CRAWFORD & CO Income Taxes Disclosure

6. Income Taxes

In December 2023, the FASB issued updated accounting guidance on disclosure for income taxes which the Company adopted prospectively as of January 1, 2025. Refer to Note 1 "Significant Accounting and Reporting Policies" for additional information regarding this new guidance.

Net cash payments for income taxes were $19,993,000 and $16,050,000 in 2024 and 2023, respectively.

The Company's consolidated effective income tax rate may change periodically due to changes in enacted statutory tax rates, changes in tax law or policy, changes in the composition of taxable income from the countries in which it operates, the Company's ability to utilize net operating loss and tax credit carryforwards, and changes in unrecognized tax benefits.

The Company’s effective income tax rate in 2025 was impacted by improved profitability in certain jurisdictions, net of global intangible low-taxed income expense and a one-time expense relating to administrative guidance issued by a foreign tax authority. The Company’s effective income tax rate in 2024 was impacted by performance in certain foreign jurisdictions and changes in valuation allowances. The Company’s effective income tax rate in 2023 was impacted by changes in domestic tax guidance and changes in valuation allowances.

The foreign tax administrative guidance issuance noted above also resulted in a one-time indirect tax expense of $3,122,000 for the year ended December 31, 2025, which is included in "Selling, general, and administrative expenses" on the Consolidated Statements of Operations.

On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the United States. The OBBBA contains changes to key U.S. federal income tax laws. This change was immaterial to the Company's overall income tax provision.

The Company maintained its permanent reinvestment position on a portion of prior year undistributed earnings for certain foreign operations and accrued deferred taxes attributable to the earnings that were not permanently reinvested. Beyond these earnings the Company has not changed the reinvestment assertion on its undistributed earnings or other outside basis differences of its remaining foreign subsidiaries. Excluding the operations that are not permanently reinvested, no additional income or withholding taxes have been provided for indefinitely reinvested undistributed foreign earnings, other than those previously taxed nor have any taxes been provided for outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. The Company has estimated that it has book over tax basis differences of approximately $127,979,000. Due to withholding tax, basis computations, and other related tax considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.

At December 31, 2025, the Company had deferred tax assets related to loss carryforwards of $38,012,000, with no netting of unrecognized tax benefits applied. An estimated $32,829,000 of the deferred tax assets will not expire, and $5,183,000 will expire over the next 20 years if not utilized by the Company.

Changes to the valuation allowance for the year ended December 31, 2025 were primarily due to foreign jurisdictions net deferred tax assets in certain of the Company's international operations, as well as a change in realization for U.S. foreign tax credits. Changes to the valuation allowance for the year ended December 31, 2024 were primarily due to foreign jurisdictions net deferred tax assets in certain of the Company's international operations, as well as a change in realization for various U.S. state loss carryforwards. Changes to the valuation allowance for the year ended December 31, 2023 were primarily due to establishments for various foreign jurisdictions net deferred tax assets in certain of the Company’s international operations.

The Company accrues interest and, if applicable, penalties related to unrecognized tax benefits in income taxes. Total accrued interest expense at December 31, 2025, 2024, and 2023, was $2,000, $1,000, and $13,000, respectively.

Included in the total unrecognized tax benefits at December 31, 2025, 2024, and 2023 were $61,000, $434,000, and $685,000, respectively, of tax benefits that, if recognized, would affect the effective income tax rate.

The Company conducts business in a number of countries and, as a result, files U.S. federal and various state and foreign jurisdiction income tax returns. In the normal course of business, the Company is subject to examination by various taxing jurisdictions throughout the world. With few exceptions, the Company is no longer subject to income tax examinations for years before 2015.

Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, including interest and penalties, have been provided for any adjustments that are expected to result from those years.