MasterCraft Boat Holdings, Inc. Income Taxes Disclosure
10. INCOME TAXES
The Company’s sources of earnings before income taxes are primarily derived in the U.S. Earnings in jurisdictions outside of the U.S. were not significant during each of the years ended June 30, 2025, 2024 and 2023.
For the years ended June 30, the components of the provision for income taxes for continuing operations are as follows:
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|
|
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|
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2025 |
|
|
2024 |
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2023 |
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|||
Current income tax expense: |
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|
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|
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|||
Federal |
|
$ |
3,827 |
|
|
$ |
6,870 |
|
|
$ |
25,363 |
|
State |
|
|
1,182 |
|
|
|
1,860 |
|
|
|
5,786 |
|
Total current tax expense |
|
$ |
5,009 |
|
|
$ |
8,730 |
|
|
$ |
31,149 |
|
Deferred tax benefit: |
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|
|
|
|
|
|
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|||
Federal |
|
$ |
(1,923 |
) |
|
$ |
(2,072 |
) |
|
$ |
(2,867 |
) |
State |
|
|
(266 |
) |
|
|
72 |
|
|
|
18 |
|
Total deferred tax benefit |
|
|
(2,189 |
) |
|
|
(2,000 |
) |
|
|
(2,849 |
) |
Income tax expense |
|
$ |
2,820 |
|
|
$ |
6,730 |
|
|
$ |
28,300 |
|
The difference between the statutory and the effective federal tax rate related to continuing operations for the periods below is attributable to the following:
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|
2025 |
|
|
2024 |
|
|
2023 |
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|||
Statutory income tax rate |
|
|
21.00 |
% |
|
|
21.00 |
% |
|
|
21.00 |
% |
State taxes (net of federal income tax benefit and valuation allowance) |
|
|
2.41 |
% |
|
|
2.17 |
% |
|
|
2.18 |
% |
Uncertain tax positions |
|
|
4.34 |
% |
|
|
3.26 |
% |
|
|
1.74 |
% |
Tax credits |
|
|
(6.03 |
%) |
|
|
(3.10 |
%) |
|
|
(0.70 |
%) |
Return to provision true-ups and rate changes |
|
|
(0.52 |
%) |
|
|
(1.15 |
%) |
|
|
— |
|
Permanent differences |
|
|
(0.35 |
%) |
|
|
0.49 |
% |
|
|
(0.88 |
%) |
Other |
|
|
(0.02 |
%) |
|
|
(0.22 |
%) |
|
|
(0.16 |
%) |
Effective income tax rate |
|
|
20.83 |
% |
|
|
22.45 |
% |
|
|
23.18 |
% |
As of June 30, 2025, and 2024, a summary of the significant components of the Company’s deferred tax assets and liabilities was as follows:
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|
2025 |
|
|
2024 |
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||
Deferred tax assets: |
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|
|
|
|
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||
Capitalized research costs |
|
$ |
8,499 |
|
|
$ |
7,666 |
|
Warranty reserves |
|
|
6,031 |
|
|
|
6,802 |
|
Accrued selling |
|
|
2,210 |
|
|
|
2,755 |
|
Intangible asset basis difference |
|
|
1,923 |
|
|
|
2,549 |
|
Unrecognized tax benefits |
|
|
1,637 |
|
|
|
1,543 |
|
Accrued compensation |
|
|
912 |
|
|
|
445 |
|
Net operating loss |
|
|
1,003 |
|
|
|
1,081 |
|
Stock compensation |
|
|
713 |
|
|
|
559 |
|
Other |
|
|
1,972 |
|
|
|
2,628 |
|
Total deferred tax assets |
|
|
24,900 |
|
|
|
26,028 |
|
Valuation allowance |
|
|
— |
|
|
|
(2 |
) |
Total deferred tax assets, net of the valuation allowance |
|
|
24,900 |
|
|
|
26,026 |
|
Deferred tax liabilities: |
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|
|
|
|
|
||
Depreciation |
|
|
(4,983 |
) |
|
|
(6,220 |
) |
Other |
|
|
(1,003 |
) |
|
|
(1,222 |
) |
Total deferred tax liabilities |
|
|
(5,986 |
) |
|
|
(7,442 |
) |
Net deferred tax assets |
|
$ |
18,914 |
|
|
$ |
18,584 |
|
As of June 30, 2025, the Company has gross state net operating loss (NOL) carryforwards of $21.9 million. Of this amount, $0.3 million expire in varying years ranging from June 30, 2038 to June 30, 2039, while the remainder can be carried forward indefinitely.
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued amounts for interest and penalties, is as follows:
|
|
2025 |
|
|
2024 |
|
||
Balance at July 1 |
|
$ |
6,861 |
|
|
$ |
6,232 |
|
Additions based on tax positions related to the current year |
|
|
348 |
|
|
|
852 |
|
Additions for tax positions of prior years |
|
|
— |
|
|
|
27 |
|
Reductions for tax positions of prior years |
|
|
(356 |
) |
|
|
(250 |
) |
Balance at June 30 |
|
$ |
6,853 |
|
|
$ |
6,861 |
|
Of this total, $5.9 million as of June 30, 2025 and 2024, represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The total amount of interest and penalties recorded in the consolidated statements of operations for the years ended June 30, 2025, 2024, and 2023, was an expense of $0.4 million, $0.5 million, and $0.2 million, respectively. The amounts accrued for interest and penalties at June 30, 2025 and 2024 were $2.2 million and $1.7 million, respectively, and are presented in unrecognized tax positions on the accompanying consolidated balance sheets.
In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of June 30, 2025, the Company has not made a current provision for U.S. or additional foreign withholding taxes on investments in foreign
subsidiaries that are indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances.
The Company and its subsidiaries are subject to U.S. federal income tax, as well as various other state income taxes and foreign income taxes. The federal income tax returns for the years ended June 30, 2022 through 2024 are subject to examination by the Internal Revenue Service. For state purposes, the statutes of limitation vary by jurisdiction. With few exceptions, the Company is no longer subject to examination by taxing authorities for years before June 30, 2022. The Company expects the total amount of unrecognized benefits to increase by approximately $0.1 million in the next twelve months. The Company records unrecognized tax benefits as liabilities and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.
Recent Tax Legislation
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing various tax provisions that may affect effective corporate income tax rates and related deferred tax positions. The Company is currently assessing the potential impact of the OBBBA on its consolidated financial statements. As the provisions of the OBBBA are scheduled to be enacted in the first quarter of fiscal year 2026, the Company will recognize the effects of any such changes in its income tax provision for the quarter ending September 30, 2025, in accordance with Accounting Standards Codification 740. No adjustments related to the OBBBA have been recorded as of June 30, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 27, 2025 | Showing above |
| 2024 | Aug 30, 2024 | |
| 2023 | Aug 30, 2023 | |
| 2022 | Sep 9, 2022 | |
| 2021 | Sep 2, 2021 | |
| 2020 | Sep 11, 2020 | |
| 2019 | Sep 13, 2019 | |
| 2018 | Sep 7, 2018 | |
| 2017 | Sep 8, 2017 | |
| 2016 | Sep 9, 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.