CBIZ, Inc.CBZ
CBIZ, Inc. Income Taxes Disclosure
INCOME TAXES
For financial reporting purposes, income before income taxes includes the following components (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 160,630 | $ | 57,521 | $ | 165,869 | |||||||||||
| Foreign (Canada) | 205 | 286 | 434 | ||||||||||||||
| Total | $ | 160,835 | $ | 57,807 | $ | 166,303 | |||||||||||
Income tax expense included in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 27,683 | $ | 23,362 | $ | 29,835 | |||||||||||
| Foreign | 55 | 76 | 116 | ||||||||||||||
| State and local | 11,244 | 8,164 | 10,298 | ||||||||||||||
| Total | 38,982 | 31,602 | 40,249 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 7,582 | (10,920) | 3,978 | ||||||||||||||
| State and local | (1,173) | (3,913) | 1,108 | ||||||||||||||
| Total | 6,409 | (14,833) | 5,086 | ||||||||||||||
| Total income tax expense | 45,391 | 16,769 | 45,335 | ||||||||||||||
The provision for income taxes differed from the amount obtained by applying the statutory U.S. federal income tax rate to income before income taxes. The reconciliation from the statutory U.S. federal tax rate to our effective income tax rate, applying ASU 2023-09 prospectively, is as follows (in thousands, except percentages):
| 2025 | |||||||||||
| Amount | % | ||||||||||
| $ | 33,775 | 21.0 | % | ||||||||
State taxes (net of federal benefit)(1) | 8,119 | 5.0 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Statutory rate difference between Canada and U.S. | 12 | — | % | ||||||||
| Change in valuation allowances | 17 | — | % | ||||||||
| Non-taxable or non-deductible items: | |||||||||||
| Meals and entertainment | 1,928 | 1.2 | % | ||||||||
| Other | 1,389 | 0.9 | % | ||||||||
| Reserves for uncertain tax positions | 688 | 0.4 | % | ||||||||
| Other adjustments | (537) | (0.3) | % | ||||||||
| Provision for income taxes | $ | 45,391 | 28.2 | % | |||||||
(1)State and local taxes in California, Massachusetts, New York, New York City and Pennsylvania made up the majority (greater than 50%) of the tax effect in this category.
The reconciliation from the statutory U.S federal tax rate to our effective income tax rate, applying ASC 740 prior to the adoption of ASU 2023-09, is as follows (in thousands, except percentages):
| 2024 | 2023 | ||||||||||
| $ | 12,139 | $ | 34,924 | ||||||||
| State taxes (net of federal benefit) | 3,182 | 10,576 | |||||||||
| Reserves for uncertain tax positions | 209 | (241) | |||||||||
| Share-based compensation | (3,907) | (5,820) | |||||||||
| Meals and entertainment | 1,193 | 1,168 | |||||||||
| Non-deductible officers' compensation | 3,762 | 5,485 | |||||||||
| Other, net | 191 | (757) | |||||||||
| Provision for income taxes | $ | 16,769 | $ | 45,335 | |||||||
| Effective income tax rate | 29.0 | % | 27.3 | % | |||||||
Cash paid, net of refunds, consisted of the following (in thousands):
| 2025 | |||||
| Federal | $ | 16,000 | |||
| State and local | 7,416 | ||||
| Foreign | 161 | ||||
| Net cash paid for income taxes | $ | 23,577 | |||
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024, were as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 6,218 | $ | 2,912 | |||||||
| Allowance for doubtful accounts | 11,614 | 7,596 | |||||||||
| Employee benefits and compensation | 53,517 | 45,122 | |||||||||
| Acquisition-related costs | 4,176 | 9,110 | |||||||||
| Deferred revenue | 436 | 4,446 | |||||||||
| Property and equipment | — | 141 | |||||||||
| Lease liabilities | 97,131 | 116,080 | |||||||||
| Other deferred tax assets | 3,753 | 1,103 | |||||||||
| Total gross deferred tax assets | 176,845 | 186,510 | |||||||||
| Less: valuation allowance | (3,475) | (2,941) | |||||||||
| Total deferred tax assets, net | 173,370 | 183,569 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Goodwill and other intangibles | 91,974 | 85,771 | |||||||||
| Right of Use assets | 87,537 | 105,478 | |||||||||
| Property and equipment | 417 | — | |||||||||
| Other deferred tax liabilities | 583 | 3,200 | |||||||||
| Total gross deferred tax liabilities | 180,511 | 194,449 | |||||||||
| Deferred income taxes, net | $ | (7,141) | $ | (10,880) | |||||||
We have established valuation allowances for deferred tax assets related to certain employee benefits and compensation and state net operating loss ("NOL") carryforwards at December 31, 2025 and December 31, 2024.
The net increase in the valuation allowance of $0.5 million for the year ended December 31, 2025, related primarily to changes in the valuation allowance for state NOLs.
In assessing the realization of deferred tax assets, management considers all available positive and negative evidence, including projected future taxable income, scheduled reversal of deferred tax liabilities, historical financial operations and tax planning strategies. Based upon review of these items, management believes it is more-likely-than-not that the Company will realize the benefits of these deferred tax assets, net of the existing valuation allowances.
We file U.S. federal, state and foreign income tax returns. In general, the examination of our material tax returns is complete for years ending prior to 2022. In the fourth quarter of 2024, the Internal Revenue Service selected our 2022 federal tax return for examination. We expect the audit will be completed in early 2026, and at this time do not anticipate any material adjustments.
With limited exceptions, our state and local income tax returns for years ending prior to January 1, 2021, and non-U.S. income tax returns for years ending prior to January 1, 2022, are no longer subject to tax authority examinations.
The availability of NOLs and state tax credits are reported as a component of deferred tax assets, net of applicable valuation allowances, in the accompanying Consolidated Balance Sheets. At December 31, 2025, we had state net operating loss carryforwards of $196.7 million and a state tax credit carryforward of $0.1 million. The state net operating loss carryforwards expire on various dates between 2026 and 2045 and the state tax credit carryforward expires in 2028.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1 | $ | 2,038 | $ | 1,847 | $ | 2,111 | |||||||||||
| Additions for tax positions of the current year | 164 | 197 | 178 | ||||||||||||||
| Additions for positions of prior years | 857 | 168 | 103 | ||||||||||||||
| Lapse of statutes of limitation | (699) | (174) | (545) | ||||||||||||||
| Balance at December 31 | $ | 2,360 | $ | 2,038 | $ | 1,847 | |||||||||||
Included in the balance of unrecognized tax benefits at December 31, 2025 are $2.0 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. We believe it is reasonably possible that certain of these unrecognized tax benefits could change in the next twelve months.
We recognize interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During 2025, we recorded an immaterial increase in accrued interest, and, as of December 31, 2025, we had recognized a liability for interest expense and penalties of $0.4 million and $0.2 million, respectively, relating to unrecognized tax benefits. During 2024, we recorded an immaterial increase in accrued interest, and, as of December 31, 2024, we had recognized a liability for interest expense and penalties of $0.3 million and $0.2 million, respectively, relating to unrecognized tax benefits.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Mar 8, 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.