SMITH MIDLAND CORP Income Taxes Disclosure
6. INCOME TAXES
Income tax expense (benefit) is comprised of the following (in thousands):
|
| December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Federal: |
|
|
|
|
|
| ||
Current |
| $ | 2,703 |
|
| $ | 2,660 |
|
Deferred |
|
| 728 |
|
|
| (1,016 | ) |
Total Federal |
|
| 3,431 |
|
|
| 1,644 |
|
State: |
|
|
|
|
|
|
|
|
Current |
|
| 851 |
|
|
| 640 |
|
Deferred |
|
| 238 |
|
|
| (141 | ) |
Total State |
|
| 1,089 |
|
|
| 499 |
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit) |
| $ | 4,520 |
|
| $ | 2,143 |
|
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updated income tax disclosure requirements related to the income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The Company has applied ASU 2023-09 prospectively beginning in 2025. As such, our effective tax rate reconciliation for 2025 is reflected in a new table following the requirements set forth in ASU 2023-09 (in thousands), while the 2024 effective tax rate reconciliations are presented in the historical format as required by U.S. GAAP (in thousands).
|
| 2025 |
| |||||
Income taxes at U.S. Federal Statutory Tax Rate |
| $ | 3,575 |
|
|
| 21.0 | % |
Nontaxable or Nondeductible Items |
|
|
|
|
|
|
|
|
Other |
|
| 27 |
|
|
| 0.2 | % |
State and Local Income Tax, Net of Federal (National) Income Tax Effect (1) |
|
| 893 |
|
|
| 21.0 | % |
Other Adjustments |
|
| 25 |
|
|
| 0.1 | % |
Effective tax rate |
| $ | 4,520 |
|
|
| 26.5 | % |
| (1) | State taxes in Virginia and the District of Columbia (DC) made up the majority (greater than 50 percent) of the tax effect in this category. |
The following table reconciles the U.S. statutory tax rate to our effective income tax rate for the years ended December 31, 2024, prior to the adoption of ASU 2023-09:
|
| December 31, 2024 |
| |||||
Income taxes at statutory rate |
| $ | 2,074 |
|
|
| 21.0 | % |
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
State income taxes, net of federal benefit |
|
| 359 |
|
|
| 3.6 | % |
Stock compensation |
|
| (175 | ) |
|
| (1.8 | )% |
Provision-to-return |
|
| (101 | ) |
|
| (1.0 | )% |
Other |
|
| (14 | ) |
|
| (0.1 | )% |
|
|
|
|
|
|
|
|
|
Income tax expense |
| $ | 2,143 |
|
|
| 21.7 | % |
|
| December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ | 193 |
|
| $ | 224 |
|
Allowance for credit losses and doubtful accounts |
|
| 139 |
|
|
| 278 |
|
Accrued vacation |
|
| 74 |
|
|
| 72 |
|
Deferred revenue |
|
| 3,823 |
|
|
| 2,588 |
|
Equity Compensation |
|
| 21 |
|
|
| 6 |
|
163 (j) interest expense limitation |
|
| — |
|
|
| 16 |
|
Lease liability |
|
| 23 |
|
|
| 27 |
|
Other |
|
| 147 |
|
|
| 209 |
|
Gross deferred tax assets |
|
| 4,420 |
|
|
| 3,420 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Retainage |
|
| (325 | ) |
|
| (389 | ) |
Fixed assets |
|
| (5,286 | ) |
|
| (3,371 | ) |
Prepaid expenses |
|
| (230 | ) |
|
| (112 | ) |
Amortization – intangibles |
|
| (16 | ) |
|
| (15 | ) |
Right-of-use asset |
|
| (23 | ) |
|
| (27 | ) |
Gross deferred tax liabilities |
|
| (5,880 | ) |
|
| (3,914 | ) |
|
|
|
|
|
|
|
|
|
Net deferred tax liability |
| $ | (1,460 | ) |
| $ | (494 | ) |
The details of cash tax payments for the year ended December 31, 2025 (net of refunds) are set forth below (in thousands).
Disclosure of Income Taxes Paid
Federal |
| $ | 2,693 |
|
Virginia |
|
| 288 |
|
District of Columbia (DC) |
|
| 206 |
|
Maryland |
|
| 182 |
|
Other States |
|
| 121 |
|
2025 Total Cash Paid for Income Taxes (Net of Refunds) |
| $ | 3,490 |
|
As of December 31, 2025 and 2024, the Company had approximately $5,038 and $5,490 (in thousands), respectively, of state net operating losses (NOLs) available to offset future state taxable income. The state NOLs begin expiring at various times between 2028 and 2037. The Company is no longer subject to U.S. or state tax examinations for the years prior to 2022. The Company does not have any uncertain tax positions as of December 31, 2025, and believes there will be no material changes in unrecognized tax positions over the next twelve months.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 14, 2026 | Showing above |
| 2024 | May 27, 2025 | |
| 2023 | May 23, 2024 | |
| 2022 | Apr 17, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 30, 2021 | |
| 2019 | Mar 26, 2020 | |
| 2018 | Mar 26, 2019 | |
| 2017 | Mar 29, 2018 | |
| 2016 | Mar 30, 2017 | |
| 2015 | Mar 28, 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.