GENTEX CORPGNTX
GENTEX CORP Income Taxes Disclosure
INCOME TAXES
The provision for income taxes is based on the earnings reported in the accompanying Consolidated Financial Statements. The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the Consolidated Financial Statements or tax returns. Under this method, deferred income tax liabilities and assets are determined based on the cumulative temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates expected to be applied to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred income tax expense is measured by the net change in deferred income tax assets and liabilities during the year.
The foreign components of income before the provision for income taxes were not material for the years ended December 31, 2025, 2024, and 2023. The components of the provision for income taxes are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Currently payable: | |||||||||||||||||
| Federal | $ | 86,632,458 | $ | 73,538,314 | $ | 85,978,954 | |||||||||||
| State | 5,785,802 | 4,678,030 | 6,242,525 | ||||||||||||||
| Foreign | 2,368,324 | 1,931,008 | 2,091,533 | ||||||||||||||
| Total | 94,786,584 | 80,147,352 | 94,313,012 | ||||||||||||||
| Deferred income tax benefit: | |||||||||||||||||
| Primarily federal | (18,406,246) | (12,421,412) | (17,735,110) | ||||||||||||||
| Provision for income taxes | $ | 76,380,338 | $ | 67,725,940 | $ | 76,577,902 | |||||||||||
The effective income tax rates are different from the statutory federal income tax rates for the following reasons:
Year ended December 31, 2025 | ||||||||||||||
Amount | Percent | |||||||||||||
U.S. federal statutory tax rate | $ | 96,823,107 | 21.0 | % | ||||||||||
State and local income taxes, net of federal income tax effect (a) | 4,235,953 | 0.9 | ||||||||||||
Foreign tax effects | 2,191,985 | 0.5 | ||||||||||||
Effect of changes in tax laws or rates enacted in the current period | — | — | ||||||||||||
Effect of cross-border tax laws: | ||||||||||||||
Foreign-derived intangible income | (18,785,189) | (4.1) | ||||||||||||
Other | 553,577 | 0.1 | ||||||||||||
Tax Credits: | ||||||||||||||
Research and development tax credits | (8,620,897) | (1.9) | ||||||||||||
Other | (2,491,033) | (0.5) | ||||||||||||
Changes in valuation allowance | (63,940) | — | ||||||||||||
Nontaxable or nondeductible items | 3,527,252 | 0.8 | ||||||||||||
Changes in unrecognized tax benefits | (954,278) | (0.2) | ||||||||||||
Other adjustments | (36,199) | — | ||||||||||||
Total income tax expense | $ | 76,380,338 | 16.6 | % | ||||||||||
(a) State taxes in Michigan and Indiana made up the majority of the tax effect in this category. | ||||||||||||||
Year ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | ||||||||||
| State income taxes, net of federal income tax benefit | 0.8 | 0.8 | ||||||||||||
| Research tax credit | (1.8) | (1.3) | ||||||||||||
Increase in reserve for uncertain tax provisions | 0.2 | — | ||||||||||||
| Non-deductible executive compensation | 0.3 | 0.1 | ||||||||||||
| Non-deductible expenses | 0.1 | 0.1 | ||||||||||||
| Foreign tax credit | (0.3) | (0.5) | ||||||||||||
| Foreign derived intangible income deduction | (5.9) | (5.1) | ||||||||||||
| Stock compensation | (0.4) | (0.4) | ||||||||||||
| Other | 0.3 | 0.5 | ||||||||||||
| Effective income tax rate | 14.3 | % | 15.2 | % | ||||||||||
The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2025 and 2024, are as follows:
| December 31, | |||||||||||
2025 | 2024 | ||||||||||
| Assets: | |||||||||||
| Accruals not currently deductible | $ | 20,537,223 | $ | 11,491,033 | |||||||
| Research and development costs | 102,026,455 | 80,310,573 | |||||||||
| Stock based compensation | 14,623,067 | 14,266,075 | |||||||||
Excess book over tax depreciation | 18,299,874 | 14,747,529 | |||||||||
Tax carryforwards | 41,607,290 | 1,807,536 | |||||||||
| Other | 13,244,931 | 3,404,621 | |||||||||
Less: Valuation Allowance | (20,431,445) | — | |||||||||
| Total deferred income tax assets | $ | 189,907,395 | $ | 126,027,367 | |||||||
| Liabilities: | |||||||||||
| Goodwill | $ | (56,452,171) | $ | (51,613,808) | |||||||
| Intangible assets | (16,630,104) | (16,566,494) | |||||||||
| Other | (9,395,450) | (4,692,233) | |||||||||
| Total deferred income tax liabilities | $ | (82,477,725) | $ | (72,872,535) | |||||||
| Net deferred income taxes | $ | 107,429,670 | $ | 53,154,832 | |||||||
In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. The Company considers the level of historical taxable income, scheduled reversal of temporary differences, tax planning strategies, and projected future taxable income in determining whether a valuation allowance is warranted. Significant weight is given to positive and negative evidence that is objectively verifiable.
The realizability of deferred tax assets is evaluated on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance.
The valuation allowance on net deferred tax assets increased by $20.4 million during the year ended December 31, 2025.
As part of the Company’s acquisition of VOXX, the Company recognized deferred tax assets of $35.7 million, primarily related to net operating losses, tax credits, and deductible temporary differences, in accordance with ASC 805-740. Based on available evidence at the acquisition date, the Company concluded that it was more-likely-than-not that a portion of these acquired deferred tax assets would not be realized and therefore recorded a valuation allowance of $20.2 million against the acquired deferred tax assets, related primarily to U.S. foreign tax credits, Japan net operating loss carryforwards, and certain foreign deferred tax assets.
Other than as set forth above, during the year ended December 31, 2025, the Company recorded an increase to the valuation allowance of $0.2 million. This change resulted from current year activity and was recorded to income tax expense.
Any further increase or reduction in the valuation allowance could have a favorable or unfavorable impact on the Company's income tax provision and, as a result, net income in the period in which such determination is made.
As of December 31, 2025, the Company had U.S. federal net operating loss and federal tax credit carryforwards of $66.0 million and $7.0 million, respectively, as reported on its tax returns. The federal tax credits will begin to expire in 2030 if not utilized. The net operating loss carryforwards are indefinite-lived. As of December 31, 2025, the Company had Japan net operating loss carryforwards of $30.0 million, as reported on its tax returns. The Japan net operating loss will begin to expire in 2032 if not utilized.
In addition, the Company has various state net operating loss carryforwards and state tax credit carryforwards, as well as other foreign net operating loss carryforwards that expire in various years and amounts through tax year 2045, most of which have a valuation allowance applied against them as they are not likely to be utilized before expiration. Utilization of the Company’s net operating loss and credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization. The Company has determined that no significant limitation would be placed on the utilization of our net operating loss and tax credit carryforwards due to prior ownership changes or expirations.
Income taxes paid in cash during the year ended December 31, 2025 were as follows:
Federal | $ | 72,050,000 | |||
State | 3,035,054 | ||||
Foreign | 3,614,611 | ||||
Total income taxes paid, net | $ | 78,699,665 | |||
Income taxes paid in cash were approximately $86.2 million, and $110.3 million during the years ended December 31, 2024 and 2023, respectively. No individual U.S. state or foreign jurisdiction exceeds 5% of total income taxes paid, net of refunds.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2025 | 2024 | 2023 | |||||||||||||||
| Beginning of year | $ | 5,798,000 | $ | 4,778,000 | $ | 4,630,000 | |||||||||||
Additions related to tax positions acquired in business combinations | 4,244,000 | — | — | ||||||||||||||
| Additions based on tax positions related to the current year | 1,451,000 | 1,350,000 | 1,046,000 | ||||||||||||||
| Additions for tax positions in prior years | 686,000 | 869,000 | 671,000 | ||||||||||||||
| Reductions for tax positions in prior years | (40,000) | — | (31,000) | ||||||||||||||
| Reductions as a result of a lapse of the applicable statute of limitations | (2,157,000) | (1,199,000) | (1,538,000) | ||||||||||||||
| End of year | $ | 9,982,000 | $ | 5,798,000 | $ | 4,778,000 | |||||||||||
If recognized, $6.6 million of unrecognized tax benefits would affect the effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits through the provision for income taxes. The Company has accrued approximately $0.8 million, $0.4 million, and $0.4 million for interest as of December 31, 2025, 2024, and 2023, respectively. Interest expensed during the years ended December 31, 2025, 2024 and 2023 was not considered significant.
The Company is also subject to periodic and routine audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change as a result of an audit, new positions taken on income tax returns, settlement of tax positions, and the closing of statute of limitations. It is not expected, however, that any such change will be material to the Company’s Consolidated Financial Statements.
For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2020.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 22, 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.