RUSH ENTERPRISES INC \TX\ Income Taxes Disclosure

13.	INCOME TAXES:

 

The significant components of the tax provision are summarized as follows (in thousands):

 

		Year Ended December 31,
		2025				2024				2023
Income before income taxes:
Domestic		$	330,391			$	392,253			$	455,288
Foreign			15,475				5,562				6,773
Total			345,866				397,815				462,061
Current provision
Federal		$	38,483			$	62,358			$	87,270
State			8,445				9,975				16,864
Foreign			4,083				702				2,265
Total			51,011				73,035				106,399
Deferred provision (benefit)
Federal			26,809				15,283				7,617
State			1,923				3,752				505
Foreign			85				775				(521	)
Total			28,817				19,810				7,601
Provision for income taxes		$	79,828			$	92,845			$	114,000

 

 

A reconciliation of taxes based on the federal statutory rates to the income tax provision (benefits) for income taxes are summarized as follows (in thousands):

 

		Year Ended December 31,
		2025								2024								2023
		Amount				Rate				Amount				Rate				Amount				Rate
Income taxes at the federal statutory rate		$	72,631				21.0	%		$	83,540				21.0	%		$	97,032				21.0	%
State income taxes, net of federal benefit (a)			8,498				2.5				10,030				2.5				14,120				3.1
Foreign Tax Effects			896				0.3				271				0.1				266				0.1
Effect of Cross-Border Tax Laws			34				–				845				0.2				–				–
Tax Credits			(2,913	)			(0.8	)			(141	)			–				(102	)			–
Tax effect of permanent differences
Share-based payments awards			(4,376	)			(1.3	)			(9,916	)			(2.5	)			(4,195	)			(1.0	)
Executive compensation (b)			−				−				4,402				1.1				−				−
Other			5,256				1.5				2,442				0.6				5,653				1.2
Changes in Unrecognized Tax Benefits			(33	)			–				1,426				0.3				1,187				0.3
Other, net			(165	)			(0.1	)			(54	)			–				39				–
Income tax provision		$	79,828				23.1	%		$	92,845				23.3	%		$	114,000				24.7	%

 

(a) State taxes in California, Illinois and Texas made up the majority (greater than 50 percent) of the tax effect in this category for each year presented.

(b)	The executive compensation limitations in years 2025 & 2023 are below the disclosure threshold and are included in other.

 

The following summarizes the components of net deferred income tax liabilities included in the balance sheet (in thousands):

 

		December 31,
		2025				2024
Deferred income tax (assets) liabilities:
Inventory		$	(6,721	)		$	(5,547	)
Accounts receivable			(372	)			(517	)
Finance lease obligations			(28,795	)			(30,696	)
Finance and operating leases			(30,476	)			(27,522	)
Stock options			(9,984	)			(8,790	)
Accrued liabilities			(7,008	)			(5,604	)
State net operating loss carry forward			(2,828	)			(1,689	)
State tax credit			223				29
Other			(6,184	)			(6,108	)
Difference between book and tax basis- Operating lease assets			29,895				26,970
Difference between book and tax basis- Depreciation and amortization			268,821				238,390
			206,571				178,916
Valuation allowance			1,162				−
Net deferred income tax liability		$	207,733			$	178,916

 

As of December 31, 2025, the Company had approximately $42.8 million in state net operating loss carry forwards that expire from 2030 to 2044, which result in a deferred tax asset of approximately $1.7 million. The Company has evaluated whether its state net operating losses are realizable and has recorded a valuation allowance against them. The valuation allowance increased $1.1 million over the prior year ending December 31, 2024.

 

The Company had unrecognized income tax benefits totaling $7.9 million ($6.2 million rate impact after net of federal benefit) as a component of accrued liabilities as of December 31, 2025, and $8.0 million ($6.3 million rate impact after net of federal benefit) as of December 31, 2024, the total of which, if recognized, the net of federal tax benefit would impact the Company’s effective tax rate. An unfavorable settlement would require a charge to income tax expense and a favorable resolution would be recognized as a reduction to income tax expense. The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense.  During the years ended December 31, 2025, 2024 and 2023, the Company recognized approximately $95,500, $197,700, and $86,200 in interest expense. No amounts were accrued for penalties. The Company had approximately $625,000, $530,000 and $389,000 of interest accrued as of December 31, 2025, 2024 and 2023, respectively.

 

Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested. Upon repatriation of those earnings in the form of dividends or otherwise, the Company may be subject to state and local taxes, and/or withholding taxes payable to the various foreign countries. The Company expects to be able to take a 100% dividends received deduction to offset any U.S. federal income tax liability on the distribution of untaxed earnings and profits.

 

As of December 31, 2025, the tax years ended December 31, 2022 through 2025 remained subject to audit by federal tax authorities and the tax years ended December 31, 2021 through 2025, remained subject to audit by state tax authorities.

 

The table below presents the reconciliation of the change in the unrecognized tax benefits (in thousands):

 

		2025				2024				2023
Unrecognized tax benefits at beginning of period		$	8,063			$	6,771			$	5,377
Gross increases – tax positions in current year			1,349				1,937				2,582
Reductions due to lapse of statute of limitations			(1,512	)			(645	)			(1,188	)
Unrecognized tax benefits at end of period		$	7,900			$	8,063			$	6,771

 

The table below presents detail to supplemental disclosure of cash flow for Income Taxes paid, net (in thousands):

 

		2025				2024				2023
Federal		$	65,584			$	63,165			$	88,945
State			8,126				12,034				15,533
Foreign			3,815				829				2,394
Total		$	77,525			$	76,028			$	106,872