LIFETIME BRANDS, INCLCUT
LIFETIME BRANDS, INC Income Taxes Disclosure
INCOME TAXES
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA includes significant changes to U.S. corporate tax provisions of the Tax Cuts and Jobs Act. Notably, it allows an immediate deduction for domestic research and development expenditures, reinstates 100% bonus depreciation, decreases the limitation on deductible interest expense, and modifies the international tax framework. The legislation has multiple effective dates, with certain provisions effective starting in 2025 and others in the subsequent years. The Company was able to reduce their cash tax expense in the year ended December 31, 2025 from the changes implemented in OBBBA by utilizing the allowable acceleration of deductions for depreciation and domestic capitalized R&D expenses, as well as the increased deduction for interest expense, which reduced federal taxable income in the year.
The components of (loss) income before income taxes and equity in losses are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Domestic | $ | (19,349) | $ | 16,509 | $ | 22,134 | |||||||||||
| Foreign | (10,871) | (12,099) | (11,659) | ||||||||||||||
Foreign - loss on equity securities | — | (14,152) | — | ||||||||||||||
Total (loss) income before income taxes and equity in losses | $ | (30,220) | $ | (9,742) | $ | 10,475 | |||||||||||
The (benefit) provision for income taxes (before equity in losses) consists of:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (32) | $ | 4,254 | $ | 6,326 | |||||||||||
| State and local | 390 | 913 | 1,447 | ||||||||||||||
| Foreign | 364 | 203 | 579 | ||||||||||||||
| Deferred | (4,005) | (2,039) | (2,130) | ||||||||||||||
Income tax (benefit) provision | $ | (3,283) | $ | 3,331 | $ | 6,222 | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred income tax assets and (liabilities) are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred income tax assets: | |||||||||||
| Operating lease liabilities | $ | 13,903 | $ | 17,257 | |||||||
| Stock options | 858 | 819 | |||||||||
| Inventory | 2,251 | 2,573 | |||||||||
| Operating loss carryforwards | 29,383 | 23,262 | |||||||||
| Accounts receivable allowances | 1,929 | 2,473 | |||||||||
| Accrued compensation | 989 | 979 | |||||||||
| Deferred compensation | 458 | 448 | |||||||||
| Environmental remediation accrual | 1,274 | 1,331 | |||||||||
| Capitalized research and experimental expenditures | 481 | 3,881 | |||||||||
Section 163j interest carryforward | 2,929 | 2,458 | |||||||||
Fixed assets | 214 | — | |||||||||
U.S Federal Tax Credits | 1,137 | 575 | |||||||||
| Other | 2,068 | 1,396 | |||||||||
| Total deferred income tax assets | $ | 57,874 | $ | 57,452 | |||||||
| Deferred income tax liabilities: | |||||||||||
| Operating lease right-of-use assets | $ | (11,511) | $ | (14,243) | |||||||
| Fixed assets | — | (304) | |||||||||
| Intangibles | (19,268) | (26,814) | |||||||||
| Total deferred income tax liabilities | (30,779) | (41,361) | |||||||||
Net deferred income tax asset | 27,095 | 16,091 | |||||||||
| Valuation allowance | (28,649) | (21,692) | |||||||||
Net deferred income tax liability | $ | (1,554) | $ | (5,601) | |||||||
As of December 31, 2025, the Company has $7.6 million of capital loss carryforwards in foreign jurisdictions. These losses can be carried forward indefinitely and are fully offset by a valuation allowance.
At December 31, 2025, the Company has net operating losses in foreign jurisdictions of $102.5 million and $11.6 million in state jurisdictions that are fully offset by valuation allowance, and $5.9 million in the U.S. federal jurisdiction, $2.4 million in foreign jurisdictions, and $1.1 million in state jurisdictions that are not offset by valuation allowance. Approximately $104.5 million of foreign net operating losses, $0.1 million of state net operating losses, and $5.9 million of U.S. federal net operating losses can be carried forward indefinitely. The remaining foreign net operating losses, if not utilized, will expire beginning in 2028. The remaining state net operating losses will begin to expire in 2026.
The (benefit) provision for income taxes (before equity in losses) differs from the amounts computed by applying the applicable federal statutory rates as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| (in thousands, except percentages) | Tax effect | Rate impact | Tax effect | Rate impact | Tax effect | Rate impact | ||||||||||||||||||||
| United States Statutory Tax Rate | $ | (6,346) | 21.00 | % | $ | (2,046) | 21.00 | % | $ | 2,200 | 21.00 | % | ||||||||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect(1) | (561) | 1.86 | 340 | (3.49) | 598 | 5.71 | ||||||||||||||||||||
| Foreign Tax Effects | ||||||||||||||||||||||||||
| China | ||||||||||||||||||||||||||
| Adjustment of deferred tax liabilities | 5 | (0.02) | 1 | (0.01) | 150 | 1.43 | ||||||||||||||||||||
| Other | (5) | 0.02 | 13 | (0.14) | (10) | (0.10) | ||||||||||||||||||||
| Hong Kong | ||||||||||||||||||||||||||
| Foreign rate Differential | (17) | 0.06 | 151 | (1.55) | 87 | 0.83 | ||||||||||||||||||||
| Other | 141 | (0.47) | (5) | 0.05 | 39 | 0.37 | ||||||||||||||||||||
| Jersey | ||||||||||||||||||||||||||
| Foreign rate Differential | — | — | (336) | 3.44 | (326) | (3.12) | ||||||||||||||||||||
| Other | — | — | — | — | — | — | ||||||||||||||||||||
| Mexico | ||||||||||||||||||||||||||
| Book Loss on GV Investment | — | — | 2,973 | (30.51) | — | — | ||||||||||||||||||||
| Other | 31 | (0.10) | 27 | (0.28) | 10 | 0.10 | ||||||||||||||||||||
| Netherlands | ||||||||||||||||||||||||||
| Adjustment of deferred tax liabilities | (32) | 0.11 | 256 | (2.63) | 16 | 0.16 | ||||||||||||||||||||
| Change in Valuation Allowance | — | — | (778) | 7.98 | (42) | (0.40) | ||||||||||||||||||||
| Reverse 2022 TP Adjustment | — | — | — | — | 111 | 1.06 | ||||||||||||||||||||
| Other | (6) | 0.02 | (4) | 0.04 | 4 | 0.04 | ||||||||||||||||||||
| United Kingdom | ||||||||||||||||||||||||||
| Adjustment of deferred tax liabilities | (901) | 2.98 | (195) | 2.00 | (186) | (1.77) | ||||||||||||||||||||
| Change in Valuation Allowance | 3,526 | (11.67) | 2,821 | (28.96) | 3,064 | 29.25 | ||||||||||||||||||||
| Foreign rate Differential | (420) | 1.39 | (420) | 4.31 | (461) | (4.40) | ||||||||||||||||||||
| Other Disallowed Interest | — | — | 336 | (3.44) | 326 | 3.12 | ||||||||||||||||||||
| Other | 17 | (0.06) | 101 | (1.03) | (90) | (0.86) | ||||||||||||||||||||
| Other foreign jurisdictions | 264 | (0.87) | (62) | 0.64 | (55) | (0.52) | ||||||||||||||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | — | — | — | — | — | — | ||||||||||||||||||||
| Effect of Cross-Border Tax Laws | ||||||||||||||||||||||||||
| Foreign Tax Withholding | 346 | (1.15) | 170 | (1.75) | 527 | 5.03 | ||||||||||||||||||||
| Other | 13 | (0.04) | 31 | (0.32) | 37 | 0.35 | ||||||||||||||||||||
| Tax Credits | ||||||||||||||||||||||||||
| R&D CREDIT | (317) | 1.05 | (290) | 2.98 | (266) | (2.54) | ||||||||||||||||||||
| Foreign Tax Credit | (245) | 0.81 | (161) | 1.66 | (522) | (4.98) | ||||||||||||||||||||
| Changes in Valuation Allowances | 978 | (3.24) | (151) | 1.55 | (16) | (0.16) | ||||||||||||||||||||
| Nontaxable or Nondeductible items | ||||||||||||||||||||||||||
FDII | — | — | (56) | 0.58 | (132) | (1.26) | ||||||||||||||||||||
Non-deductible Officer's Compensation | 104 | (0.34) | 653 | (6.70) | 476 | 4.55 | ||||||||||||||||||||
| Other | 76 | (0.25) | 83 | (0.85) | 77 | 0.74 | ||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | (22) | 0.07 | (747) | 7.67 | (97) | (0.93) | ||||||||||||||||||||
| Other Adjustments | ||||||||||||||||||||||||||
| Adjustment of deferred tax liabilities | 111 | (0.37) | 911 | (9.35) | 839 | 8.01 | ||||||||||||||||||||
| Return to Provision | 56 | (0.19) | (285) | 2.91 | (136) | (1.31) | ||||||||||||||||||||
Other | (79) | 0.30 | — | — | — | — | ||||||||||||||||||||
| Effective Tax Rate | $ | (3,283) | 10.90 | % | $ | 3,331 | (34.20) | % | $ | 6,222 | 59.40 | % | ||||||||||||||
(1) State taxes in CA and NJ made up the majority (greater than 50 percent) of the tax effect in this category.
The estimated values of the Company’s gross uncertain tax positions at December 31, 2025, 2024 and 2023 consist of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Balance at January 1 | $ | (457) | $ | (990) | $ | (1,130) | |||||||||||
| Additions based on tax positions related to the current year | (37) | (27) | (27) | ||||||||||||||
| Reductions for tax position of prior years | 78 | 560 | 167 | ||||||||||||||
| Balance at December 31 | $ | (416) | $ | (457) | $ | (990) | |||||||||||
The Company had approximately $0.2 million and $0.2 million, net of federal and state tax benefit, accrued at December 31, 2025 and 2024, respectively, for the payment of interest and penalties. The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes.
If the Company’s tax positions are ultimately sustained, the Company’s liability, including interest, would be reduced by $0.7 million, all of which would impact the Company’s tax provision. On a quarterly basis, the Company evaluates its tax positions and revises its estimates accordingly.
The Company is no longer subject to U.S. Federal income tax examinations for the years prior to 2022. The Company has identified the following jurisdictions as “major” tax jurisdictions: U.S. Federal, California, New Jersey, New York, and the United Kingdom. At December 31, 2025, the periods subject to examination by the Company’s major state jurisdictions are generally for the years ended 2021 through 2024. In certain jurisdictions, Filament, an acquired entity, may have additional periods subject to examination. As of December 31, 2025, there are no material assessments in any given year.
The following table presents cash paid for taxes (net of refunds) by jurisdiction for the year ended December 31, 2025:
| Year Ended December 31, | |||||
| 2025 | |||||
| (in thousands) | |||||
| Federal taxes | |||||
| United States | $ | 2,185 | |||
| State | |||||
| Other state jurisdictions | 600 | ||||
| Foreign | |||||
| Canada | 274 | ||||
| Other foreign jurisdictions | 114 | ||||
| $ | 3,173 | ||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 9, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 14, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 14, 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.