TRIMAS CORPTRS
TRIMAS CORP Income Taxes Disclosure
The Company's income before income taxes and income tax expense (benefit), each by tax jurisdiction, consists of the following (dollars in thousands):
| Year ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| Income before income taxes: | ||||||||||||||||||||
| Domestic | $ | 3,320 | $ | 20,660 | $ | 56,750 | ||||||||||||||
| Foreign | 26,720 | 29,930 | 30,920 | |||||||||||||||||
| Total income before income taxes | $ | 30,040 | $ | 50,590 | $ | 87,670 | ||||||||||||||
| Current income tax expense: | ||||||||||||||||||||
| Federal | $ | 1,000 | $ | 2,740 | $ | 13,300 | ||||||||||||||
| State and local | 250 | 670 | 3,470 | |||||||||||||||||
| Foreign | 7,080 | 8,690 | 6,170 | |||||||||||||||||
| Total current income tax expense | 8,330 | 12,100 | 22,940 | |||||||||||||||||
| Deferred income tax expense (benefit): | ||||||||||||||||||||
| Federal | (900) | 1,800 | (1,780) | |||||||||||||||||
| State and local | 100 | 150 | 50 | |||||||||||||||||
| Foreign | (1,740) | (3,820) | 290 | |||||||||||||||||
| Total deferred income tax expense (benefit) | (2,540) | (1,870) | (1,440) | |||||||||||||||||
| Income tax expense | $ | 5,790 | $ | 10,230 | $ | 21,500 | ||||||||||||||
The components of deferred taxes are as follows (dollars in thousands):
| December 31, 2024 | December 31, 2023 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Accounts receivable | $ | 940 | $ | 1,770 | ||||||||||
| Inventories | 6,810 | 7,260 | ||||||||||||
| Accrued liabilities and other long-term liabilities | 20,560 | 16,780 | ||||||||||||
| Operating lease liability | 10,320 | 10,690 | ||||||||||||
| Research and experimentation costs | 7,480 | 6,530 | ||||||||||||
| Tax loss and credit carryforwards | 29,260 | 28,880 | ||||||||||||
| Other | (190) | (470) | ||||||||||||
| Gross deferred tax asset | 75,180 | 71,440 | ||||||||||||
| Valuation allowances | (16,430) | (15,960) | ||||||||||||
| Net deferred tax asset | 58,750 | 55,480 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property and equipment | (27,910) | (30,300) | ||||||||||||
| Right of use asset | (9,670) | (10,150) | ||||||||||||
| Goodwill and other intangible assets | (30,130) | (27,580) | ||||||||||||
| Investment in foreign affiliates, including withholding tax | (390) | (510) | ||||||||||||
| Gross deferred tax liability | (68,100) | (68,540) | ||||||||||||
| Net deferred tax liability | $ | (9,350) | $ | (13,060) | ||||||||||
The Company recognizes a valuation allowance for the deferred tax asset associated with its foreign tax credits due to the uncertainty in the ability to utilize these credits in future years. The increase in the consolidated valuation allowance is primarily driven by an increase in the cumulative foreign tax credit carryover.
The following is a reconciliation of income tax expense computed at the U.S. federal statutory rate to income tax expense allocated to income before income taxes (dollars in thousands):
| Year ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| U.S. federal statutory rate | 21 | % | 21 | % | 21 | % | ||||||||||||||
| Tax at U.S. federal statutory rate | $ | 6,310 | $ | 10,610 | $ | 18,380 | ||||||||||||||
| State and local taxes, net of federal tax benefit | 200 | 710 | 2,790 | |||||||||||||||||
| Differences in statutory foreign tax rates | 2,020 | 2,980 | 1,150 | |||||||||||||||||
| Change in recognized tax benefits | (420) | (130) | (600) | |||||||||||||||||
| Share-based compensation | 500 | 250 | 680 | |||||||||||||||||
| Tax credits and incentives | (1,530) | (1,570) | (1,260) | |||||||||||||||||
| Net change in valuation allowance | (1,140) | (2,700) | 340 | |||||||||||||||||
| Nondeductible compensation | (430) | 560 | 990 | |||||||||||||||||
| Other, net | 280 | (480) | (970) | |||||||||||||||||
| Income tax expense | $ | 5,790 | $ | 10,230 | $ | 21,500 | ||||||||||||||
The Company has recorded deferred tax assets on $24.6 million of various state operating loss carryforwards and $92.7 million of various foreign operating loss carryforwards. The majority of the state tax loss carryforwards expire between 2026 and 2032 and the majority of the foreign losses have indefinite carryforward periods.
The Company has not made a provision for U.S. or additional foreign withholding taxes related to investments in foreign subsidiaries that are indefinitely reinvested since any excess of the amount for financial reporting over the tax basis in these investments is not significant as of December 31, 2024.
Unrecognized Tax Benefits
The Company had $0.6 million and $0.8 million of unrecognized tax benefits ("UTBs") as of December 31, 2024 and 2023, respectively. If the UTBs were recognized, the impact to the Company's effective tax rate would be to reduce reported income tax expense for the years ended December 31, 2024 and 2023 by $0.6 million and $1.0 million, respectively.
A reconciliation of the change in the UTBs for the years ended December 31, 2024 and 2023 is as follows (dollars in thousands):
| Unrecognized Tax Benefits | ||||||||
| Balance at December 31, 2022 | $ | 1,110 | ||||||
| Tax positions related to current year: | ||||||||
| Additions | 140 | |||||||
| Tax positions related to prior years: | ||||||||
| Additions | — | |||||||
| Reductions | (20) | |||||||
| Settlements | — | |||||||
| Lapses in the statutes of limitations | (400) | |||||||
| Balance at December 31, 2023 | $ | 830 | ||||||
| Tax positions related to current year: | ||||||||
| Additions | 120 | |||||||
| Tax positions related to prior years: | ||||||||
| Additions | — | |||||||
| Reductions | (20) | |||||||
| Settlements | — | |||||||
| Lapses in the statutes of limitations | (340) | |||||||
| Balance at December 31, 2024 | $ | 590 | ||||||
In addition to the UTBs summarized above, the Company has recorded $0.3 million and $0.4 million in potential interest and penalties associated with uncertain tax positions as of December 31, 2024 and 2023, respectively.
The Company is subject to U.S. federal, state and local, and certain non-U.S. income tax examinations for tax years 2015 through 2024. In addition, there are currently several state and foreign income tax examinations in process. The Company does not believe that the results of these examinations will have a significant impact on the Company's tax position or its effective tax rate.
Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to UTBs and is not aware of, nor does it anticipate, any subsequent events that could have a significant impact on the Company's financial position during the next twelve months.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.