TRAVELZOOTZOO
TRAVELZOO Income Taxes Disclosure
Income Taxes
The components of income before income tax expense are as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. | $ | 5,713 | $ | 12,747 | |||||||
| Foreign | 1,944 | 6,339 | |||||||||
| $ | 7,657 | $ | 19,086 | ||||||||
Income tax expense consists of current and deferred components, further categorized by federal, state and foreign jurisdictions, as shown below. The current provision is generally that portion of income tax expense that is currently payable to the taxing authorities. The Company makes estimated payments of these amounts during the year. The deferred tax provision results from changes in the Company’s deferred tax assets (future deductible amounts) and tax liabilities (future taxable amounts), which are presented in the table below:
| Current | Deferred | Total | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||
| Federal | $ | 1,871 | $ | (233) | $ | 1,638 | |||||||||||
| State | 371 | (31) | 340 | ||||||||||||||
| Foreign | 995 | (294) | 701 | ||||||||||||||
| $ | 3,237 | $ | (558) | $ | 2,679 | ||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||
| Federal | $ | 3,044 | $ | (471) | $ | 2,573 | |||||||||||
| State | 877 | (19) | 858 | ||||||||||||||
| Foreign | 2,001 | (28) | 1,973 | ||||||||||||||
| $ | 5,922 | $ | (518) | $ | 5,404 | ||||||||||||
Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rates applicable to the Company’s level of pretax income as a result of the following (in thousands):
| Year Ended December 31, | |||||
| 2024 | |||||
| Federal tax at statutory rates | $ | 4,005 | |||
| State taxes, net of federal income tax benefit | 520 | ||||
| Uncertain tax positions | 263 | ||||
| Foreign income taxed at different rates | 586 | ||||
| Stock-based compensation | (90) | ||||
| Other | 120 | ||||
| Total income tax expense | $ | 5,404 | |||
The effective tax rate of the Company's provision (benefit) for income taxes under ASU 2023-09 differs from the federal statutory rate as follows (in thousands):
| December 31, | |||||||||||
| 2025 | |||||||||||
| US Federal Statutory Tax Rate | $ | 1,608 | 21.00 | % | |||||||
| Domestic federal | |||||||||||
| Nontaxable and nondeductible Items | 124 | 1.62 | % | ||||||||
| Effect of Cross-Border Tax Laws | (71) | (0.92) | % | ||||||||
| Other | 26 | 0.35 | % | ||||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect | 239 | 3.12 | % | ||||||||
| Foreign Tax Effects | |||||||||||
| Canada | |||||||||||
| Statutory rate differential | (184) | (2.41) | % | ||||||||
| Provincial tax | 354 | 4.62 | % | ||||||||
| Other | (10) | (0.13) | % | ||||||||
| Other foreign jurisdictions | 72 | 0.94 | % | ||||||||
| Worldwide changes in unrecognized tax benefits | 521 | 6.80 | % | ||||||||
| Tax Expense (Benefit) / Effective Tax Rate | 2,679 | 34.99 | % | ||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and credit carryforwards | $ | 3,548 | $ | 3,279 | |||||||
| Operating lease liabilities | 1,276 | 1,575 | |||||||||
| State income taxes | 56 | 117 | |||||||||
| Accruals and allowances | 306 | 408 | |||||||||
| Stock-based compensation | 648 | 433 | |||||||||
| Unrealized foreign exchange losses | 290 | 23 | |||||||||
| Deferred revenue | 1,005 | 616 | |||||||||
| Property, equipment and intangible assets | 267 | 266 | |||||||||
| Capital loss carryforward | 403 | 401 | |||||||||
| Total deferred tax assets | 7,799 | 7,118 | |||||||||
| Valuation allowance | (2,806) | (2,806) | |||||||||
| Total deferred tax assets net of valuation allowance | 4,993 | 4,312 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease right-of-use assets | (791) | (932) | |||||||||
| Total deferred tax liabilities | (791) | (932) | |||||||||
| Net deferred tax assets | $ | 4,202 | $ | 3,380 | |||||||
Changes in the deferred tax assets valuation allowance for the years ended December 31, 2025 and 2024 are as follows (in thousands):
| Balance at the beginning of the year | Charged (Credited) to expenses | Charged (Credited) to other account (*) | Balance at end of year | ||||||||||||||||||||
| Deferred tax assets valuation allowance | |||||||||||||||||||||||
| Year Ended December 31, 2024 | $ | 2,878 | (72) | — | $ | 2,806 | |||||||||||||||||
| Year Ended December 31, 2025 | $ | 2,806 | — | — | $ | 2,806 | |||||||||||||||||
(*) Amounts not charged (credited) to expenses are charged (credited) to stockholders' equity or deferred tax assets (liabilities).
The cash paid for income taxes (net of refunds) during the year ended December 31, 2025 was as follows (in thousands):
| December 31, | |||||
| 2025 | |||||
| Federal | $ | 228 | |||
| State and Local | |||||
| California | * | ||||
| Illinois | * | ||||
| Other | 86 | ||||
| Foreign | |||||
| Canada | 1,270 | ||||
| United Kingdom | 2,164 | ||||
| Other | 87 | ||||
| Total Tax Paid | $ | 3,835 | |||
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
As of December 31, 2025, the Company has a valuation allowance of approximately $2.4 million related to foreign net operating loss (“NOL”) carryforwards of approximately $14.6 million primarily related to the Company's Asia Pacific entities for which it is more likely than not that the tax benefit will not be realized. The amount of the valuation allowance represented an increase of approximately $1,000 over the amount recorded as of December 31, 2024, and was due to the increase of deferred tax assets and related valuation allowance for Travelzoo Asia. If not utilized, $14.6 million of the remaining foreign NOL may be carried forward indefinitely.
As of December 31, 2025, the Company has US federal NOL carryforwards of $31.2 million as a result of the transaction with MTE. If not utilized, $7.4 million may be carried forward indefinitely, and $23.8 million will expire at various times between 2032 and 2037. As of December 31, 2025, the Company has state and local NOL carryforwards of $119.9 million, which will expire at various times between 2035 and 2044. The Company has not recorded these net operating losses because an uncertain tax position has been recorded relating to them.
As of December 31, 2025, the Company is permanently reinvested in certain Non-U.S. subsidiaries and does not have a deferred tax liability related to its undistributed foreign earnings. The estimated amount of the unrecognized deferred tax liability attributed to future withholding taxes on dividend distributions of undistributed earnings for certain non-U.S. subsidiaries, which the Company intends to reinvest the related earnings indefinitely in its operations outside the U.S., is approximately $984.7 thousand at December 31, 2025.
The total amount of gross unrecognized tax benefits was $23.9 million as of December 31, 2025, of which up to $16.6 million would affect the Company’s effective tax rate if realized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits in 2024 and 2025 is as follows (in thousands):
| Gross unrecognized tax benefits balance at December 31, 2023 | 23,895 | ||||
| Increase related to current year tax positions | — | ||||
| Settlements | — | ||||
| Gross unrecognized tax benefits balance at December 31, 2024 | 23,895 | ||||
| Increase related to current year tax positions | — | ||||
| Settlements | — | ||||
| Gross unrecognized tax benefits balance at December 31, 2025 | $ | 23,895 | |||
The Company’s policy is to include provisions for interest and penalties related to uncertain and unrecognized tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income tax provision in the period that such determination is made. As of December 31, 2025, and December 31, 2024, the Company had approximately $1.59 million and $1.1 million in accrued interest, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is subject to U.S. federal and certain state tax examinations for certain years after 2020 and is subject to California tax examinations for years after 2019.
Although the timing of initiation, resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of the gross unrecognized tax benefits related to the method of computing income taxes in certain jurisdictions and losses reported on certain income tax returns could significantly change in the next 12 months. These changes may occur through settlement with the taxing authorities or the expiration of the statute of limitations on the returns filed. The Company is unable to estimate the range of possible adjustments to the balance of the gross unrecognized tax benefits.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. This legislation includes changes to U.S. federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. We have assessed the legislation and its effect on our consolidated financial statements. The enactment of the OBBBA Act did not have a material impact for the period ended December 31, 2025. We will continue to monitor any future guidance or legislative developments related to the OBBBA Act to assess its potential implications on our tax position.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 11, 2026 | Showing above |
| 2024 | Mar 19, 2025 | |
| 2023 | Mar 22, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 20, 2020 | |
| 2018 | Mar 11, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 15, 2017 | |
| 2015 | Mar 14, 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.