GORMAN RUPP CO Income Taxes Disclosure

Note 8 – Income Taxes

 

The components of Income before income taxes are:

 

		2024				2023				2022
United States		$	38,548			$	34,763			$	6,270
Foreign countries			11,945				9,198				7,602
Total		$	50,493			$	43,961			$	13,872

 

The components of income tax expense are:

 

		2024				2023				2022
Current expense:
Federal		$	8,223			$	6,735			$	1,581
Foreign			2,121				1,591				1,264
State and local			1,451				1,098				918
		$	11,795			$	9,424			$	3,763
Deferred expense (benefit):
Federal		$	(1,476	)		$	(206	)		$	(565	)
Foreign			87				196				147
State and local			(28	)			(404	)			(668	)
			(1,417	)			(414	)			(1,086	)
Income tax expense		$	10,378			$	9,010			$	2,677

 

The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is:

 

		2024				2023				2022
Income taxes at statutory rate		$	10,603			$	9,232			$	2,913
State and local income taxes, net of federal tax benefit			1,094				620				282
Tax credits			(1,608	)			(1,208	)			(627	)
Uncertain tax positions			19				(34	)			(99	)
Valuation allowance			30				(72	)			(85	)
GILTI/FDII			512				368				608
Foreign rate differential			(300	)			(145	)			(186	)
Other			28				249				(129	)
Income tax expense		$	10,378			$	9,010			$	2,677

 

The Company made income tax payments of $10.2 million, $7.9 million, and $4.5 million in 2024, 2023, and 2022, respectively.

 

Deferred income tax assets and liabilities consist of:

 

		December 31,
		2024				2023
Deferred tax assets:
Inventories		$	1,392			$	520
Accrued liabilities			3,390				3,011
Postretirement health benefits obligation			5,526				5,600
Pension obligation			1,351				2,386
Lease liabilities			4,861				4,916
Capitalized R&D			3,124				2,041
Interest			12,884				8,703
Other			1,190				1,155
Total deferred tax assets			33,718				28,332
Valuation allowance			(420	)			(390	)
Net deferred tax assets			33,298				27,942
Deferred tax liabilities
Depreciation and amortization			(27,935	)			(22,923	)
Leases - right of use assets			(4,627	)			(4,922	)
Total deferred tax liabilities			(32,562	)			(27,845	)
Net deferred tax assets (liabilities)		$	736			$	97

 

The Company had state tax credit carryforwards of $0.4 million and $0.3 million as of December 31, 2024 and 2023, respectively, which will expire incrementally between 2025 and 2036.

 

The Company had valuation allowances of $0.4 million at each of December 31, 2024 and 2023, against certain of its deferred tax assets. ASC 740, Income Taxes, requires that a valuation allowance be recorded against deferred tax assets when it is more likely than not that some or all of a Company’s deferred tax assets will not be realized based on available positive and negative evidence.

 

Total unrecognized tax benefits were $0.7 million at each of December 31, 2024 and 2023. The total amount of unrecognized tax benefits that, if ultimately recognized, would reduce the Company’s annual effective tax rate were $0.6 million at each of December 31, 2024 and 2023. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense for all periods presented. The Company accrued approximately $0.2 million for the payment of interest and penalties at each of December 31, 2024, 2023 and 2022.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

		2024				2023				2022
Balance at beginning of year		$	704			$	754			$	808
Additions based on tax positions related to the current year			217				180				117
Reductions due to lapse of applicable statute of limitations			(192	)			(230	)			(171	)
Balance at end of year		$	729			$	704			$	754

 

The Company is subject to income taxes in the U.S. federal and various state, local and foreign jurisdictions. Income tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2019.