HEALTHCARE SERVICES GROUP INCHCSG
HEALTHCARE SERVICES GROUP INC Income Taxes Disclosure
Note 12 — Income Taxes
The table below provides a reconciliation between the tax expense computed by applying the statutory federal income tax rate to income before income taxes and the provision for income taxes:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| (in thousands, except for percentages) | |||||||||||||||||||||||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 14,252 | 21.0 | % | $ | 11,118 | 21.0 | % | $ | 11,182 | 21.0 | % | |||||||||||||||||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect 1 | 2,386 | 3.5 | % | 2,641 | 5.0 | % | 4,153 | 7.8 | % | ||||||||||||||||||||||||||
| Tax Credits | |||||||||||||||||||||||||||||||||||
| Federal Jobs Credits | (3,019) | (4.5) | % | (1,914) | (3.6) | % | (2,014) | (3.8) | % | ||||||||||||||||||||||||||
| Changes in Valuation Allowance | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
Employee Retention Credit2 | (6,840) | (10.1) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Share-based compensation | 1,834 | 2.7 | % | 1,722 | 3.3 | % | 1,610 | 3.0 | % | ||||||||||||||||||||||||||
| Other | 154 | 0.2 | % | 108 | 0.2 | % | 57 | 0.1 | % | ||||||||||||||||||||||||||
| Other Adjustments | 40 | 0.1 | % | (205) | (0.4) | % | (318) | (0.6) | % | ||||||||||||||||||||||||||
| Effective Tax Rate | $ | 8,807 | 12.9 | % | $ | 13,470 | 25.5 | % | $ | 14,670 | 27.5 | % | |||||||||||||||||||||||
1.For 2025, states that comprise the majority (>50%) of the state tax effect are California, Kentucky, Maryland, Massachusetts, Pennsylvania, Texas, and Virginia. For 2024, states that comprise the majority (>50%) of the state tax effect are Maryland, California, Massachusetts, New Jersey, Florida, Texas, Virginia, Connecticut and Pennsylvania. For 2023, states that comprise the majority (>50%) of the state tax effect are New Jersey, California, Maryland, Massachusetts, Texas, Florida, Connecticut, Virginia, and Kentucky.
2.Amount received in ERC credits during 2025 was treated as a permanent tax difference and excluded from taxable income.
Income taxes paid (net of refunds received) for each period is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Federal | 14,935 | 11,475 | 3,099 | ||||||||||||||
| State | |||||||||||||||||
| Massachusetts | — | — | 327 | ||||||||||||||
| New Jersey | — | — | 317 | ||||||||||||||
| Other | 5,452 | 3,757 | 1,842 | ||||||||||||||
| Total | $ | 20,387 | $ | 15,232 | $ | 5,585 | |||||||||||
The following table summarizes the provision for income taxes:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (9,332) | $ | 12,275 | $ | 13,728 | |||||||||||
| State | (919) | 4,139 | 5,762 | ||||||||||||||
| $ | (10,251) | $ | 16,414 | $ | 19,490 | ||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | 15,946 | $ | (2,304) | $ | (4,183) | |||||||||||
| State | 3,112 | (640) | (637) | ||||||||||||||
| $ | 19,058 | $ | (2,944) | $ | (4,820) | ||||||||||||
| Tax provision | $ | 8,807 | $ | 13,470 | $ | 14,670 | |||||||||||
Deferred income taxes are recorded using the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax basis of assets and liabilities.
Significant components of the Company’s federal and state deferred tax asset and liability balances were as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for doubtful accounts | $ | 5,200 | $ | 25,138 | |||||||
| Deferred compensation | 9,869 | 9,159 | |||||||||
| Accrued insurance claims | 4,953 | 5,277 | |||||||||
| Non-deductible reserves | 193 | 497 | |||||||||
| Lease liabilities | 3,848 | 4,214 | |||||||||
| Share based compensation | 3,692 | 3,312 | |||||||||
| Other | 4,246 | 3,275 | |||||||||
| Total deferred tax assets | $ | 32,001 | $ | 50,872 | |||||||
| Deferred tax liabilities: | |||||||||||
| Expensing of housekeeping supplies | $ | (2,117) | $ | (2,174) | |||||||
| Amortization of goodwill and intangibles | (4,416) | (3,861) | |||||||||
| Depreciation of property and equipment | (2,162) | (1,664) | |||||||||
| Lease right-of-use assets | (3,634) | (4,048) | |||||||||
| Other | (1,200) | (955) | |||||||||
| Total deferred tax liabilities | $ | (13,529) | $ | (12,702) | |||||||
| Net deferred tax assets | $ | 18,472 | $ | 38,170 | |||||||
Realization of the Company’s deferred tax assets is dependent upon future earnings in specific tax jurisdictions, the timing and amount of which are uncertain. Management assesses the Company’s income tax positions and records tax benefits for all years subject to examination based upon an evaluation of the facts, circumstances and information available at the reporting dates, which include historical operating results and expectations of future earnings. As such, management believes it is more likely than not that the deferred tax assets recorded will be realized to reduce future income taxes and therefore no valuation allowances are necessary.
The Company performs an evaluation each period of its tax positions taken and expected to be taken in tax returns. The evaluation is performed on positions relating to tax years that remain subject to examination by major tax jurisdictions, the earliest of which is the tax year ended December 31, 2020. Based on the evaluation, the Company concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Therefore, the table reporting on the change in the liability for unrecognized tax benefits during the years ended December 31, 2025 and 2024 is omitted as there is no activity to report in such account for the years ended December 31, 2025 or 2024.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 19, 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.