ASURE SOFTWARE INCASUR
ASURE SOFTWARE INC Income Taxes Disclosure
INCOME TAXES
The components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2025 and 2024, are as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Current | |||||||||||
| Federal | $ | — | $ | 9 | |||||||
| State | — | 40 | |||||||||
| Total current | $ | — | $ | 49 | |||||||
| Deferred | |||||||||||
| Federal | $ | 81 | $ | 532 | |||||||
| State | 571 | 352 | |||||||||
| Total deferred | $ | 652 | $ | 884 | |||||||
| Total tax provision | $ | 652 | $ | 933 | |||||||
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), as described in Note 1 — Description of Business, Basis of Presentation, and Significant Accounting Policies, the reconciliation of taxes at the federal statutory rate to our provision for income taxes for the year ended December 31, 2025, was as follows:
| 2025 | |||||||||||
| U.S. federal statutory tax rate | $ | (2,621) | 21.0 | % | |||||||
State taxes, net of federal benefit(1) | 551 | (4.4) | % | ||||||||
| Tax credits | |||||||||||
| Research and development tax credits | 123 | (1.0) | % | ||||||||
| Change in valuation allowance | 2,445 | (19.6) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock compensation | (102) | 0.8 | % | ||||||||
| Officer's compensation limitation | 489 | (3.9) | % | ||||||||
| Impact of deferred tax true up for intangible assets | 214 | (1.7) | % | ||||||||
| Impact of deferred tax true up for stock compensation | 147 | (1.2) | % | ||||||||
| Impact of asset acquisitions on deferred taxes | (712) | 5.7 | % | ||||||||
| Changes in unrecognized tax benefits | 19 | (0.1) | % | ||||||||
| Other adjustments | 99 | (0.8) | % | ||||||||
| $ | 652 | (5.2) | % | ||||||||
(1)The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include New York State, New York City, the New York Metropolitan Commuter Transportation District, New Jersey, and California.
The reconciliation of taxes at the federal statutory income tax rate of 21% to our provision for income taxes for the year ended December 31, 2024, in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| 2024 | |||||
| Computed at statutory rate | $ | (2,276) | |||
| State tax, net of federal benefit | (377) | ||||
| Permanent items and other | 76 | ||||
| Officer’s compensation limitation | 345 | ||||
| Stock compensation | 109 | ||||
| Credit carryforwards | 759 | ||||
| Change in valuation allowance | 2,297 | ||||
| $ | 933 | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred taxes for the years ended December 31, 2025 and 2024, are as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Net operating losses | $ | 12,415 | $ | 10,914 | |||||||
| Research and development credit carryforwards | 3,402 | 3,500 | |||||||||
| Stock compensation | 2,291 | 2,135 | |||||||||
| Fixed assets | 60 | 24 | |||||||||
| Capitalized Software | 3,443 | 3,254 | |||||||||
| Acquired intangibles | 6,124 | 2,722 | |||||||||
| Lease liabilities | 1,962 | 1,314 | |||||||||
| Accrued expenses | 2,460 | 2,244 | |||||||||
| Deferred revenue | 1,192 | 326 | |||||||||
| Other | — | 34 | |||||||||
| Gross deferred tax assets | 33,349 | 26,467 | |||||||||
| Less: Valuation allowance | (22,538) | (18,497) | |||||||||
| Total deferred tax assets | $ | 10,811 | $ | 7,970 | |||||||
| Deferred tax liabilities | |||||||||||
| Deferred commissions | $ | (4,024) | $ | (3,236) | |||||||
| Goodwill | (8,403) | (6,287) | |||||||||
| Right-of-use assets | (1,648) | (1,059) | |||||||||
| Total deferred tax liabilities | $ | (14,075) | $ | (10,582) | |||||||
| Net deferred tax liabilities | $ | (3,264) | $ | (2,612) | |||||||
At December 31, 2025, we had federal net operating loss carryforwards of $51,259 and research and development credit carryforwards of $3,448. We also had state net operating loss carryforwards of $29,197 and state tax credit carryforwards of $567. The net operating loss and research and development credit carryforwards will expire in varying amounts from 2026 through 2042, if not utilized. Approximately $23,706 of the federal net operating loss carryforwards carry forward indefinitely, but can only offset up to 80% of taxable income.
As a result of various acquisitions by us in prior years, we may be subject to a substantial annual limitation in the utilization of the net operating losses and credit carryforwards due to the “change in ownership” provisions of Section 382 of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses before utilization. However, based on our analysis, we do not expect any material net operating losses to expire prior to utilization.
Due to the uncertainty surrounding the timing of realizing the benefits of our favorable tax attributes in future tax returns, we have placed a valuation allowance against our net deferred tax assets, exclusive of jurisdictions in which we have net deferred tax liabilities. During the year ended December 31, 2025, the valuation allowance increased by $4,041 due primarily to operations.
Under ASC 740-10, Income Taxes, we periodically review the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. We use a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefits or a liability for uncertain tax positions. We have determined it has the following unrecognized assets or liabilities related to uncertain tax positions as of December 31, 2025. We do not anticipate any significant changes in such uncertainties and judgments during the next twelve months. To the extent we are required to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability. The reconciliation of our unrecognized tax benefits is as follows:
| Balance at December 31, 2023 | $ | 649 | |||
| Additions based on tax positions related to the current year | — | ||||
| Additions for tax positions of prior years | — | ||||
| Reductions for tax positions of prior years | (97) | ||||
| Balance at December 31, 2024 | 552 | ||||
| Additions based on tax positions related to the current year | — | ||||
| Additions for tax positions of prior years | — | ||||
| Reductions for tax positions of prior years | (47) | ||||
| Balance at December 31, 2025 | $ | 505 | |||
As of December 31, 2025, we had $505 of unrecognized tax benefits, of which $19 would affect the effective tax rate if recognized.
Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the twelve months ended December 31, 2025, we recognized $0 of interest and penalties in our income tax expense.
We file tax returns in the U.S. federal jurisdiction and in several state jurisdictions. We are subject to U.S. federal income tax examinations for years ending on or after December 31, 2022 and are subject to state and local income tax examinations by tax authorities for years ending on or after December 31, 2021. We are not currently under audit for any federal or state jurisdictions. However, since we have net operating losses, the taxing authorities have the ability to review tax returns no longer subject to examination and make adjustments to these net operating loss carryforwards.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 14, 2022 | |
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.