DIAMOND HILL INVESTMENT GROUP INC Income Taxes Disclosure
Note 9 Income Taxes
The provision for income taxes consists of the following:
For the year ended December 31, |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current federal income tax provision |
|
$ |
12,412,990 |
|
|
$ |
11,122,669 |
|
|
$ |
9,974,451 |
|
Current state and local income tax expense |
|
|
3,037,819 |
|
|
|
3,038,022 |
|
|
|
2,731,661 |
|
Deferred income tax expense (benefit) |
|
|
2,470,682 |
|
|
|
1,672,382 |
|
|
|
2,783,768 |
|
Provision for income taxes |
|
$ |
17,921,491 |
|
|
$ |
15,833,073 |
|
|
$ |
15,489,880 |
|
Net income before income taxes and income tax expense consists of the following:
For the year ended December 31, |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Income before income taxes - Domestic |
|
$ |
67,281,490 |
|
|
$ |
59,010,991 |
|
|
$ |
58,575,428 |
|
Income before income taxes - Foreign |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net income before income taxes |
|
$ |
67,281,490 |
|
|
$ |
59,010,991 |
|
|
$ |
58,575,428 |
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax expense - Domestic |
|
$ |
(17,921,491 |
) |
|
$ |
(15,833,073 |
) |
|
$ |
(15,489,880 |
) |
Income tax expense - Foreign |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total income tax expense |
|
$ |
(17,921,491 |
) |
|
$ |
(15,833,073 |
) |
|
$ |
(15,489,880 |
) |
The following table reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate:
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||||
Statutory U.S. federal income tax |
|
$ |
14,129,113 |
|
|
|
21.0 |
% |
|
$ |
12,392,308 |
|
|
|
21.0 |
% |
|
$ |
12,300,840 |
|
|
|
21.0 |
% |
State and local income taxes, net of |
|
|
2,960,386 |
|
|
|
4.4 |
% |
|
|
2,714,506 |
|
|
|
4.6 |
% |
|
|
2,753,045 |
|
|
|
4.7 |
% |
Internal revenue code section 162 |
|
|
874,659 |
|
|
|
1.3 |
% |
|
|
826,154 |
|
|
|
1.4 |
% |
|
|
761,481 |
|
|
|
1.3 |
% |
Other |
|
|
159,177 |
|
|
|
0.2 |
% |
|
|
(99,895 |
) |
|
|
(0.2 |
)% |
|
|
(91,184 |
) |
|
|
(0.2 |
)% |
Unconsolidated effective income tax |
|
|
18,123,335 |
|
|
|
26.9 |
% |
|
|
15,833,073 |
|
|
|
26.8 |
% |
|
|
15,724,182 |
|
|
|
26.8 |
% |
Impact attributable to redeemable |
|
|
(201,844 |
) |
|
|
(0.3 |
%) |
|
|
— |
|
|
|
— |
|
|
|
(234,302 |
) |
|
|
(0.4 |
)% |
Effective income tax rate |
|
$ |
17,921,491 |
|
|
|
26.6 |
% |
|
$ |
15,833,073 |
|
|
|
26.8 |
% |
|
$ |
15,489,880 |
|
|
|
26.4 |
% |
Income taxes paid (net of refunds) were as follows:
For the year ended December 31, |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Federal |
|
$ |
11,586,428 |
|
|
$ |
10,698,803 |
|
|
$ |
9,100,000 |
|
State - New York |
|
|
585,138 |
|
|
|
740,376 |
|
|
|
785,440 |
|
State - Other |
|
|
1,000,072 |
|
|
|
916,366 |
|
|
|
867,989 |
|
Local - Columbus, OH |
|
|
1,040,000 |
|
|
|
1,200,000 |
|
|
|
1,650,000 |
|
Local - Other |
|
|
260,000 |
|
|
|
535,000 |
|
|
|
460,000 |
|
Total Income taxes paid |
|
$ |
14,471,638 |
|
|
$ |
14,090,545 |
|
|
$ |
12,863,429 |
|
Income taxes paid are disaggregated by jurisdiction when such jurisdiction represents five percent or more of total income taxes paid in any period presented. Columbus, Ohio represented five percent or more of total income taxes paid in each of the years ended December 31, 2025, 2024, and 2023. New York represented five percent or more of total income taxes paid in the years ended December 31, 2024 and 2023. Although New York did not meet the five percent threshold in 2025, it is presented separately for consistency and comparability, as income taxes paid in that jurisdiction were close to the quantitative threshold.
Deferred income taxes and benefits arise from temporary differences between taxable income for financial statement and income tax return purposes. Net deferred tax assets consisted of the following as of December 31, 2025 and 2024:
|
|
Year Ended |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Stock-based compensation |
|
$ |
2,604,816 |
|
|
$ |
2,649,082 |
|
Accrued compensation |
|
|
11,471,484 |
|
|
|
10,696,310 |
|
Unrealized gains |
|
|
(5,951,558 |
) |
|
|
(3,257,452 |
) |
Property and equipment |
|
|
(741,221 |
) |
|
|
(194,110 |
) |
Other assets and liabilities |
|
|
63,853 |
|
|
|
24,226 |
|
Net deferred tax assets |
|
$ |
7,447,374 |
|
|
$ |
9,918,056 |
|
The net temporary differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2025, no valuation allowance was deemed necessary.
FASB ASC 740, Income Taxes, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are “more-likely-than-not” sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company did not record an accrual for tax-related uncertainties or unrecognized tax positions as of December 31, 2025 and 2024, respectively. The Company does not expect a change to the reserve for uncertain tax positions within the next twelve months that would have a material impact on the consolidated financial statements.
The Company and its subsidiaries file income tax returns with the Internal Revenue Service and the taxing authorities of various states. Generally, the Company is subject to federal, state, and local examinations by tax authorities for the tax years ended December 31, 2021 through 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2017 | Feb 22, 2018 | |
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.