Climb Global Solutions, Inc. Income Taxes Disclosure
7. Income Taxes
Deferred tax attributes resulting from differences between the tax basis of assets and liabilities and the reported amounts in the Consolidated Balance Sheets are as follows:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Deferred tax assets: | ||||||||
| Accruals and reserves | $ | 3,006 | $ | 1,563 | ||||
| Deferred rent credit | 56 | 92 | ||||||
| Depreciation and amortization | 632 | 635 | ||||||
| Total deferred tax assets | 3,694 | 2,290 | ||||||
| Deferred tax liabilities: | ||||||||
| Accruals and reserves | (1,632 | ) | (965 | ) | ||||
| Depreciation and amortization | (6,932 | ) | (5,855 | ) | ||||
| Total deferred tax liabilities | (8,564 | ) | (6,820 | ) | ||||
| Net deferred tax liabilities | $ | (4,870 | ) | $ | (4,530 | ) | ||
The provision for income taxes is as follows:
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Current: | ||||||||||||
| Federal | $ | 3,226 | $ | 4,610 | $ | 2,793 | ||||||
| State | 969 | 839 | 676 | |||||||||
| Foreign | 2,498 | 1,471 | 1,372 | |||||||||
| Total current tax expense | 6,693 | 6,920 | 4,841 | |||||||||
| Deferred: | ||||||||||||
| Federal | 817 | 28 | 32 | |||||||||
| State | 19 | 112 | 10 | |||||||||
| Foreign | (941 | ) | (652 | ) | (425 | ) | ||||||
| Total deferred tax expense (benefit) | (105 | ) | (512 | ) | (383 | ) | ||||||
| Total income tax expense (benefit) | $ | 6,588 | $ | 6,408 | $ | 4,458 | ||||||
| Effective Tax Rate | 23.6 | % | 25.6 | % | 26.6 | % | ||||||
For financial reporting purposes, income before income taxes includes the following components:
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| United States | $ | 21,804 | $ | 20,961 | $ | 11,990 | ||||||
| Foreign | 6,114 | 4,057 | 4,791 | |||||||||
| $ | 27,918 | $ | 25,018 | $ | 16,781 | |||||||
| Year ended December 31, 2025 | ||||||||
| $ | % | |||||||
| Provision for income taxes at U.S. federal statutory rate | $ | 5,863 | 21.0 | % | ||||
| State and local income taxes, net of federal benefit (1) | 780 | 2.8 | % | |||||
| Foreign tax effects | 274 | 1.0 | % | |||||
| Effects of changes in tax laws or rates enacted in the current period | — | 0.0 | % | |||||
| Effect of cross-border tax laws: | ||||||||
| Foreign derived intangible income ("FDII") | — | 0.0 | % | |||||
| Other | — | 0.0 | % | |||||
| Tax credits: | ||||||||
| Tax credits | — | 0.0 | % | |||||
| Non-taxable or non-deductible items: | ||||||||
| Stock based compensation | (968 | ) | % | |||||
| Executive compensation limitation (IRC 162m) | 691 | 2.5 | % | |||||
| Other items | 26 | 0.1 | % | |||||
| Uncertain tax positions | — | 0.0 | % | |||||
| Other items | (78 | ) | % | |||||
| Total tax provision and effective tax rate | $ | 6,588 | 23.6 | % | ||||
| (1) | State taxes in California, Florida, Illinois and Pennsylvania made up the majority (greater than 50 percent) 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 effective income tax rate differs from the statutory federal income tax rate as follows:
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Statutory rate applied to pretax income | $ | 5,254 | $ | 3,524 | ||||
| Other permanent items | 384 | 569 | ||||||
| State income taxes, net of federal income tax benefit | 752 | 542 | ||||||
| Acquisition related costs | 760 | 132 | ||||||
| Other items | 56 | — | ||||||
| Dividends | (1 | ) | (3 | ) | ||||
| GILTI, net of foreign tax credits | (41 | ) | (11 | ) | ||||
| Foreign income taxes (under) U.S. statutory rate | (200 | ) | (46 | ) | ||||
| Stock compensation | (556 | ) | (249 | ) | ||||
| Income tax expense | $ | 6,408 | $ | 4,458 | ||||
The Company has analyzed filing positions in all the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal consolidated tax return, its state tax returns, its Canadian tax return and its tax return in the United Kingdom as major tax jurisdictions. As of December 31, 2025, the Company’s through 2024 Federal tax returns remain open for examination. The Company’s various states and Canadian tax returns are open for examination for the years through 2024. The Company’s tax return in the United Kingdom is open for examination for the years and 2024. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including experience and interpretations of tax law applied to the facts of each matter.
The Company has approximately $11.3 million of undistributed earnings in Canada and $5.3 million of undistributed earnings in the United Kingdom and $2.2 million of undistributed earnings in Ireland, which it continues to reinvest indefinitely, and therefore no withholding taxes related to its repatriation has been recorded.
There was no activity related to the Company’s unrecognized tax benefits during the years ended December 31, 2025, 2024 and 2023.
During the years ended December 31, 2025, 2024 and 2023, the Company incurred interest and penalties of zero, respectively, related to these uncertain tax benefits.
As required by ASU 2023-09, the total cash paid for income taxes by U.S. federal, U.S. state and foreign jurisdictions for the year ended December 31, 2025 is as follows:
| Year ended December 31, | ||||
| 2025 | ||||
| U.S. federal | $ | 6,120 | ||
| U.S. state | $ | 1,347 | ||
| Foreign: | ||||
| United Kingdom | 1,202 | |||
| Ireland | 648 | |||
| Canada | 558 | |||
| Other | 64 | |||
| Foreign Subtotal | $ | 2,472 | ||
| Total cash paid for income taxes (net of refunds) | $ | 9,939 | ||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 9, 2022 | |
| 2020 | Mar 16, 2021 | |
| 2019 | Mar 4, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 15, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 22, 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.