CRA INTERNATIONAL, INC.CRAI
CRA INTERNATIONAL, INC. Income Taxes Disclosure
Income Taxes
The components of income before provision for income taxes are as follows (in thousands):
| Year Ended | Year Ended | Year Ended | |||||||||||||||
January 3, 2026 (53 weeks) | December 28, 2024 (52 weeks) | December 30, 2023 (52 weeks) | |||||||||||||||
| Income before provision for income taxes: | |||||||||||||||||
| U.S. | $ | 59,514 | $ | 51,549 | $ | 41,238 | |||||||||||
| Foreign | 17,059 | 14,693 | 11,050 | ||||||||||||||
| Total | $ | 76,573 | $ | 66,242 | $ | 52,288 | |||||||||||
The provision (benefit) for income taxes consists of the following (in thousands):
| Year Ended | Year Ended | Year Ended | |||||||||||||||
January 3, 2026 (53 weeks) | December 28, 2024 (52 weeks) | December 30, 2023 (52 weeks) | |||||||||||||||
| Currently payable: | |||||||||||||||||
| Federal | $ | 14,391 | $ | 12,747 | $ | 11,544 | |||||||||||
| Foreign | 4,491 | 3,959 | 2,796 | ||||||||||||||
| State | 4,636 | 5,748 | 4,101 | ||||||||||||||
| Total current expense | 23,518 | 22,454 | 18,441 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (1,490) | (2,295) | (2,963) | ||||||||||||||
| Foreign | (396) | 146 | (1,041) | ||||||||||||||
| State | 159 | (716) | (630) | ||||||||||||||
| Total deferred expense (benefit) | (1,727) | (2,865) | (4,634) | ||||||||||||||
| Total tax expense | $ | 21,791 | $ | 19,589 | $ | 13,807 | |||||||||||
A reconciliation of CRA's tax rates with the federal statutory rate is as follows:
| Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||||||||||||||||
| January 3, 2026 | December 28, 2024 | December 30, 2023 | ||||||||||||||||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 16,080 | 21.0 | % | $ | 13,911 | 21.0 | % | $ | 10,980 | 21.0 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1) (2) (3) | 3,428 | 4.5 | 3,776 | 5.7 | 2,755 | 5.3 | ||||||||||||||||||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||||||||||||||
| Brazil | ||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowance | — | — | — | — | (788) | (1.5) | ||||||||||||||||||||||||||||||||
| Other | 23 | — | 28 | — | (300) | (0.6) | ||||||||||||||||||||||||||||||||
| Other foreign jurisdictions | 490 | 0.7 | 993 | 1.5 | 522 | 1.0 | ||||||||||||||||||||||||||||||||
| Effect of cross border tax laws | (628) | (0.8) | (477) | (0.7) | (414) | (0.8) | ||||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||||||||||||||
| Executive compensation | 1,625 | 2.1 | 998 | 1.5 | 874 | 1.7 | ||||||||||||||||||||||||||||||||
| Other | 415 | 0.5 | 189 | 0.3 | 163 | 0.3 | ||||||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 352 | 0.5 | 201 | 0.3 | (35) | (0.1) | ||||||||||||||||||||||||||||||||
| Other adjustments | 6 | — | (30) | — | 50 | 0.1 | ||||||||||||||||||||||||||||||||
| Effective tax rate | $ | 21,791 | 28.5 | % | $ | 19,589 | 29.6 | % | $ | 13,807 | 26.4 | % | ||||||||||||||||||||||||||
_______________________________
(1)For the fiscal year ended January 3, 2026, state taxes in California, New York, and Illinois made up the majority (greater than 50%) of the tax effect in this category.
(2)For the fiscal year ended December 28, 2024, state taxes in California, Massachusetts, and New York made up the majority (greater than 50%) of the tax effect in this category.
(3)For the fiscal year ended December 30, 2023, state taxes in California, Massachusetts, and Illinois made up the majority (greater than 50%) of the tax effect in this category.
The components of CRA's deferred tax assets and liabilities are as follows (in thousands):
| January 3, 2026 | December 28, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued compensation and related expense | $ | 21,969 | $ | 20,679 | |||||||
| Allowance for doubtful accounts | 2,759 | 2,324 | |||||||||
| Net operating loss carryforwards | 800 | 693 | |||||||||
| Lease liabilities | 23,808 | 26,627 | |||||||||
| Foreign exchange and other | 498 | 540 | |||||||||
| Total gross deferred tax assets | 49,834 | 50,863 | |||||||||
| Less: valuation allowance | — | (2) | |||||||||
| Total deferred tax assets, net of valuation allowance | 49,834 | 50,861 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Goodwill and other intangible asset amortization | 6,611 | 6,109 | |||||||||
| Right-of-Use assets | 19,794 | 21,311 | |||||||||
| Property and equipment | 5,298 | 6,912 | |||||||||
| Prepaids and other | 898 | 1,068 | |||||||||
| Total deferred tax liabilities | 32,601 | 35,400 | |||||||||
| Net deferred tax assets | $ | 17,233 | $ | 15,461 | |||||||
At January 3, 2026, CRA had foreign net operating loss carryforwards of $2.4 million with indefinite life, an increase of $0.4 million from the prior fiscal year-end. The change in the total valuation allowance for the current fiscal year was immaterial.
The aggregate changes in the balances of gross unrecognized tax benefits were as follows (in thousands):
| Fiscal Year | Fiscal Year | ||||||||||
| 2025 | 2024 | ||||||||||
| Balance at beginning of period | $ | 735 | $ | — | |||||||
| Additions for tax positions taken during prior years | 276 | ||||||||||
| Additions for tax positions taken during the current year | 342 | 459 | |||||||||
| Reductions as a result of a lapse of the applicable statutes of limitations | — | — | |||||||||
| Balance at end of the period | $ | 1,077 | $ | 735 | |||||||
CRA files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. CRA adjusts its unrecognized tax benefits and the associated interest in light of changing facts and circumstances. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, CRA believes that its unrecognized tax benefits reflect the most likely outcome. At the end of fiscal 2025, accrued interest for uncertain tax positions was immaterial. CRA's total unrecognized tax benefit at the end of fiscal 2025 is $1.1 million. Settlement of any particular position could require the use of cash. Of the total $1.1 million balance at the end of fiscal 2025, a favorable resolution would result in $0.6 million being recognized as a reduction to the effective income tax rate in the period of resolution. There are no unrecognized tax benefits expected to reverse in the next twelve months.
The number of years with open tax audits varies depending on the tax jurisdiction. CRA's major taxing jurisdiction is the United States where CRA is no longer subject to U.S. federal examinations by the Internal Revenue Service for years before fiscal 2022. Within the significant states where CRA is subject to income tax, CRA is no longer subject to examinations by state taxing authorities before fiscal 2021. CRA's United Kingdom ("U.K.") subsidiary's corporate tax returns are no longer subject to examination by His Majesty's Revenue and Customs for years before fiscal 2024.
If amounts are repatriated from certain of our foreign subsidiaries, CRA could be subject to deferred taxes that are a consequence of foreign exchange translation from earnings that are no longer considered permanently reinvested. CRA considers all other undistributed earnings to be indefinitely reinvested. Foreign withholding taxes, estimated to be $0.7 million, have not been recorded for these foreign subsidiaries.
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.