HARVARD BIOSCIENCE INC Income Taxes Disclosure

15.	Income Tax

 

Income tax (benefit) expense for the years ended December 31, 2025 and 2024, consisted of:

 

		Year Ended December 31,
(in thousands)		2025				2024
Current income tax expense:
Federal and state		$	(6	)		$	140
Foreign			(127	)			290
			(133	)			430
Deferred income tax (benefit) expense:
Federal and state			(431	)			(70	)
Foreign			(122	)			380
			(553	)			310
Total income tax (benefit) expense		$	(686	)			740

 

The effective tax rate for the year ended December 31, 2025 was 1.1% as compared with (6.3)% for the same period in 2024. The difference between the Company’s effective tax rate year over year was primarily attributable to a goodwill impairment, an increase in the Company’s GILTI inclusion, and a decrease in the change in the Company’s valuation allowance.

 

Income tax expense for the years ended December 31, 2025 and 2024, differed from the amount computed by applying the U.S. federal income tax rate of 21% to pre-tax loss as a result of the following:

 

		Year Ended December 31,
(in thousands)		2025
U.S. federal statutory tax rates		$	(11,963	)			21.0	%
State and local income taxes, net of federal income tax benefit (a)			(150	)			0.3	%
Foreign tax effects
Spain
Goodwill impairment			715				-1.3	%
Other			(76	)			0.1	%
United Kingdom
Goodwill impairment			1,403				-2.5	%
Other			(281	)			0.5	%
Other foreign jurisdictions			208				-0.4	%
Effect of changes in tax laws or rates enacted in the current period			(13	)			0.0	%
Effect of cross-border tax laws			281				-0.49	%
Tax credits			507				-0.9	%
Change in valuation allowance allocated to income tax			1,386				-2.57	%
Nontaxable or nondeductible items
Goodwill impairment			6,565				-11.5	%
Other			415				-0.7	%
Change in reserve for uncertain tax position			(170	)			0.3	%
Other			487				-0.9	%
Total income tax (benefit)		$	(686	)			1.1	%

 

(a) Taxes in Massachusetts and Minnesota make up the majority of the effect of the state and local tax category.

 

		Year Ended December 31,
(in thousands)		2024
Income tax benefit computed at federal statutory tax rate		$	(2,450	)
Increase (decrease) in income taxes resulting from:
Permanent differences, net			82
Non-deductible executive compensation			243
Global Intangible Low-Taxed Income (GILTI)			-
State income taxes, net of federal income tax benefit			(245	)
Stock-based compensation			210
Tax credits			52
Net operating loss true-ups and expirations			(125	)
Change in reserve for uncertain tax position			(233	)
Impact of change to prior year tax accruals			398
Change in valuation allowance allocated to income tax			2,666
Other			142
Total income tax expense		$	740

 

Income tax expense was based on the following pre-tax (loss) income:

 

		Year Ended December 31,
(in thousands)		2025				2024
Domestic		$	(47,480	)		$	(10,966	)
Foreign			(9,906	)			(699	)
Total		$	(57,386	)		$	(11,665	)

 

Income taxes paid (net of refunds) of ($0.1) million for the year ended December 31, 2025 disaggregated as follows:

 

		Year Ended December 31,
(in thousands)		2025
Federal		$	-
State			26
Foreign			(124	)
Total income taxes paid (net of refunds)		$	(98	)

 

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024, were as follows:

 

		Year Ended December 31,
(in thousands)		2025				2024
Deferred income tax assets:
Inventory		$	881			$	1,036
Operating loss and credit carryforwards			12,817				12,371
Research and development			3,973				4,776
Employee retention credit			1,409				1,409
Lease liabilities			1,451				1,675
Accrued expenses			242				472
Stock compensation			208				699
Deferred interest expense			1,689				1,023
Other assets			704				204
Total gross deferred assets			23,374				23,665
Less: valuation allowance			(19,873	)			(17,769	)
Deferred tax assets			3,501				5,896
Deferred income tax liabilities:
Indefinite-lived intangible assets			296				1,990
Definite-lived intangible assets			1,682				2,468
Lease right-of-use assets			1,159				1,339
Employee benefit plans			568				597
Other liabilities			113				120
Total deferred tax liabilities			3,818				6,514
Deferred income tax liabilities, net		$	(317	)		$	(618	)

 

Deferred income tax assets and liabilities by classification on the consolidated balance sheets were as follows:

 

		Year Ended December 31,
(in thousands)		2025				2024
Deferred tax assets (included in other long-term assets)		$	-			$	92
Deferred income tax liabilities			(317	)			(710	)
Deferred income tax liability, net		$	(317	)		$	(618	)

 

As of December 31, 2025, the Company had federal net operating loss carryforwards of $5.4 million, state net operating loss carryforwards of $11.4 million, and foreign net operating loss carryforwards of $7.1 million The federal and foreign net operating losses can be carried forward indefinitely while the state net operating losses expire between 2025 and 2044, all of which are partially offset by valuation allowances. The Company had $7.1 million of federal research and development tax credit carryforwards which begin to expire in 2025 and are partially offset by a reserve of $0.8 million for uncertain tax positions. The Company had a total of $2.8 million of state investment tax credit carryforwards, research and development tax credit carryforwards, and enterprise zone credit carryforwards, which begin to expire in 2026 and are partially offset by a reserve of $0.3 million for uncertain tax positions. In addition, the Company had a total of $0.4 million of international R&D credits which begin to expire in 2037. The Internal Revenue Code (“IRC”) limits the amounts of net operating loss carryforwards or credits that a company may use in any one year in the event of a change in ownership under IRC Sections 382 or 383.

 

As of December 31, 2025 and 2024, the Company maintained a total valuation allowance of $19.9 million and $17.8 million, respectively, which related to foreign, federal, and state deferred tax assets in both years. The valuation allowance was based on estimates of taxable income in each of the jurisdictions in which the Company operates and the period over which deferred tax assets will be recoverable. The net change in the total valuation allowance for the years ended December 31, 2025 and 2024, was an increase of $2.1 million and $2.5 million, respectively. The change in valuation allowance for the year ended December 31, 2025 of $2.1 million was recorded through continuing operations and relates to federal, state, and foreign jurisdictions in the amounts of $1.4 million, $0.3 million, and $0.4 million, respectively.

 

As of December 31, 2025 and 2024, cash and cash equivalents held by the Company’s foreign subsidiaries were $2.7 million and $2.7 million, respectively. As of December 31, 2025, the Company has determined the potential income tax and withholding liability related to available cash balances at foreign subsidiaries to be immaterial.

 

A summary of activity of unrecognized tax benefits is as follows:

 

(in thousands)
Balance at December 31, 2023		$	2,222
Additions based on tax positions of prior years			172
Decreases based on tax positions of prior years			(382	)
Additions based on tax positions of current year			111
Other decreases, net			(134	)
Balance at December 31, 2024			1,989
Additions based on tax positions of prior years			-
Decreases based on tax positions of prior years			(159	)
Additions based on tax positions of current year			34
Other decreases, net			(75	)
Balance at December 31, 2025		$	1,789

 

The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense, which has not been significant during the years ended December 31, 2025 and 2024, respectively.

 

With a few exceptions, the Company is no longer subject to income tax examinations by tax authorities in foreign jurisdictions for the years before 2020. In the U.S., the Company’s net operating loss and tax credit carryforward amounts remain subject to federal and state examination for tax years starting in 2006 as a result of tax credits generated in the prior years. There are currently no pending federal or state tax examinations.

 

On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was signed into law. The Act includes several significant tax-related provisions, including the permanent extension of certain elements of the Tax Cuts and Jobs Act. The legislation features staggered effective dates beginning in 2025 and continuing through 2027. The Company has incorporated the provisions from the Act into the year end 2025 income tax provision and has concluded that these changes did not have a significant impact on its consolidated financial statements and related disclosures.