AMERICAN VANGUARD CORP Income Taxes Disclosure
(4) Income Taxes
The provision for income taxes are:
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
(367 |
) |
|
$ |
(1,131 |
) |
|
$ |
8,038 |
|
State |
|
|
6 |
|
|
|
(271 |
) |
|
|
1,211 |
|
Foreign |
|
|
4,445 |
|
|
|
5,629 |
|
|
|
3,238 |
|
|
|
|
4,084 |
|
|
|
4,227 |
|
|
|
12,487 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(352 |
) |
|
|
783 |
|
|
|
(6,263 |
) |
State |
|
|
99 |
|
|
|
1,208 |
|
|
|
(1,029 |
) |
Foreign |
|
|
(1,152 |
) |
|
|
(336 |
) |
|
|
(2,417 |
) |
|
|
|
(1,405 |
) |
|
|
1,655 |
|
|
|
(9,709 |
) |
Total |
|
$ |
2,679 |
|
|
$ |
5,882 |
|
|
$ |
2,778 |
|
The table below provides the updated requirements of ASU 2023-09 for 2025. Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21.0% to income before income tax expense, as a result of the following:
|
|
2025 |
|
|||||
|
|
Amount |
|
|
Percentage |
|
||
Computed tax expense at statutory federal rates |
|
|
(9,912 |
) |
|
|
21.0 |
% |
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
||
State taxes, net of federal income tax benefit (1) |
|
|
115 |
|
|
|
-0.2 |
% |
Foreign tax effects: |
|
|
|
|
|
|
||
Panama |
|
|
|
|
|
|
||
Other |
|
|
(518 |
) |
|
|
1.1 |
% |
Nicaragua |
|
|
|
|
|
|
||
Change in Valuation Allowance |
|
|
845 |
|
|
|
-1.8 |
% |
Other |
|
|
181 |
|
|
|
-0.4 |
% |
Brazil |
|
|
|
|
|
|
||
Foreign Rate Differential |
|
|
(1,139 |
) |
|
|
2.4 |
% |
Goodwill Impairment |
|
|
2,882 |
|
|
|
-6.1 |
% |
Other |
|
|
142 |
|
|
|
-0.3 |
% |
Australia |
|
|
|
|
|
|
||
Goodwill Impairment |
|
|
700 |
|
|
|
-1.5 |
% |
Other |
|
|
(59 |
) |
|
|
0.1 |
% |
Costa Rica |
|
|
|
|
|
|
||
Foreign Rate Differential |
|
|
(858 |
) |
|
|
1.8 |
% |
Goodwill Impairment |
|
|
2,809 |
|
|
|
-6.0 |
% |
Other |
|
|
88 |
|
|
|
-0.2 |
% |
Other foreign jurisdictions |
|
|
512 |
|
|
|
-1.1 |
% |
Effect of cross-border tax laws: |
|
|
|
|
|
|
||
Subpart F Income |
|
|
648 |
|
|
|
-1.4 |
% |
Tax credits |
|
|
|
|
|
|
||
Research and development ("R&D") credits |
|
|
(171 |
) |
|
|
0.4 |
% |
Changes in valuation allowance |
|
|
5,463 |
|
|
|
-11.6 |
% |
Nontaxable or nondeductible items: |
|
|
|
|
|
|
||
Equity compensation |
|
|
573 |
|
|
|
-1.2 |
% |
Other |
|
|
362 |
|
|
|
-0.8 |
% |
Changes in unrecognized tax benefits |
|
|
(115 |
) |
|
|
0.2 |
% |
Other adjustments: |
|
|
|
|
|
|
||
Return to provision |
|
|
(159 |
) |
|
|
0.3 |
% |
Other |
|
|
290 |
|
|
|
-0.6 |
% |
Total |
|
|
2,679 |
|
|
|
-5.9 |
% |
|
|
|
|
|
|
|
||
(1) State taxes in Illinois, Alabama, Florida, Minnesota, Pennsylvania, Louisiana, California, and North Carolina made up the majority (greater than 50%) of the tax effect in this category. |
|
|||||||
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21.0% to income before income tax expense, as a result of the following:
|
|
2024 |
|
|
2023 |
|
||
Computed tax expense at statutory federal rates |
|
$ |
(25,296 |
) |
|
$ |
2,162 |
|
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
||
State taxes, net of federal income tax benefit |
|
|
(3,117 |
) |
|
|
756 |
|
Unrecognized tax benefits |
|
|
(191 |
) |
|
|
(585 |
) |
Income tax credits |
|
|
(288 |
) |
|
|
(720 |
) |
Foreign tax rate differential |
|
|
(2,599 |
) |
|
|
1,025 |
|
Stock based compensation |
|
|
685 |
|
|
|
219 |
|
Global intangible low-taxed income |
|
|
— |
|
|
|
685 |
|
Change in valuation allowance |
|
|
29,730 |
|
|
|
1,376 |
|
Return to provision |
|
|
(1,189 |
) |
|
|
158 |
|
Nondeductible expenses / (tax deductions) |
|
|
2,161 |
|
|
|
(327 |
) |
Gross receipts taxes |
|
|
398 |
|
|
|
425 |
|
Goodwill impairment |
|
|
6,471 |
|
|
|
|
|
IP migration |
|
|
— |
|
|
|
(2,455 |
) |
Other |
|
|
(883 |
) |
|
|
59 |
|
Total |
|
$ |
5,882 |
|
|
$ |
2,778 |
|
(Loss) income before provision for income taxes is as follows:
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Domestic |
|
$ |
(36,290 |
) |
|
$ |
(103,918 |
) |
|
$ |
6,672 |
|
International |
|
|
(10,913 |
) |
|
|
(16,540 |
) |
|
|
3,625 |
|
Total |
|
$ |
(47,203 |
) |
|
$ |
(120,458 |
) |
|
$ |
10,297 |
|
Temporary differences between the consolidated financial statements’ carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the net deferred tax liability at December 31, 2025 and 2024 relate to the following:
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Inventories |
|
$ |
6,083 |
|
|
$ |
9,322 |
|
Program accrual |
|
|
8,790 |
|
|
|
10,486 |
|
Vacation pay accrual |
|
|
685 |
|
|
|
682 |
|
Accrued bonuses and severance |
|
|
860 |
|
|
|
882 |
|
Bad debt expense |
|
|
3,323 |
|
|
|
2,550 |
|
Stock compensation |
|
|
620 |
|
|
|
1,047 |
|
Domestic NOL carryforward |
|
|
9,319 |
|
|
|
4,604 |
|
Foreign NOL carryforward |
|
|
7,180 |
|
|
|
6,297 |
|
Tax credits |
|
|
1,892 |
|
|
|
1,794 |
|
Lease liability |
|
|
3,578 |
|
|
|
5,078 |
|
Accrued expenses |
|
|
527 |
|
|
|
678 |
|
Accrued product liability |
|
|
1,858 |
|
|
|
— |
|
Unrealized foreign exchange loss |
|
|
1,152 |
|
|
|
2,521 |
|
Capitalized R&D costs |
|
|
5,384 |
|
|
|
7,587 |
|
Disallowed interest expense |
|
|
7,964 |
|
|
|
3,670 |
|
Other |
|
|
1,298 |
|
|
|
— |
|
Deferred tax assets |
|
|
60,513 |
|
|
|
57,198 |
|
Less valuation allowance |
|
|
(41,386 |
) |
|
|
(33,855 |
) |
Deferred tax assets, net |
|
$ |
19,127 |
|
|
$ |
23,343 |
|
Deferred tax liabilities |
|
|
|
|
|
|
||
Plant and equipment |
|
$ |
(19,346 |
) |
|
$ |
(22,686 |
) |
Lease assets |
|
|
(3,414 |
) |
|
|
(4,895 |
) |
Prepaid expenses |
|
|
(1,881 |
) |
|
|
(1,809 |
) |
Other |
|
|
— |
|
|
|
(700 |
) |
Deferred tax liabilities |
|
$ |
(24,641 |
) |
|
$ |
(30,090 |
) |
|
|
|
|
|
|
|
||
Total net deferred tax liabilities |
|
$ |
(5,514 |
) |
|
$ |
(6,747 |
) |
Certain 2024 balances were reclassified to conform with the 2025 presentation.
As of December 31, 2025, the Company maintained a full valuation allowance against its net deferred income tax assets related to the Company’s operations in the United States, Brazil, Dominican Republic, Honduras, Nicaragua, Hong Kong, Spain, and Ukraine totaling $41,386. The valuation allowance increased by $7,531 for the year ended December 31, 2025, of which $308 relates to unrealized foreign exchange gains and foreign currency translation included in other comprehensive (loss) income for 2025, and $7,839 included in the provision for income taxes for 2025. As of December 31, 2024, the Company maintained a full valuation allowance against the net deferred income tax assets related to the Company’s operations in the United States, Brazil, Dominican Republic, Honduras, Hong Kong, Spain, and Ukraine totaling $33,855.
Gross foreign NOLs related to the Company's foreign operations were $22,231 and $19,577, for the years ended December 31, 2025 and 2024, respectively. Substantially all of the Company’s foreign NOLs can be carried forward indefinitely.
Gross domestic federal and state NOLs available across all jurisdictions in which we operate were $76,166 and $30,062 as of December 31, 2025 and 2024, respectively. The Company’s federal NOL can be carried forward indefinitely and is subject to annual limitations in accordance with IRC Section 382. The Company’s state NOLs expire over varying intervals in the future and are subject to annual limitations in accordance with IRC Section 382.
The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the years ended December 31, 2025 and 2024 included in other liabilities on the Company’s consolidated balance sheets:
|
|
2025 |
|
|
2024 |
|
||
Balance at beginning of year |
|
$ |
903 |
|
|
$ |
1,796 |
|
Additions for tax positions related to the current year |
|
|
97 |
|
|
|
63 |
|
Additions for tax positions related to the prior years |
|
|
48 |
|
|
|
— |
|
Reduction for tax positions related to the prior years |
|
|
(235 |
) |
|
|
(995 |
) |
Effect of exchange rate changes |
|
|
— |
|
|
|
39 |
|
Balance at end of year |
|
$ |
813 |
|
|
$ |
903 |
|
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s consolidated financial statements. As of December 31, 2025 and 2024, the Company incurred $138 in both years in interest and penalties related to unrecognized tax benefits on its consolidated balance sheets.
The Company believes it is more likely than not that the deferred assets detailed in the table above, exclusive of those in the United States, Brazil, Dominican Republic, Honduras, Nicaragua, Hong Kong, Spain, and Ukraine with the previously mentioned full valuation allowances, will be realized in the normal course of business. It is the intent of the Company that undistributed earnings of foreign subsidiaries that amounted to $102,873 at December 31, 2025, are permanently reinvested. Determination of the unrecognized deferred tax liability is not practical due to the complexities of a hypothetical calculation.
The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax returns of the Company are subject to Internal Revenue Service (“IRS”) examination for the 2022 through 2024 tax years. State income tax returns are subject to examination for the 2021 through 2024 tax years. The Company has foreign income tax returns subject to examination.
On July 4, 2025, new U.S. tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. The Company has accounted for the impact of the new legislation during the year ended December 31, 2025 and the impact is not material to the results of operations.
Beginning in 2022, The Tax Cuts and Jobs Act of 2017 ("TCJA"), requires taxpayers to capitalize and amortize research and development expenditures pursuant to Internal Revenue Code, or IRC, Section 174. The enactment of the OBBBA repealed IRC Section 174 for tax years beginning after December 31, 2024. As of December 31, 2024, IRC Section 174 resulted in increases in the Company’s deferred tax asset balance of $7,587. There was an increase in cash tax payments in the amount of $1,431 for the year ended December 31, 2024.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | May 29, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 10, 2020 | |
| 2018 | Mar 12, 2019 | |
| 2017 | Mar 14, 2018 | |
| 2016 | Mar 7, 2017 | |
| 2015 | Mar 2, 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.