Mastech Digital, Inc. Income Taxes Disclosure
The components of income before income taxes as shown in the accompanying Consolidated Statement of Operations, consisted of the following for the years ended December 31, 2025, 2024 and 2023:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(Amounts in thousands) |
|
|||||||||
Income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
$ |
(1,574 |
) |
|
$ |
1,556 |
|
|
$ |
(6,222 |
) |
Foreign |
|
|
2,636 |
|
|
|
2,868 |
|
|
|
(2,809 |
) |
Income (loss) before income taxes |
|
$ |
1,062 |
|
|
$ |
4,424 |
|
|
$ |
(9,031 |
) |
The provision (benefit) for income taxes, as shown in the accompanying Consolidated Statement of Operations, consisted of the following for the years ended December 31, 2025, 2024 and 2023:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(Amounts in thousands) |
|
|||||||||
Current provision (benefit): |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
506 |
|
|
$ |
672 |
|
|
$ |
(473 |
) |
State |
|
|
180 |
|
|
|
93 |
|
|
|
(23 |
) |
Foreign |
|
|
1,036 |
|
|
|
762 |
|
|
|
316 |
|
Total current provision (benefit) |
|
|
1,722 |
|
|
|
1,527 |
|
|
|
(180 |
) |
Deferred provision (benefit): |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(609 |
) |
|
|
(445 |
) |
|
|
(648 |
) |
State |
|
|
(108 |
) |
|
|
(52 |
) |
|
|
(133 |
) |
Foreign |
|
|
(535 |
) |
|
|
6 |
|
|
|
(1,001 |
) |
Total deferred provision (benefit) |
|
|
(1,252 |
) |
|
|
(491 |
) |
|
|
(1,782 |
) |
Change in valuation allowance |
|
|
(17 |
) |
|
|
(14 |
) |
|
|
69 |
|
Total provision (benefit) for income taxes |
|
$ |
453 |
|
|
$ |
1,022 |
|
|
$ |
(1,893 |
) |
The reconciliation of income taxes computed using our statutory U.S. income tax rate and the provision (benefit) for income taxes for the years ended December 31, 2025, 2024 and 2023 were as follows:
|
|
Years Ended December 31, |
|
|||||||||||||||||||||
(Amounts in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
$ |
223 |
|
|
|
21.0 |
% |
|
$ |
929 |
|
|
|
21.0 |
% |
|
$ |
(1,897 |
) |
|
|
(21.0 |
)% |
|
State income taxes, net of federal tax benefit |
|
|
72 |
|
|
|
6.8 |
|
|
|
21 |
|
|
|
0.5 |
|
|
|
(198 |
) |
|
|
(2.2 |
) |
Shortfalls in expected tax benefits from stock options/RSUs |
|
|
291 |
|
|
|
27.4 |
|
|
|
102 |
|
|
|
2.3 |
|
|
|
220 |
|
|
|
2.4 |
|
Worthless stock deduction |
|
|
— |
|
|
|
— |
|
|
|
(248 |
) |
|
|
(5.6 |
) |
|
|
— |
|
|
|
— |
|
Executive compensation disallowed |
|
|
234 |
|
|
|
22.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Return to provision and other discrete items |
|
|
(385 |
) |
|
|
(36.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Difference in tax rate on foreign earnings/other |
|
|
35 |
|
|
|
3.3 |
|
|
|
232 |
|
|
|
5.2 |
|
|
|
(87 |
) |
|
|
(1.0 |
) |
Change in valuation allowance |
|
|
(17 |
) |
|
|
(1.6 |
) |
|
|
(14 |
) |
|
|
(0.3 |
) |
|
|
69 |
|
|
|
0.8 |
|
|
|
$ |
453 |
|
|
|
42.7 |
% |
|
$ |
1,022 |
|
|
|
23.1 |
% |
|
$ |
(1,893 |
) |
|
|
(21.0 |
)% |
The components of the deferred tax assets and liabilities were as follows:
|
|
At December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(Amounts in thousands) |
|
|||||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for credit losses |
|
$ |
61 |
|
|
$ |
100 |
|
Accrued vacation and bonuses |
|
|
603 |
|
|
|
403 |
|
Stock-based compensation expense |
|
|
2,248 |
|
|
|
2,316 |
|
Acquisition-related transaction costs |
|
|
404 |
|
|
|
455 |
|
Severance liabilities |
|
|
410 |
|
|
|
448 |
|
Net operating losses |
|
|
1,008 |
|
|
|
452 |
|
Other |
|
|
82 |
|
|
|
157 |
|
Total deferred tax assets |
|
|
4,816 |
|
|
|
4,331 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
536 |
|
|
|
776 |
|
Depreciation, intangibles and contingent consideration |
|
|
1,262 |
|
|
|
1,805 |
|
Total deferred tax liabilities |
|
|
1,798 |
|
|
|
2,581 |
|
Valuation allowance |
|
|
(435 |
) |
|
|
(452 |
) |
Net deferred tax asset (liability) |
|
$ |
2,583 |
|
|
$ |
1,298 |
|
For the three years ending on December 31, 2025, the Company had no unrecognized tax benefits related to uncertain tax positions.
We evaluate deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted GAAP accounting guidance requires us to assess whether valuation allowances should be established against deferred tax asset based on all available evidence, both positive and negative using a "more likely than not' standard. Our assessment considers, among other things, the nature of cumulative losses, forecast of future profitability; the duration of statutory carry-forward periods and tax planning alternatives. At December 31, 2025 and 2024, our valuation allowance was comprised of net operating loses in Ireland and the United Kingdom totaled approximately $435,000 and $452,0000, respectively. Our valuation allowances reflects net operating losses which may not be realized in the future.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 18, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 27, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 16, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Mar 29, 2019 | |
| 2017 | Mar 23, 2018 | |
| 2016 | Mar 24, 2017 | |
| 2015 | Mar 25, 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.