NWPX Infrastructure, Inc. Income Taxes Disclosure

16.	INCOME TAXES:

 

The United States and foreign components of Income before income taxes are as follows (in thousands):

 

		Year Ended December 31,
		2025				2024				2023
United States		$	45,194			$	40,626			$	27,814
Foreign			1,284				1,745				1,465
Total		$	46,478			$	42,371			$	29,279

 

The components of Income tax expense are as follows (in thousands):

 

		Year Ended December 31,
		2025				2024				2023
Current:
Federal		$	5,031			$	8,308			$	6,817
State			1,605				2,104				1,519
Foreign			348				286				289
Total current income tax expense			6,984				10,698				8,625
Deferred:
Federal			3,865				(2,127	)			(612	)
State			210				(419	)			195
Foreign			8				13				(1	)
Total deferred income tax expense (benefit)			4,083				(2,533	)			(418	)
Total:
Federal			8,896				6,181				6,205
State			1,815				1,685				1,714
Foreign			356				299				288
Total income tax expense		$	11,067			$	8,165			$	8,207

 

The difference between the Company’s effective income tax rate and the federal statutory income tax rate is explained as follows (dollar amounts in thousands):

 

		Year Ended December 31,
		2025								2024								2023
United States Federal statutory income tax rate		$	9,760				21.0	%		$	8,902				21.0	%		$	6,148				21.0	%
State and local income taxes, net of federal income tax effect (1)			1,478				3.2				1,244				3.0				1,396				4.8
Foreign tax effects			86				0.2				(68	)			(0.2	)			(21	)			(0.1	)
Effects of cross-border tax laws			(27	)			(0.1	)			(40	)			(0.1	)			(17	)			(0.1	)
Tax credits			-				-				2				-				-				-
Nontaxable or nondeductible items:
Excess officer compensation			868				1.9				345				0.8				460				1.6
Other nondeductible expenses (benefits)			(265	)			(0.6	)			(2	)			-				51				0.2
Changes in unrecognized income tax benefits			(663	)			(1.4	)			(2,152	)			(5.1	)			201				0.7
Other			(170	)			(0.4	)			(66	)			(0.1	)			(11	)			(0.1	)
Effective income tax rate		$	11,067				23.8	%		$	8,165				19.3	%		$	8,207				28.0	%

 

(1)

In 2025 and 2024, state and local income taxes in California comprise the majority of the state and local income taxes, net of federal income tax effect category. In 2023, state and local income taxes in Texas and Oregon comprise the majority of the state and local income taxes, net of federal income tax effect category.

 

The income tax effect of temporary differences that give rise to significant portions of deferred income tax assets and liabilities is presented below (in thousands):

 

		December 31,
		2025				2024
Deferred income tax assets:
Accrued employee benefits		$	5,109			$	4,237
Inventories			267				373
Trade receivable, net			766				536
Net operating loss carryforwards			3,059				2,733
Tax credit carryforwards			2,611				2,628
Contract assets, net			1,100				680
Intangible assets			165				-
Other			1,277				2,476
			14,354				13,663
Valuation allowance			(6,072	)			(5,709	)
			8,282				7,954
Deferred income tax liabilities:
Property and equipment			(17,531	)			(12,804	)
Intangible assets			-				(312	)
Goodwill			(2,127	)			(1,692	)
Prepaid expenses			(997	)			(1,238	)
			(20,655	)			(16,046	)
Net deferred income tax liabilities		$	(12,373	)		$	(8,092	)
Amounts are presented in the Consolidated Balance Sheets as follows:
Deferred income tax assets, included in Other assets		$	111			$	205
Deferred income taxes			(12,484	)			(8,297	)
Net deferred income tax liabilities		$	(12,373	)		$	(8,092	)

 

In assessing the ability to realize deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, taxable income in carryback periods, and tax planning strategies in making this assessment. The Company believes it is more likely than not it will realize the benefits of its deductible differences as of December 31, 2025, net of any valuation allowance. As of December 31, 2025, the Company continues to maintain a valuation allowance on federal tax credits and select state jurisdictions.

 

As of December 31, 2025, the Company had approximately $0.2 million of federal income tax credit carryforwards, which expire in 2026. As of December 31, 2025, the Company also had approximately $12.4 million of state net operating loss carryforwards, which expire on various dates between 2026 and 2036, and state income tax credit carryforwards of $4.3 million, which began to expire in 2025. As of December 31, 2025, the Company also had approximately $8.1 million of foreign net operating loss carryforwards, which expire on various dates between 2026 and 2033.

 

The Company files income tax returns in the United States Federal jurisdiction, in a limited number of foreign jurisdictions, and in many state jurisdictions. With few exceptions, the Company is no longer subject to United States Federal, state, or foreign income tax examinations for years before 2021.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has evaluated the OBBBA and implemented provisions effective 2025, which did not have a material impact on its effective income tax rate for 2025. Certain provisions of the OBBBA will be effective in future periods and are also expected to have an immaterial impact on the consolidated financial statements. The Company will continue to evaluate the full impact of these legislative changes as additional guidance becomes available.

 

A summary of the changes in the unrecognized income tax benefits associated with uncertain income tax positions is presented below (in thousands):

 

		Year Ended December 31,
		2025				2024				2023
Unrecognized income tax benefits, beginning of year		$	2,532			$	4,736			$	4,472
Decreases for lapse in statute of limitations			(1,024	)			(2,277	)			-
Increases for positions taken in the current year			279				-				-
Increases for positions taken in prior years			69				73				264
Unrecognized income tax benefits, end of year		$	1,856			$	2,532			$	4,736

 

During the years ended December 31, 2025 and 2024, the Company recorded a reduction in the uncertain income tax positions due to the lapse of the statute of limitations of $1.0 million and $2.3 million, respectively. Effectively all of the unrecognized income tax benefits would affect the Company’s effective income tax rate if recognized at some point in the future.

 

The Company recognizes interest and penalties related to uncertain income tax positions in Income tax expense. As of December 31, 2025 and 2024, the Company had approximately $0 and $0.2 million, respectively, of accrued interest related to uncertain income tax positions. Total interest for uncertain income tax positions did not change materially in 2025, 2024, or 2023.