MARTEN TRANSPORT LTD Income Taxes Disclosure

5. Income Taxes

 

We adopted FASB ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, for the year ended December 31, 2025. The standard expanded disclosures related to the effective tax rate reconciliation, cash income taxes paid by jurisdiction, and income before income taxes by jurisdiction. We adopted the standard on a prospective basis. The impact of this standard is limited to financial statement disclosures. Prior-period disclosures were not recast.

 

Income before income taxes by jurisdiction consisted of the following:

 

(In thousands)		2025
Domestic		$	24,331
Foreign			46
Total income before income taxes		$	24,377

 

The components of income taxes expense consisted of the following:

 

(In thousands)		2025				2024				2023
Current:
Federal		$	21,003			$	21,254			$	33,416
State			3,234				3,598				4,706
Foreign			14				-				-
Total current			24,251				24,852				38,122
Deferred:
Federal			(14,809	)			(12,748	)			(13,526	)
State			(2,509	)			(2,680	)			(1,053	)
Foreign			-				-				-
Total deferred			(17,318	)			(15,428	)			(14,579	)
Total expense		$	6,933			$	9,424			$	23,543

 

Income taxes expense by jurisdiction consisted of the following:

 

(In thousands)		2025
Federal		$	6,194
State			725
Foreign			14
Total income taxes expense		$	6,933

 

The federal statutory income tax rate is reconciled to the effective income tax rate after the adoption of FASB ASU 2023-09 as follows:

 

(Dollars in thousands)		2025
U.S statutory federal tax rate		$	5,119				21	%
State and local income taxes, net of federal income tax effects			572				2
Nontaxable or non-deductible items:
Non-deductible per diem expenses			1,289				5
Other			185				1
Tax credits			(272	)			(1	)
Other adjustments			40				-
Effective tax rate		$	6,933				28	%

 

States comprising a substantial portion of state and local income tax expense in 2025, in the aggregate representing at least 50%, included Arkansas, California, Georgia, Florida, Texas and Wisconsin.

 

The federal statutory income tax rate is reconciled to the effective income tax rate prior to the adoption of FASB ASU 2023-09 as follows:

 

		2024				2023
Federal statutory income tax rate			21	%			21	%
Increase in taxes arising from state income taxes, net of federal income tax benefit			2				3
Per diem and other non-deductible expenses			4				2
Federal tax credits			(1	)			-
Other, net			-				(1	)
Effective tax rate			26	%			25	%

 

As of December 31, the net deferred tax liability consisted of the following:

 

(In thousands)		2025				2024
Deferred tax assets:
Reserves and accrued liabilities		$	11,881			$	12,347
Other			1,495				1,454
			13,376				13,801
Deferred tax liabilities:
Depreciation			99,956				117,595
Prepaid expenses			3,136				3,240
			103,092				120,835
Net deferred tax liability		$	89,716			$	107,034

 

We have not provided a valuation allowance against deferred tax assets at December 31, 2025 or 2024. We believe the deferred tax assets will be realized principally through future reversals of existing taxable temporary differences (deferred tax liabilities) and future taxable income.

 

Income taxes paid, net of refunds received, by jurisdiction consisted of the following:

 

(In thousands)		2025
Federal		$	22,850
State (aggregate)			4,157
Foreign			14
Total income taxes paid		$	27,021

 

State income taxes paid are presented in the aggregate, as no individual state represented 5% or more of total income taxes paid in 2025. Foreign income taxes paid relate to our Mexican subsidiary.

 

Our reserves for unrecognized tax benefits were $327,000 as of December 31, 2025 and $386,000 as of December 31, 2024. The $59,000 decrease in the amount reserved relates to current period tax positions. If recognized, $259,000 of the unrecognized tax benefits as of December 31, 2025 would favorably impact our effective tax rate. Potential interest and penalties related to unrecognized tax benefits of $14,000 were recognized in our financial statements as of each of December 31, 2025 and 2024.

 

The federal statute of limitations remains open for 2022 and forward. We file tax returns in numerous state jurisdictions with varying statutes of limitations.