INTEST CORPINTT

INTEST CORP Income Taxes Disclosure

10-KFiled Mar 12, 20265 min read
INCOME TAXES
We are subject to Federal and certain state income taxes. In addition, we are taxed in certain foreign countries.
The components of (loss) earnings before income taxes were as follows:
Years Ended
December 31,
(in thousands)20252024
Domestic$(2,014)$4,889 
Foreign(1,208)(1,435)
Total (loss) earnings before income taxes$(3,222)$3,454 
The components of income tax (benefit) expense were as follows:
Years Ended
December 31,
(in thousands)20252024
Current
Domestic – federal$(365)$1,221 
Domestic – state38 230 
Foreign711 (71)
Total current384 1,380 
Deferred
Domestic – federal(585)(1,186)
Domestic – state19 (262)
Foreign(513)631 
Total deferred(1,079)(817)
Total income tax (benefit) expense$(695)$563 
Deferred income taxes reflect the net tax effect of net operating loss and tax credit carryforwards as well as temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. The following summarizes the significant components of our deferred tax assets and liabilities at December 31, 2025 and 2024:
December 31,
(in thousands)20252024
Deferred tax assets:
Capitalized research and development costs$2,476 $3,272 
Operating lease liabilities1,620 1,870 
Net operating loss (domestic and foreign)1,728 381 
Accrued vacation pay and stock-based compensation442 532 
Inventories605 434 
Foreign intangible assets495 403 
Tax credit carryforward3720
Acquisition costs41 43 
Allowance for credit losses50 45 
Accrued warranty1 25 
Other224 151 
Total8,054 7,156 
Valuation allowance(760)(261)
Deferred tax assets7,294 6,895 
Deferred tax liabilities:
Intangible assets(4,516)(4,673)
Right-of-use assets(1,553)(1,821)
Depreciation of property and equipment(450)(334)
Deferred tax liabilities(6,519)(6,828)
Net deferred tax assets$775 $67 
In assessing the ability to realize the deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the total deferred tax assets, we will need to generate future taxable income prior to the expiration of net operating loss and tax credit carryforwards which expire in various years through 2045.
We have not recognized any deferred taxes related to unremitted earnings from our international subsidiaries as these earnings will be indefinitely reinvested, including in relation to Alfamation Italy. We plan to distribute earnings from our German subsidiary, but have taken action to ensure zero withholding tax will be applicable. Therefore, no deferred tax liability has been recorded related to our unremitted earnings.
As of December 31, 2025, we had research and development tax credits of $0.1 million which expire in 2045 and foreign tax credits of $0.3 million which expire in 2035. We believe it is more likely than not that results of future operations will generate sufficient taxable income to utilize these credits.
The reconciliations between our effective tax rate and the expected statutory rate of 21% for the years ended December 31, 2025 and 2024 were as follows:
Year EndedYear Ended
December 31, 2025December 31, 2024
($ in thousands)$%$%
Expected income tax at U.S. federal statutory rate(677)21.0%726 21.0%
State and local income taxes, net of federal income tax effect*(333)10.3%(32)(0.9%)
Foreign tax effects
Netherlands
Statutory tax rate difference between Netherlands and the U.S.34 (1.1%)13 0.4%
Change in valuation allowance447 (13.9%)130 3.8%
Other(120)3.7%— —%
Germany
Statutory tax rate difference between Germany and the U.S.97 (3.0%)52 1.5%
Other77 (2.4%)— —%
Italy
Statutory tax rate difference between Italy and the U.S.(15)0.5%(26)(0.8%)
Other(1)—%— —%
Malaysia
Statutory tax rate difference between Malaysia and the U.S.(12)0.4%(13)(0.4%)
Change in valuation allowance94 (2.9%)— —%
Other— —%104 3.0%
U.K.
Statutory tax rate difference between the U.K. and the U.S.8 (0.2%)4 0.1%
Change in valuation allowance(42)1.3%(4)(0.1%)
Other(11)0.3%— —%
Canada
Statutory tax rate difference between Canada and the U.S.(4)0.1 %(22)(0.6%)
Other(93)2.9 %— —%
Other foreign jurisdictions(6)0.2%(1)—%
Effect of changes in tax laws or rates enacted in the current period— —%— —%
Effect of cross-border tax laws
Subpart F income for foreign subsidiaries213 (6.6%)145 4.2%
Section 250 foreign-derived intangible income deduction— —%(537)(15.5%)
Tax credits
Research and development tax credits(132)4.1%(294)(8.5%)
Foreign tax credits(264)8.2%(70)(2.0%)
Changes in U.S. valuation allowances— —%(110)(3.2%)
Nontaxable or nondeductible items
Stock-based compensation awards226 (7.0%)201 5.8%
Federal provision-to-return adjustments110 (3.4%)168 4.9%
Acquisition costs— —%71 2.1%
Other22 (0.7%)17 0.5%
Changes in unrecognized tax benefits— —%— —%
Federal income tax benefit adjustment(310)9.6%— —%
Other adjustments(3)0.1%41 1.2%
Effective income tax (benefit) expense**(695)21.6%563 16.3%
* State taxes in CA, NJ, TN and TX made up the majority (greater than 50%) of the tax effect in this category in 2025; CA, MI, MA, NJ and TN in 2024.
** sum of percentages may not add due to rounding
At December 31, 2025 and 2024, we did not have an accrual for uncertain tax positions.
We file U.S. income tax returns and multiple state and foreign income tax returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ended December 31, 2022 and thereafter are subject to examination by the relevant taxing authorities. As of December 31, 2025, we have federal net operating losses of $4.1 million inclusive of $0.4 million which is subject to a Section 382 limitation and will begin to expire in 2032 if not utilized. The remaining $3.7 million can be carried forward indefinitely subject to an annual 80% limitation. We have state net operating losses of $1.7 million which will begin to expire in 2027.
Jurisdictions where cash paid for income taxes equal to or greater than 5% of the total income taxes paid (net of refunds received) were as follows:
Years Ended
December 31,
(in thousands)20252024
U.S. Federal$(22)$1,855 
State - Tennessee2 153 
State - California(53)14 
State - New Jersey18 29 
State - all others22 89 
Foreign - Italy— 998 
Foreign - Germany223 197 
Foreign - Canada— (238)
Foreign - all others3 (25)
Total income taxes paid net of refunds received$193 $3,072 

Historical Timeline

Fiscal YearFiled
2025Mar 12, 2026Showing above
2024Mar 13, 2025
2023Mar 27, 2024
2022Mar 22, 2023
2021Mar 23, 2022
2020Mar 23, 2021
2019Mar 23, 2020
2018Mar 26, 2019
2017Mar 28, 2018
2016Mar 27, 2017
2015Mar 29, 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.

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