KVH INDUSTRIES INC \DE\KVHI
KVH INDUSTRIES INC \DE\ Income Taxes Disclosure
Income Taxes
Income tax (benefit) expense for the years ended December 31, 2025 and 2024 attributable to loss from operations is presented below.
| Current | Deferred | Total | |||||||||||||||
| Year ended December 31, 2025 | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State* | (12) | — | (12) | ||||||||||||||
| Foreign | 335 | (454) | (119) | ||||||||||||||
| $ | 323 | $ | (454) | $ | (131) | ||||||||||||
| Year ended December 31, 2024 | |||||||||||||||||
| Federal | $ | 23 | $ | — | $ | 23 | |||||||||||
| State* | 7 | — | 7 | ||||||||||||||
| Foreign | 274 | 117 | 391 | ||||||||||||||
| $ | 304 | $ | 117 | $ | 421 | ||||||||||||
*- State taxes in Rhode Island make up the majority of the tax effect in this category
The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis for the year ended December 31, 2025. A reconciliation of income tax computed using the U.S. federal statutory rate of 21% compared to that reflected in operations, as required by ASU 2023-09, for the year ended December 31, 2025 consists of:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Income tax benefit at Federal statutory income tax rate | $ | (1,578) | 21.00 | % | |||||||
| Increase (decrease) in income taxes resulting from: | |||||||||||
| State income tax (expense) benefit, net of federal benefit* | — | — | |||||||||
| Foreign tax effects | |||||||||||
| Brazil | |||||||||||
| Statutory rate difference | 35 | (0.47) | |||||||||
| Valuation allowance | (329) | 4.38 | |||||||||
| Other | 76 | (1.01) | |||||||||
| Other foreign jurisdictions | |||||||||||
| Statutory rate difference | (8) | 0.11 | |||||||||
| Valuation allowance | 26 | (0.35) | |||||||||
| Other | 121 | (1.61) | |||||||||
| Changes in valuation allowance | 1,239 | (16.49) | |||||||||
| Non-taxable or non-deductible | |||||||||||
| Share-based payment awards | 156 | (2.07) | |||||||||
| Other | 46 | (0.62) | |||||||||
| Uncertain tax positions | 72 | (0.96) | |||||||||
| Other adjustments | 13 | (0.17) | |||||||||
| Effective tax rate | $ | (131) | 1.74 | % | |||||||
*- State taxes in Rhode Island make up the majority of the tax effect in this category
A reconciliation of income tax computed using the United States Federal statutory income tax rate of 21% compared to that reflected in operations, prior to the requirements of ASU 2023-09, for the year ended December 31, 2024 consists of:
| Year Ended December 31, | |||||
| 2024 | |||||
| Income tax benefit at Federal statutory income tax rate | $ | (2,232) | |||
| Increase (decrease) in income taxes resulting from: | |||||
| State income tax (expense) benefit, net of federal benefit | (48) | ||||
| State research and development, investment credits | 423 | ||||
| Non-deductible meals & entertainment | 31 | ||||
| Non-deductible stock compensation expense | 479 | ||||
| Foreign exchange loss | 110 | ||||
| Foreign tax rate differential | 102 | ||||
| Uncertain tax positions | 51 | ||||
| Provision to tax return adjustments | (15) | ||||
| Change in valuation allowance | 1,344 | ||||
| Non-deductible foreign transaction taxes | 110 | ||||
| Other | 66 | ||||
| Income tax expense | $ | 421 | |||
Loss before income tax (benefit) expense determined by tax jurisdiction, are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| United States | $ | (6,837) | $ | (10,392) | |||||||
| Foreign | (677) | (235) | |||||||||
| Total | $ | (7,514) | $ | (10,627) | |||||||
Deferred tax assets and liabilities for the periods presented consisted of the following:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accounts receivable, due to allowance for doubtful accounts | $ | 70 | $ | 112 | |||||||
| Inventories | 1,781 | 2,188 | |||||||||
| Operating loss carryforwards | 9,078 | 5,772 | |||||||||
| Stock-based compensation expense | 388 | 436 | |||||||||
| Property and equipment, due to difference in depreciation | 74 | 74 | |||||||||
| Research and development tax credit carryforwards | 5,852 | 5,852 | |||||||||
| Foreign tax credit carryforwards | 2,345 | 2,345 | |||||||||
| State tax credit carryforwards | 2,456 | 2,962 | |||||||||
| Capitalized research and development | 3,856 | 5,570 | |||||||||
| Warranty reserve | 138 | 130 | |||||||||
| Accrued expenses | 457 | 333 | |||||||||
| Intangible assets | 210 | — | |||||||||
| Lease liability | 908 | 244 | |||||||||
| Gross deferred tax assets | 27,613 | 26,018 | |||||||||
| Less valuation allowance | (23,890) | (23,179) | |||||||||
| Total deferred tax assets | 3,723 | 2,839 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment, due to differences in depreciation | (2,218) | (2,430) | |||||||||
| Right of use asset | (908) | (267) | |||||||||
| Total deferred tax liabilities | (3,126) | (2,697) | |||||||||
| Net deferred tax asset | $ | 597 | $ | 142 | |||||||
| Deferred income tax asset | $ | 602 | $ | 157 | |||||||
| Deferred income tax liability | $ | (5) | $ | (15) | |||||||
As of December 31, 2025 the Company has federal and state tax loss carryforwards of approximately $39,151 and $3,560, respectively. The federal loss carryforward has no expiration date. The state losses expire through the year 2045. As of December 31, 2025, the Company had federal research and development tax credit carryforwards in the amount of $5,843 and other general business credits of $9 that expire in years 2029 through 2043. As of December 31, 2025, the Company had foreign tax credit carryforwards in the amount of $2,345 that expire in years 2026 through 2027. As of December 31, 2025, the Company had state research and development tax credit carryforwards in the amount of $3,000 that expire in years 2026 through 2032. The Company also had other state tax credit carryforwards of $109 available to reduce future state tax expense that expire in years 2026 through 2032.
The Company’s ability to utilize these net operating loss carryforwards and tax credit carryforwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code Section 382. An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period.
In assessing the realizability of its net deferred tax assets, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2025, the valuation increased by $710. The change was primarily the result of the current year loss and an increase in the inventory valuation reserve. As part of the Company’s analysis, the Company evaluated, among other factors, its recent history of generating tax losses and its near-term forecasts of future taxable income or losses.
As of December 31, 2025, unremitted foreign earnings, which were not significant, have been retained by the Company’s foreign subsidiaries for indefinite reinvestment. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to state tax and withholding taxes payable to various foreign countries.
The Company establishes reserves for uncertain tax positions based on management’s assessment of exposure associated with tax deductions, permanent tax differences, and tax credits. The tax reserves are analyzed periodically and adjustments are made as events occur that warrant adjustment to the reserve. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.
The aggregate changes in the total gross amount of unrecognized tax benefits, excluding penalties and interest, are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Unrecognized tax benefits as of January 1 | $ | 871 | $ | 1,044 | |||||||
| Gross increase (decrease) in unrecognized tax benefits due to currency fluctuations - prior year tax positions | 74 | (159) | |||||||||
| Lapse of statute of limitations | (8) | (14) | |||||||||
| Unrecognized tax benefits as of December 31 | $ | 937 | $ | 871 | |||||||
All unrecognized tax benefits as of December 31, 2025 and 2024, if recognized, would result in a reduction of the Company's effective tax rate.
The Company recorded interest and penalties of $86 and $80 in its consolidated statement of operations for the years ended December 31, 2025 and 2024, respectively. Total accrued interest and penalties related to tax positions taken on our tax returns and included in non-current income taxes payable was approximately $508 and $431 as of December 31, 2025 and 2024, respectively.
The timing of any resolution of income tax examinations is highly uncertain, as are the amounts and timing of any settlement payment. These events could cause fluctuations in the balance sheet classification of current and non-current assets and liabilities.
The Company’s tax jurisdictions include the United States, the United Kingdom, Denmark, Cyprus, Norway, Brazil, Singapore, Japan, and India. In general, the statute of limitations with respect to the Company’s United States federal income taxes has expired for years prior to 2022, and the relevant state and foreign statutes vary. However, preceding years remain open to examination by United States federal and state and foreign taxing authorities to the extent of future utilization of net operating losses and research and development tax credits generated in each preceding year.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company’s adoption of OBBBA did not materially affect its consolidated financial statements.
Net income taxes paid (net of refunds):
| Year Ended December 31, | |||||
| 2025 | |||||
| Federal | $ | — | |||
| State | 25 | ||||
| Foreign | 172 | ||||
| $ | 197 | ||||
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
| Year Ended December 31, | |||||
| 2025 | |||||
| State | * | ||||
| Foreign | |||||
| Brazil | 43 | ||||
| Denmark | 104 | ||||
| India | 18 | ||||
*- No jurisdiction exceeds 5%
Net income taxes paid (net of refunds) during 2024 was $173.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 10, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 11, 2022 | |
| 2020 | Mar 3, 2021 | |
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.