GRAHAM CORP Income Taxes Disclosure
Note 11 – Income Taxes:
An analysis of the components of income before provision for income taxes is presented below:
|
|
Year ended March 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
United States |
|
$ |
14,381 |
|
|
$ |
5,077 |
|
|
$ |
(66 |
) |
Asia |
|
|
1,026 |
|
|
|
497 |
|
|
|
627 |
|
Income before provision for income taxes |
|
$ |
15,407 |
|
|
$ |
5,574 |
|
|
$ |
561 |
|
The provision for income taxes consists of:
|
|
Year ended March 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
1,387 |
|
|
$ |
1,133 |
|
|
$ |
37 |
|
State |
|
|
37 |
|
|
|
100 |
|
|
|
204 |
|
Foreign |
|
|
282 |
|
|
|
257 |
|
|
|
73 |
|
|
|
|
1,706 |
|
|
|
1,490 |
|
|
|
314 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
5,429 |
|
|
|
(419 |
) |
|
|
(89 |
) |
State |
|
|
210 |
|
|
|
88 |
|
|
|
(82 |
) |
Foreign |
|
|
25 |
|
|
|
(106 |
) |
|
|
93 |
|
Changes in valuation allowance |
|
|
(4,193 |
) |
|
|
(35 |
) |
|
|
(42 |
) |
|
|
|
1,471 |
|
|
|
(472 |
) |
|
|
(120 |
) |
Total provision for income taxes |
|
$ |
3,177 |
|
|
$ |
1,018 |
|
|
$ |
194 |
|
The reconciliation of the provision calculated using the U.S. federal tax rate with the provision for income taxes presented in the consolidated financial statements is as follows:
|
|
Year ended March 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Provision for income taxes at federal rate |
|
$ |
3,238 |
|
|
$ |
1,170 |
|
|
$ |
118 |
|
State taxes |
|
|
196 |
|
|
|
156 |
|
|
|
92 |
|
Charges not deductible for income tax purposes |
|
|
45 |
|
|
|
54 |
|
|
|
26 |
|
Stock based compensation |
|
|
(382 |
) |
|
|
(8 |
) |
|
|
114 |
|
Research and development tax credits |
|
|
(308 |
) |
|
|
(327 |
) |
|
|
(240 |
) |
Valuation allowance |
|
|
(4,193 |
) |
|
|
(35 |
) |
|
|
(42 |
) |
Effect of foreign tax rate |
|
|
50 |
|
|
|
26 |
|
|
|
27 |
|
Uncertain tax positions |
|
|
140 |
|
|
|
— |
|
|
|
— |
|
Nondeductible fringe benefits |
|
|
31 |
|
|
|
30 |
|
|
|
44 |
|
162(m) |
|
|
420 |
|
|
|
105 |
|
|
|
— |
|
Foreign withholding tax |
|
|
9 |
|
|
|
— |
|
|
|
— |
|
Foreign-derived intangible income deduction |
|
|
(61 |
) |
|
|
(134 |
) |
|
|
— |
|
Global intangible low-taxed income |
|
|
— |
|
|
|
(20 |
) |
|
|
55 |
|
Capital loss expiration |
|
|
4,211 |
|
|
|
— |
|
|
|
— |
|
Earnout revaluation |
|
|
(239 |
) |
|
|
— |
|
|
|
— |
|
Other |
|
|
20 |
|
|
|
1 |
|
|
|
— |
|
Provision for income taxes |
|
$ |
3,177 |
|
|
$ |
1,018 |
|
|
$ |
194 |
|
The net deferred income tax asset (liability) recorded in the Consolidated Balance Sheets results from differences between financial statement and tax reporting of income and deductions. A summary of the composition of the Company's net deferred income tax asset (liability) follows:
|
|
March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Depreciation |
|
$ |
(3,060 |
) |
|
$ |
(2,931 |
) |
Accrued compensation |
|
|
322 |
|
|
|
237 |
|
Goodwill |
|
|
(1,007 |
) |
|
|
(607 |
) |
Prepaid pension asset |
|
|
(1,278 |
) |
|
|
(1,399 |
) |
Accrued pension liability |
|
|
219 |
|
|
|
232 |
|
Accrued postretirement benefits |
|
|
61 |
|
|
|
68 |
|
Compensated absences |
|
|
641 |
|
|
|
531 |
|
Inventories |
|
|
645 |
|
|
|
2,541 |
|
Warranty liability |
|
|
171 |
|
|
|
182 |
|
Accrued expenses |
|
|
445 |
|
|
|
600 |
|
Equity-based compensation |
|
|
475 |
|
|
|
328 |
|
Allowance for doubtful accounts |
|
|
136 |
|
|
|
18 |
|
Operating lease assets |
|
|
(1,460 |
) |
|
|
(1,694 |
) |
Operating lease liabilities |
|
|
1,557 |
|
|
|
1,784 |
|
Acquisition costs |
|
|
163 |
|
|
|
180 |
|
Intangible assets |
|
|
71 |
|
|
|
187 |
|
New York State investment tax credit |
|
|
1,048 |
|
|
|
1,030 |
|
Research and development cost |
|
|
3,612 |
|
|
|
2,771 |
|
Net operating loss carryforwards |
|
|
280 |
|
|
|
182 |
|
Capital loss carryforward |
|
|
— |
|
|
|
4,211 |
|
Other |
|
|
(515 |
) |
|
|
(238 |
) |
|
|
|
2,526 |
|
|
|
8,213 |
|
Less: Valuation allowance |
|
|
(1,048 |
) |
|
|
(5,241 |
) |
Total |
|
$ |
1,478 |
|
|
$ |
2,972 |
|
Deferred income taxes include the impact of state investment tax credits of $254, which expire from to and state investment tax credits of $794, which have an unlimited carryforward period.
In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the consideration of the weight of both positive and negative evidence, management determined that a portion of the deferred tax assets as of March 31, 2025 related to certain state investment tax credits would not be realized and recorded a valuation allowance of $1,048. As of March 31, 2024, management determined that a portion of the deferred tax assets related to certain state investment tax credits and the capital loss related to a past acquisition would not be realized, and recorded a valuation allowance of $5,241. The decrease from fiscal 2024 to fiscal 2025 was due to the expiration of the capital loss.
The Company files federal and state income tax returns in several domestic and international jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is subject to U.S. federal examination for tax years and examination in state tax jurisdictions for tax years . The Company is subject to examination in the People's Republic of China for tax years and in India for tax years . The liability for unrecognized tax benefits was $0 at each of March 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jun 9, 2025 | Showing above |
| 2024 | Jun 7, 2024 | |
| 2023 | Jun 8, 2023 | |
| 2022 | Jun 9, 2022 | |
| 2021 | Jun 2, 2021 | |
| 2020 | Jun 15, 2020 | |
| 2019 | May 31, 2019 | |
| 2018 | Jun 4, 2018 | |
| 2017 | Jun 5, 2017 | |
| 2016 | Jun 1, 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.