CARRIAGE SERVICES INCCSV
CARRIAGE SERVICES INC Income Taxes Disclosure
INCOME TAXES
U.S. income from continuing operations before income tax expense was $70.3 million, $50.1 million, and $46.4 million for the year ended December 31, 2025, 2024, and 2023, respectively. The provision for income taxes consisted of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| U.S. federal provision | $ | 10,500 | $ | 13,902 | $ | 7,862 | |||||||||||
| State provision | 4,275 | 3,923 | 1,847 | ||||||||||||||
| Total current provision | $ | 14,775 | $ | 17,825 | $ | 9,709 | |||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal (benefit) provision | $ | 4,507 | $ | (1,338) | $ | 2,117 | |||||||||||
| State provision (benefit) | (526) | 640 | 1,190 | ||||||||||||||
| Total deferred (benefit) provision | $ | 3,981 | $ | (698) | $ | 3,307 | |||||||||||
| Total income tax provision | $ | 18,756 | $ | 17,127 | $ | 13,016 | |||||||||||
A reconciliation of income taxes calculated at the U.S. federal statutory rate to those reflected in the Consolidated Statements of Operations is as follows (dollars in thousands):
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Federal statutory rate | $ | 14,755 | 21.0 | % | $ | 10,517 | 21.0 | % | $ | 9,750 | 21.0 | % | |||||||||||||||||||||||
| Effect of state income taxes, net of federal benefit | 2,961 | 4.2 | 3,655 | 7.3 | 2,396 | 5.2 | |||||||||||||||||||||||||||||
| Effect of non-taxable or non-deductible expenses, net | |||||||||||||||||||||||||||||||||||
| 162(m) Officers' Compensation Limitation | 2,075 | 3.0 | 1,717 | 3.4 | 332 | 0.7 | |||||||||||||||||||||||||||||
| Restricted stock and performance awards | (2,097) | (3.0) | 72 | 0.1 | (4) | — | |||||||||||||||||||||||||||||
| Divestiture and impairment of business | 775 | 1.1 | 219 | 0.4 | — | — | |||||||||||||||||||||||||||||
| ESPP and stock options | (376) | (0.5) | 601 | 1.2 | 157 | 0.3 | |||||||||||||||||||||||||||||
| Other adjustments | 663 | 0.9 | 346 | 0.8 | 385 | 0.8 | |||||||||||||||||||||||||||||
| Total | $ | 18,756 | 26.7 | % | $ | 17,127 | 34.2 | % | $ | 13,016 | 28.0 | % | |||||||||||||||||||||||
We are subject to taxation in the U.S. and various state jurisdictions. In 2025, state and local income taxes in California comprise the majority of the effect of state income taxes, net of federal benefit category. In 2024, and 2023, state and local income taxes in California and Virginia comprise the majority of the effect of state income taxes, net of federal benefit category. Income taxes paid by jurisdiction is a follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal | $ | 12,200 | $ | 13,178 | $ | 7,720 | |||||||||||
| U.S. state and local | |||||||||||||||||
| California | 1,919 | 1,398 | 573 | ||||||||||||||
Virginia(1) | 981 | — | 683 | ||||||||||||||
All other states | 1,890 | 2,078 | 1,472 | ||||||||||||||
| Total income taxes paid | $ | 16,990 | $ | 16,654 | $ | 10,448 | |||||||||||
(1) The blank cells indicate that the amount of income tax paid during the year is either immaterial or does not meet the 5% disaggregation threshold.
The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities are as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 435 | $ | 483 | |||||||
| Interest expense limitation | 5,281 | 7,350 | |||||||||
| Tax credit carryforwards | 51 | 51 | |||||||||
| State depreciation | 913 | 1,096 | |||||||||
| Accrued and other liabilities | 7,738 | 9,787 | |||||||||
| Amortization of non-compete agreements | 803 | 875 | |||||||||
| Preneed assets, net | 373 | 312 | |||||||||
| Lease liabilities | 5,726 | 4,135 | |||||||||
| Total deferred income tax assets | 21,320 | 24,089 | |||||||||
| Less: valuation allowance | (111) | (156) | |||||||||
| Total deferred income tax assets | 21,209 | 23,933 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Depreciation and amortization | $ | (68,082) | $ | (69,730) | |||||||
| Right-of-use assets | (5,964) | (3,670) | |||||||||
| Prepaid assets and other | (2,572) | (1,962) | |||||||||
| Total deferred income tax liabilities | (76,618) | (75,362) | |||||||||
| Total net deferred tax liabilities | $ | (55,409) | $ | (51,429) | |||||||
Our deferred tax assets and liabilities, along with related valuation allowances, are classified as non-current on our Consolidated Balance Sheets at December 31, 2025 and 2024. We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain. Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more-likely-than not that the tax benefits will be realized. We recognized an immaterial net decrease in our valuation allowance during the years ended December 31, 2025 and 2024.
For state reporting purposes, we have $8.7 million of net operating loss carryforwards that will expire between 2026 and 2043, if not utilized. Based on management’s assessment of the various state net operating losses, it was determined that it is more-likely-than not that we will be able to realize tax benefits on some portion of the amount of the state losses. The valuation allowance at December 31, 2025 was attributable to the deferred tax asset related to a portion of the state operating losses.
We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheets. The deferred tax assets recognized for those net operating losses (“NOLs”) are presented net of these unrecognized tax benefits.
At December 31, 2025, the Company’s unrecognized tax benefit for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property for the benefit derived from carrying back losses generated in 2018 to tax years with a higher effective tax rate than the current 21.0% rate. Our unrecognized tax benefit for the years ended December 31, 2025 and 2024 was $3.6 million and $3.5 million, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefit at beginning of year | $ | 3,471 | $ | 3,382 | $ | 3,294 | |||||||||||
| Gross decreases - tax positions in prior period | 162 | — | 88 | ||||||||||||||
| Gross increases - tax positions in current period | — | 89 | — | ||||||||||||||
| Unrecognized tax benefit at end of year | $ | 3,633 | $ | 3,471 | $ | 3,382 | |||||||||||
Our total unrecognized tax benefits that, if recognized, would affect our effective tax rates were $3.6 million, $3.5 million, and $3.4 million as of December 31, 2025, 2024 and 2023, respectively.
We accrued interest of $0.2 million during 2025 and in total, as of December 31, 2025, recognized a liability related to the unrecognized tax benefit noted above for interest of $0.5 million. During 2024, we accrued interest of $0.1 million and in total, as of December 31, 2024, recognized a liability for interest of $0.4 million.
As of December 31, 2025, tax years 2013 to 2016, 2018, and 2022 to current are subject to examination by taxing authorities. In 2017, we filed amended returns for the tax years ending December 31, 2013, 2014, 2015, resulting in $1.9 million in refunds. These amended returns were selected for a limited scope audit. Additionally, losses incurred in the tax years ending December 31, 2018, and 2019 were carried back to the tax years 2015 and 2016, generating refunds exceeding $5.0 million, which require Joint Committee approval. In late 2024, the refunds for the tax years 2013, 2014, and 2015 were received; however, the Company continues to be under examination.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Mar 1, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 2, 2022 | |
| 2020 | Mar 2, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 23, 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.