BALCHEM CORPBCPC
BALCHEM CORP Income Taxes Disclosure
INCOME TAXES
Cash paid for income taxes (net of refunds received) were $42,643 and $35,725 for the years ended December 31, 2024 and 2023, respectively.
The Company’s effective tax rate for 2025, 2024 and 2023 was 22.2%, 22.8%, and 20.9%, respectively. The decrease from 2024 to 2025 is primarily due to a decrease in certain state and foreign taxes partially offset by lower tax benefits from stock-based compensation.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax provisions, was signed into law in the United States. While the OBBBA did not have material impact on the Company's annual effective tax rate in 2025, the Company will continue to assess its impact for future reporting periods.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance if it believes that such assets may not be recovered, taking into consideration historical operating results, expectations of future earnings, changes in its operations and the expected timing of the reversals of existing temporary differences.
The Company considers the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company's specific plans for reinvestment of those subsidiary earnings. The Company projects that its foreign earnings will be utilized offshore for working capital and future foreign growth. The determination of the unrecognized deferred tax liability on those undistributed earnings is not practicable due to its legal entity structure and the complexity of U.S. and local country tax laws. If the Company decides to change its assertion on its remaining undistributed foreign earnings, it will need to recognize the income tax effects in the period it changes its assertion.
Effective for the year ended December 31, 2025, the Company adopted ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", using the prospective transition method. The following table reconciles the difference between the provision for income taxes and the amount computed by applying the Federal statutory rate of 21.0% after the adoption of ASU 2023-09:
| 2025 | ||||||||||||||
| Amount | Percent | |||||||||||||
| Income tax at Federal statutory rate | $ | 41,796 | 21.0 | % | ||||||||||
| State and local income tax, net of federal (national) income tax effect | 3,143 | 1.6 | % | |||||||||||
| Foreign tax effects | 1,044 | 0.5 | % | |||||||||||
| Effect of cross-border tax laws: | ||||||||||||||
| Foreign-derived intangible income (FDII) | (1,608) | (0.8) | % | |||||||||||
| Global intangible low-tax income (GILTI) | 515 | 0.3 | % | |||||||||||
| Subpart F income | 56 | — | % | |||||||||||
| Tax credits: | ||||||||||||||
| R&D tax credits | (1,045) | (0.5) | % | |||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||
| Share-based payment awards | 960 | 0.5 | % | |||||||||||
| Changes in unrecognized tax benefits | (265) | (0.1) | % | |||||||||||
| Other | (411) | (0.3) | % | |||||||||||
| Total income tax provision | $ | 44,185 | 22.2 | % | ||||||||||
As of December 31, 2025, the majority of state and local taxes were concentrated in California, New Jersey and Utah.
The following table reconciles the difference between the provision for income taxes and the amount computed by applying the Federal statutory rate of 21.0% before the adoption of ASU 2023-09:
| 2024 | 2023 | |||||||||||||
| Income tax at Federal statutory rate | $ | 34,955 | $ | 28,825 | ||||||||||
| State income taxes, net of Federal income taxes | 2,284 | 2,513 | ||||||||||||
| Change in foreign tax reserves | 2,146 | — | ||||||||||||
| Stock options | (1,904) | (1,004) | ||||||||||||
| Foreign-derived intangible income (FDII) | (1,562) | (1,752) | ||||||||||||
| Foreign rate differential | 1,024 | 946 | ||||||||||||
| Other | 1,035 | (810) | ||||||||||||
| Total income tax provision | $ | 37,978 | $ | 28,718 | ||||||||||
The following table states earnings before income tax expense between domestic and foreign for the year ended December 31, 2025 after the adoption of ASU 2023-09:
| 2025 | ||||||||
| Domestic | $ | 173,022 | ||||||
| Foreign | 26,008 | |||||||
| Total earnings before income tax expense | $ | 199,030 | ||||||
Income tax expense consists of the following:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 29,592 | $ | 30,208 | $ | 27,306 | ||||||||||||||
| Foreign | 5,972 | 10,376 | 7,634 | |||||||||||||||||
| State | 2,507 | 4,173 | 4,403 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | 5,555 | (2,442) | (7,737) | |||||||||||||||||
| Foreign | 106 | (3,192) | (2,285) | |||||||||||||||||
| State | 453 | (1,145) | (603) | |||||||||||||||||
| Total income tax expense | $ | 44,185 | $ | 37,978 | $ | 28,718 | ||||||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 were as follows:
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Inventories | $ | 905 | $ | 2,437 | ||||||||||
| Share-based compensation | 5,223 | 4,476 | ||||||||||||
| Lease liabilities | 4,033 | 4,296 | ||||||||||||
| Research and development | 6,658 | 12,838 | ||||||||||||
| Other | 4,510 | 5,658 | ||||||||||||
| Total deferred tax assets | 21,329 | 29,705 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Amortization | $ | (41,810) | $ | (38,532) | ||||||||||
| Depreciation | (26,871) | (26,234) | ||||||||||||
| Prepaid expenses | (392) | (306) | ||||||||||||
| Foreign currency and interest rate swaps | (646) | (642) | ||||||||||||
| Right of use assets | (3,810) | (4,032) | ||||||||||||
| Other | (1,921) | (3,656) | ||||||||||||
| Total deferred tax liabilities | (75,450) | (73,402) | ||||||||||||
| Valuation allowance | (22) | (25) | ||||||||||||
| Net deferred tax liability | $ | (54,143) | $ | (43,722) | ||||||||||
As of December 31, 2025, the Company has state income tax net operating loss (NOL) carryforwards of $285. The state NOL carryforwards will expire between 2026 and 2035. The Company believes that the benefit from the state NOL carryforwards will not be realized, therefore, a valuation allowance has been established in the amount of $22.
Provisions of ASC 740-10 clarify whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is included in other long-term obligations on the Company’s consolidated balance sheets, is as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Balance at beginning of period | $ | 6,720 | $ | 4,650 | $ | 5,815 | ||||||||||||||
| Increases for tax positions of prior years | 1,179 | 3,211 | 1,353 | |||||||||||||||||
| Decreases for tax positions of prior years | (1,168) | (1,141) | (2,518) | |||||||||||||||||
| Balance at end of period | $ | 6,731 | $ | 6,720 | $ | 4,650 | ||||||||||||||
All of Balchem's unrecognized tax benefits, if recognized in future periods, would impact the Company's effective tax rate in such future periods.
The Company recognizes both interest and penalties as part of the income tax provision. During the years ended December 31, 2025, 2024 and 2023, these amounts decreased by $2, increased by $939, and decreased by $322, respectively. As of December 31, 2025 and 2024, accrued interest and penalties were $2,350 and $2,352, respectively.
Balchem files income tax returns in the U.S. and in various states and foreign countries. In the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2021.
The European Union (“EU”) member states formally adopted the EU’s Pillar Two Directive, which was established by the Organization for Economic Co-operation and Development. Pillar Two generally provides for a 15 percent minimum effective tax rate for the jurisdictions where multinational enterprises operate. While it did not have material impact on the Company's tax provision or effective tax rate in 2025 and the Company does not anticipate that this will have a material impact for future reporting periods, the Company continues to monitor evolving tax legislation in the jurisdictions in which it operates.
The following table presents cash paid for income taxes by jurisdiction for the year ended December 31, 2025 in accordance with ASU 2023-09:
| 2025 | ||||||||
| Jurisdiction | ||||||||
| Federal | $ | 27,255 | ||||||
| State and local | 2,860 | |||||||
| Foreign | ||||||||
| Belgium | 3,444 | |||||||
| Norway | 2,589 | |||||||
| All other jurisdictions | 1,601 | |||||||
| Total cash paid for income taxes (net of refunds received) | $ | 37,749 | ||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 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.