HOULIHAN LOKEY, INC.HLI
HOULIHAN LOKEY, INC. Income Taxes Disclosure
Income Taxes
The Company’s provision for income taxes was $138,091, $131,624, and $110,238, for the years ended March 31, 2026, 2025, and 2024, respectively. These represent effective tax rates of 24.6%, 24.8%, and 28.2% for the years ended March 31, 2026, 2025, and 2024, respectively.
| Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Income before provision for income taxes by geography | |||||||||||||||||
| United States | $ | 363,222 | $ | 356,072 | $ | 256,472 | |||||||||||
| International | 199,043 | 175,263 | 134,067 | ||||||||||||||
| Income before provision for income taxes | $ | 562,265 | $ | 531,335 | $ | 390,539 | |||||||||||
The provision for income taxes on operations for the years ended March 31, 2026, 2025, and 2024 is comprised of the following:
Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 73,435 | $ | 73,724 | $ | 40,838 | |||||||||||
| State and local | 28,596 | 15,065 | 16,116 | ||||||||||||||
| Foreign | 61,176 | 43,792 | 32,814 | ||||||||||||||
| Subtotal | 163,207 | 132,581 | 89,768 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (11,766) | (7,593) | 14,116 | ||||||||||||||
| State and local | (9,283) | 1,114 | 3,498 | ||||||||||||||
| Foreign | (4,067) | 5,522 | 2,856 | ||||||||||||||
| Subtotal | (25,116) | (957) | 20,470 | ||||||||||||||
| Total | $ | 138,091 | $ | 131,624 | $ | 110,238 | |||||||||||
The provision for income taxes on operations for the year ended March 31, 2026 is reconciled to the income taxes computed at the statutory federal income tax rate (computed by applying the federal corporate rate of 21% to consolidated operating income before provision for income taxes) as follows:
Year Ended March 31, | |||||||||||
| 2026 | |||||||||||
| U.S. federal statutory tax rate | $ | 118,076 | 21.0 | % | |||||||
| Nontaxable or nondeductible items | |||||||||||
| Executive compensation limit | 10,485 | 1.9 | % | ||||||||
| Stock compensation | (25,225) | (4.5) | % | ||||||||
| Other | 5,997 | 1.1 | % | ||||||||
| Effect of cross-border tax laws | (2,513) | (0.4) | % | ||||||||
State and local income tax, net of federal (national) income tax effect (1) | 15,257 | 2.7 | % | ||||||||
| Foreign tax effects | |||||||||||
| Other foreign jurisdictions | 16,014 | 2.8 | % | ||||||||
| Effective tax rate | $ | 138,091 | 24.6 | % | |||||||
(1)State and local taxes in NYC, NY and CA made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rates prior to the adoption of the new income tax disclosures guidance is shown below for the years ended March 31, 2025 and 2024:
Year Ended March 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Federal income tax provision computed at statutory rate | $ | 111,580 | 21.0 | % | $ | 82,013 | 21.0 | % | |||||||||||||||
| State and local taxes, net of federal tax effect | 21,297 | 4.0 | % | 20,027 | 5.1 | % | |||||||||||||||||
| Tax impact from foreign operations | 12,535 | 2.4 | % | 7,922 | 2.0 | % | |||||||||||||||||
| Nondeductible expenses | 14,313 | 2.7 | % | 9,133 | 2.4 | % | |||||||||||||||||
| Stock compensation | (20,387) | (3.8) | % | (7,468) | (1.9) | % | |||||||||||||||||
| Uncertain tax positions, true-up items, and other | (7,714) | (1.5) | % | (1,389) | (0.4) | % | |||||||||||||||||
| Total | $ | 131,624 | 24.8 | % | $ | 110,238 | 28.2 | % | |||||||||||||||
Deferred income taxes arise principally from temporary differences between book and tax recognition of income, expenses, and losses relating to financing and other transactions. Deferred income taxes as of March 31, 2026 and March 31, 2025, comprise the following:
| March 31, 2026 | March 31, 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Deferred compensation expense/accrued bonus | $ | 139,533 | $ | 125,428 | |||||||
| Allowance for credit losses | 2,089 | 2,246 | |||||||||
| Accounts receivable and work in progress | 1,153 | 950 | |||||||||
| US foreign tax credits | 2,375 | 2,365 | |||||||||
| Operating lease liabilities | 99,492 | 85,088 | |||||||||
| Non-U.S. | 49,512 | 40,639 | |||||||||
| Other, net | 3,528 | 2,431 | |||||||||
| Total deferred tax assets | 297,682 | 259,147 | |||||||||
| Deferred tax asset valuation allowance | (12,623) | (13,415) | |||||||||
| Total deferred tax assets | 285,059 | 245,732 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangibles | (70,133) | (69,335) | |||||||||
| Operating lease right-of-use assets | (79,940) | (67,901) | |||||||||
| Other, net | (25,328) | (24,504) | |||||||||
| Total deferred tax liabilities | (175,401) | (161,740) | |||||||||
| Net deferred tax assets | $ | 109,658 | $ | 83,992 | |||||||
The Company has various foreign net operating losses totaling $37,541. If not utilized, the foreign net operating loss carryforwards will begin to expire in two years, although in certain jurisdictions these attributes do not expire.
We continue to expect that the remaining balance of our undistributed foreign earnings will be indefinitely reinvested. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.
A reconciliation of the unrecognized tax position as of March 31, 2026 and 2025 is as follows:
| March 31, 2026 | March 31, 2025 | ||||||||||
| Unrecognized tax position at the beginning of the year | $ | 329 | $ | 15,800 | |||||||
| Decrease related to prior year tax positions | — | (15,471) | |||||||||
| Unrecognized tax position at the end of the year | $ | 329 | $ | 329 | |||||||
The Company files a consolidated federal income tax return, as well as consolidated and separate returns in state and local jurisdictions. As of March 31, 2026, all of the federal income tax returns filed since 2023 by the Company are still subject to adjustment upon audit. The Company also files combined and separate income tax returns in many states, which are also open to adjustment.
The amount of cash income taxes, net of refunds paid during the fiscal year ended March 31, 2026 were as follows:
| March 31, 2026 | |||||
| Federal taxes | |||||
| United States | $ | 89,436 | |||
| State & local taxes | |||||
| Other state jurisdictions | 26,356 | ||||
| Foreign taxes | |||||
| Germany | 29,712 | ||||
| United Kingdom | 24,449 | ||||
| Other foreign jurisdictions | 17,294 | ||||
| Total cash taxes paid | $ | 187,247 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 22, 2026 | Showing above |
| 2025 | May 15, 2025 | |
| 2024 | May 21, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 27, 2022 | |
| 2021 | May 21, 2021 | |
| 2020 | May 15, 2020 | |
| 2019 | May 24, 2019 | |
| 2018 | May 25, 2018 | |
| 2017 | Jun 13, 2017 | |
| 2016 | Jun 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.