,139 | $ | 2,004 | $ | 1,016 | |||||
| Deferred | 683 | 682 | 1,418 | ||||||||
| Total state income tax expense | $ | 2,822 | $ | 2,686 | $ | 2,434 | |||||
Income Taxes Paid:
| For the Year Ended December 31, | |||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||
| U.S. Federal | $ | 4,819 | $ | 4,000 | $ | 2,355 | |||||
| State: | |||||||||||
| Delaware | $ | 2,061 | $ | 1,021 | $ | 1,233 | |||||
| Other | 24 | 10 | 2 | ||||||||
| State Subtotal | $ | 2,085 | $ | 1,031 | $ | 1,235 | |||||
| Total cash paid for income taxes (net of refunds) | $ | 6,904 | $ | 5,031 | $ | 3,590 | |||||
Reconciliation of effective tax rate:
| 2025 | 2025 | 2024 | 2024 | 2023 | 2023 | ||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||
| Reconciliation of effective tax Rate | |||||||||||||||||||||||
| Income before federal and state income taxes | $ | 30,653 | 100.0 | % | $ | 27,709 | 100.0 | % | $ | 23,047 | 100.0 | % | |||||||||||
| Amount computed at statutory rate | 6,437 | 21.0 | % | 5,819 | 21.0 | % | 4,840 | 21.0 | % | ||||||||||||||
| Reconciling items | |||||||||||||||||||||||
| State income tax-net of federal tax benefit(a) | 2,210 | 7.2 | % | 2,094 | 7.6 | % | 1,918 | 8.3 | % | ||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||
| Share based payment awards | 3 | 0.0 | % | 21 | 0.1 | % | (43 | ) | (0.2 | )% | |||||||||||||
| Other | 72 | 0.2 | % | 164 | 0.5 | % | 69 | 0.3 | % | ||||||||||||||
| Regulatory liability adjustment | (937 | ) | (3.0 | )% | (719 | ) | (2.6 | )% | (449 | ) | (1.9 | )% | |||||||||||
| Other | 46 | 0.2 | % | (64 | ) | (0.2 | )% | 13 | 0.1 | % | |||||||||||||
| Total income tax expense and effective rate | $ | 7,831 | 25.6 | % | $ | 7,315 | 26.4 | % | $ | 6,348 | 27.6 | % |
(a) State taxes in
made up the majority (greater than 50 percent) of the tax effect in
this category for all years
Deferred income taxes at December 31, 2025 and 2024 were comprised of the following:
| For the Year Ended December 31, | |||||||
| In thousands | 2025 | 2024 | |||||
| Deferred tax assets related to: | |||||||
| State operating loss carry-forwards | $ | 1,177 | $ | 1,086 | |||
| Allowance for credit losses | 95 | 96 | |||||
| Stock options | 25 | 31 | |||||
| Tax effect of regulatory liabilities | 7,042 | 7,408 | |||||
| Other | 203 | 183 | |||||
| Total deferred tax assets | $ | 8,542 | $ | 8,804 | |||
| Less: valuation allowance | (1,174 | ) | (1,084 | ) | |||
| Total deferred tax assets net of valuation allowance | $ | 7,368 | $ | 7,720 | |||
| Deferred tax liabilities related to: | |||||||
| Property plant and equipment basis differences | $ | (59,547 | ) | $ | (57,296 | ) | |
| Bond retirement costs | (831 | ) | (907 | ) | |||
| Property taxes | (504 | ) | (610 | ) | |||
| Other | (1,242 | ) | (1,172 | ) | |||
| Total deferred tax liabilities | $ | (62,124 | ) | $ | (59,985 | ) | |
| Net deferred tax liability | $ | (54,756 | ) | $ | (52,265 | ) | |
Schedule of Valuation Allowance
| Balance at | Additions Charged to | Balance at | |||||||||||||
| In thousands | Beginning of Period | Costs and Expenses | Deductions | End of Period | |||||||||||
| Classification | |||||||||||||||
| For the Year Ended December 31, 2025 Valuation allowance for deferred tax assets | $ | 1,084 | $ | 102 | $ | 12 | $ | 1,174 | |||||||
| For the Year Ended December 31, 2024 Valuation allowance for deferred tax assets | $ | 906 | $ | 190 | $ | 12 | $ | 1,084 | |||||||
| For the Year Ended December 31, 2023 Valuation allowance for deferred tax assets | $ | 600 | $ | 312 | $ | 6 | $ | 906 |
Under FASB ASC Topic 740, the Company establishes reserves for uncertain tax positions based upon management’s assessment of whether
the positions are more likely than not to be sustained upon examination. The Company recorded a liability related to the difference in the tax depreciation utilizing the half-year convention rather than the mid-quarter convention for 2022 and 2024.
The following table provides the changes in the Company's uncertain tax position:
| For the Year Ended December 31, | |||||||
| In thousands | 2025 | 2024 | |||||
| Balance at beginning of year | $ | 221 | $ | 158 | |||
| Additions based on tax positions related to the current year | - | 46 | |||||
| Additions based on tax positions related to prior years | 22 | 17 | |||||
| Settlements with taxing authorities | - | - | |||||
| Lapses in statutes of limitations | - | - | |||||
| Balance at end of year | $ | 243 | $ | 221 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 26, 2025 | |
| 2023 | Mar 18, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Mar 11, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 15, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 11, 2016 | |
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.