CORVEL CORP Income Taxes Disclosure
Note 6 — Income Taxes
The income tax provision consisted of the following for the fiscal years ended March 31, 2026, 2025 and 2024:
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Current — Federal |
|
$ |
20,394,000 |
|
|
$ |
23,985,000 |
|
|
$ |
17,463,000 |
|
Current — State |
|
|
7,613,000 |
|
|
|
6,833,000 |
|
|
|
4,707,000 |
|
Subtotal |
|
|
28,007,000 |
|
|
|
30,818,000 |
|
|
|
22,170,000 |
|
Deferred — Federal |
|
|
5,076,000 |
|
|
|
(4,594,000 |
) |
|
|
(2,828,000 |
) |
Deferred — State |
|
|
(296,000 |
) |
|
|
(565,000 |
) |
|
|
(493,000 |
) |
Subtotal |
|
|
4,780,000 |
|
|
|
(5,159,000 |
) |
|
|
(3,321,000 |
) |
|
|
$ |
32,787,000 |
|
|
$ |
25,659,000 |
|
|
$ |
18,849,000 |
|
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. As a result, disclosures for fiscal year 2026 reflect the requirements of ASU 2023-09, including the reconciliation of the statutory federal income tax rate and disaggregated tax payment information. The disclosures for fiscal years 2025 and 2024 are presented under the prior disclosure requirements.
The following is a reconciliation of the income tax provision from the statutory federal income tax rate to the effective rate for the fiscal year ended March 31, 2026:
|
|
2026 |
|
||||
|
$ |
30,058,000 |
|
|
21.00 |
% |
|
State income taxes, net of federal benefit (1) |
|
|
6,047,000 |
|
|
4.22 |
% |
Tax credits |
|
|
(1,262,000 |
) |
|
(0.88 |
%) |
Change in valuation allowance |
|
|
38,000 |
|
|
0.03 |
% |
Nondeductible items: |
|
|
|
|
|
||
Stock-based compensation |
|
|
(2,640,000 |
) |
|
(1.84 |
%) |
§162(m) limitation and permanent items |
|
|
1,065,000 |
|
|
0.74 |
% |
Worldwide changes in unrecognized tax benefits |
|
|
33,000 |
|
|
0.02 |
% |
Other: |
|
|
|
|
|
||
Deferred tax adjustment |
|
|
(552,000 |
) |
|
(0.38 |
%) |
|
|
$ |
32,787,000 |
|
|
22.91 |
% |
(1) |
State taxes in the following states made up the majority of the tax effect in this category: California, Georgia, Illinois, Pennsylvania and Texas. |
The following is a reconciliation of the income tax provision from the statutory federal income tax rate to the effective rate for the fiscal years ended March 31, 2025 and 2024:
|
|
2025 |
|
|
2024 |
|
||
Income taxes at federal statutory rate |
|
$ |
25,373,000 |
|
|
$ |
19,971,000 |
|
State income taxes, net of federal benefit |
|
|
4,937,000 |
|
|
|
3,369,000 |
|
Uncertain tax positions |
|
|
9,000 |
|
|
|
(22,000 |
) |
Stock-based compensation and §162(m) limitation |
|
|
(3,687,000 |
) |
|
|
(3,961,000 |
) |
Permanent items and tax credits |
|
|
(568,000 |
) |
|
|
(480,000 |
) |
Adjustments to returns as filed |
|
|
(420,000 |
) |
|
|
67,000 |
|
Valuation allowance |
|
|
15,000 |
|
|
|
(95,000 |
) |
|
|
$ |
25,659,000 |
|
|
$ |
18,849,000 |
|
The cash paid for income taxes (net of refunds) during the fiscal year 2026 was as follows:
|
|
2026 |
|
|
Federal |
|
$ |
23,912,000 |
|
State and local: |
|
|
|
|
California |
|
|
1,269,000 |
|
Texas |
|
|
592,000 |
|
Georgia |
|
|
538,000 |
|
New York |
|
|
451,000 |
|
Pennsylvania |
|
|
398,000 |
|
Illinois |
|
|
354,000 |
|
Other |
|
|
3,478,000 |
|
State and local total |
|
|
7,080,000 |
|
Foreign: |
|
|
|
|
Puerto Rico |
|
|
145,000 |
|
Foreign total |
|
|
145,000 |
|
Total |
|
$ |
31,137,000 |
|
Net cash payments for income taxes were $28,095,000 and $22,874,000 in 2025 and 2024, respectively.
Deferred tax assets and liabilities at March 31, 2026 and 2025 are, as follows:
|
|
2026 |
|
|
2025 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Accrued liabilities not currently deductible |
|
$ |
8,753,000 |
|
|
$ |
8,363,000 |
|
Allowance for expected credit losses |
|
|
1,024,000 |
|
|
|
1,947,000 |
|
Stock-based compensation |
|
|
3,362,000 |
|
|
|
2,808,000 |
|
Deferred lease liability |
|
|
7,253,000 |
|
|
|
7,094,000 |
|
Capitalized research and development expenditures |
|
|
321,000 |
|
|
|
5,826,000 |
|
Other |
|
|
574,000 |
|
|
|
541,000 |
|
Deferred tax assets |
|
|
21,287,000 |
|
|
|
26,579,000 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Excess of book over tax basis of fixed assets |
|
|
(4,108,000 |
) |
|
|
(4,645,000 |
) |
Intangible assets |
|
|
(4,987,000 |
) |
|
|
(4,905,000 |
) |
Right-of-use asset |
|
|
(5,461,000 |
) |
|
|
(5,267,000 |
) |
Accrued revenue |
|
|
(1,911,000 |
) |
|
|
(2,350,000 |
) |
Other |
|
|
(606,000 |
) |
|
|
(456,000 |
) |
Total deferred tax liabilities |
|
|
(17,073,000 |
) |
|
|
(17,623,000 |
) |
Valuation allowance |
|
|
(290,000 |
) |
|
|
(252,000 |
) |
Deferred tax liabilities |
|
|
(17,363,000 |
) |
|
|
(17,875,000 |
) |
Net deferred tax assets (liabilities) |
|
$ |
3,924,000 |
|
|
$ |
8,704,000 |
|
|
|
|
|
|
|
|
||
Prepaid income taxes are $1,287,000 at March 31, 2026, and $0 at March 31, 2025.
A reconciliation of the financial statement recognition and measurement of uncertain tax positions during the current fiscal year is as follows:
Balance as of March 31, 2025 |
|
$ |
163,000 |
|
Additions based on tax positions related to the current year |
|
|
— |
|
Additions for tax positions of prior years |
|
|
91,000 |
|
Reductions for tax positions related to the current year |
|
|
— |
|
Reductions for tax positions of prior years |
|
|
(50,000 |
) |
Balance as of March 31, 2026 |
|
$ |
204,000 |
|
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the fiscal years ended March 31, 2026, 2025 and 2024, the Company recognized approximately $(8,000), $(9,000) and $(14,000) in interest and
penalties, respectively. As of March 31, 2026, 2025 and 2024, accrued interest and penalties related to uncertain tax positions were $23,000, $31,000 and $40,000, respectively.
The tax fiscal years from remain open to examination by the major taxing jurisdictions to which the Company is subject.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 22, 2026 | Showing above |
| 2025 | May 23, 2025 | |
| 2024 | May 24, 2024 | |
| 2023 | May 26, 2023 | |
| 2022 | May 27, 2022 | |
| 2021 | May 28, 2021 | |
| 2020 | Jun 10, 2020 | |
| 2019 | Jun 7, 2019 | |
| 2018 | Jun 8, 2018 | |
| 2017 | Jun 9, 2017 | |
| 2016 | Jun 10, 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.