UNIVERSAL ELECTRONICS INCUEIC
UNIVERSAL ELECTRONICS INC Income Taxes Disclosure
Income Taxes
In 2025, 2024 and 2023, pre-tax income (loss) was attributed to the following jurisdictions:
| Year Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic operations | $ | (47,871) | $ | (53,708) | $ | (95,876) | |||||||||||
| Foreign operations | 35,911 | 35,110 | 3,622 | ||||||||||||||
| Total pre-tax income (loss) | $ | (11,960) | $ | (18,598) | $ | (92,254) | |||||||||||
The provision for income taxes charged to operations was as follows:
| Year Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current tax expense: | |||||||||||||||||
| U.S. federal | $ | 90 | $ | 37 | $ | 23 | |||||||||||
| State and local | 35 | 45 | 44 | ||||||||||||||
| Foreign | 6,012 | 5,068 | 7,193 | ||||||||||||||
| Total current | 6,137 | 5,150 | 7,260 | ||||||||||||||
| Deferred tax (benefit) expense: | |||||||||||||||||
| U.S. federal | — | 269 | (813) | ||||||||||||||
| State and local | — | — | (126) | ||||||||||||||
| Foreign | 502 | 12 | (337) | ||||||||||||||
| Total deferred | 502 | 281 | (1,276) | ||||||||||||||
| Total provision for income taxes | $ | 6,639 | $ | 5,431 | $ | 5,984 | |||||||||||
Reconciliation of Statutory Federal Income Tax Rate to the Effective Income Tax Rate
Below is a tabular rate reconciliation for the year ended December 31, 2025:
| Year Ended December 31, | |||||||||||
| (In thousands) | Amount | Percent | |||||||||
| Tax provision at U.S. federal statutory rate | $ | (2,512) | 21.0 | % | |||||||
| State and local income taxes, net of U.S. federal income tax effect * | 28 | (0.2) | % | ||||||||
| Foreign tax effect | |||||||||||
| Brazil | |||||||||||
| Statutory tax rate difference between Brazil & the United States | 301 | (2.5) | % | ||||||||
| Preferential income tax rate | (291) | 2.4 | % | ||||||||
| Non-taxable and nondeductible items: | |||||||||||
| Non-taxable legal settlement income | (126) | 1.1 | % | ||||||||
| Other adjustments | 11 | (0.1) | % | ||||||||
| China | |||||||||||
| Statutory tax rate difference between China & the United States | 230 | (1.9) | % | ||||||||
| Research and development super deduction | (437) | 3.7 | % | ||||||||
| Changes in unrecognized tax benefits | (152) | 1.3 | % | ||||||||
| Changes in valuation allowance | (2,013) | 16.8 | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Withholding taxes | 312 | (2.6) | % | ||||||||
| Other adjustments: | |||||||||||
| DTA write-off from factory shutdown | 1,743 | (14.6) | % | ||||||||
| Miscellaneous other items | (41) | 0.3 | % | ||||||||
| Hong Kong | |||||||||||
| Statutory tax rate difference between Hong Kong & the United States | (775) | 6.5 | % | ||||||||
| Non-taxable and nondeductible items: | |||||||||||
| Non-territorial income | (1,812) | 15.2 | % | ||||||||
| Non-taxable foreign exchange gain | (282) | 2.4 | % | ||||||||
| Other adjustments | 107 | (0.9) | % | ||||||||
| Korea | |||||||||||
| Effect of cross-border tax laws: | |||||||||||
| Withholding taxes | 1,227 | (10.3) | % | ||||||||
| Other adjustments | 21 | (0.2) | % | ||||||||
| Mexico | |||||||||||
| Statutory tax rate difference between Mexico & the United States | 197 | (1.7) | % | ||||||||
| Non-taxable and nondeductible items: | |||||||||||
| Annual inflationary adjustment | (192) | 1.6 | % | ||||||||
| Employee fringe benefits | 174 | (1.5) | % | ||||||||
| Other adjustments: | |||||||||||
| Fixed asset provision to return adjustment | 192 | (1.6) | % | ||||||||
| Intercompany sale of fixed assets | (229) | 1.9 | % | ||||||||
| Miscellaneous other items | 168 | (1.4) | % | ||||||||
| Netherlands | 318 | (2.7) | % | ||||||||
| Other foreign jurisdictions | 323 | (2.7) | % | ||||||||
| Effect of changes in taw laws or rates enacted in the current period | |||||||||||
| Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | 6,459 | (54.0) | % | ||||||||
| Subpart F income | 331 | (2.8) | % | ||||||||
| Tax credits: | (571) | 4.8 | % | ||||||||
| Changes in valuation allowance: | 2,606 | (21.8) | % | ||||||||
| Non-taxable or nondeductible items: | |||||||||||
| Stock-based compensation | 872 | (7.3) | % | ||||||||
| Provision to return | 412 | (3.4) | % | ||||||||
| Miscellaneous other items | 46 | (0.4) | % | ||||||||
| Changes in unrecognized tax benefits | 1 | — | % | ||||||||
| Other adjustments | (7) | 0.1 | % | ||||||||
| Total provision for income taxes | $ | 6,639 | (55.5) | % | |||||||
* The Company is subject to state & local minimum taxes, with Texas, Mississippi, and North Carolina comprising greater than 50%.
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pre-tax income from operations, for the years ended December 31, 2024 and December 31, 2023, as a result of the following:
| Year Ended December 31, | ||||||||||||||||||||||||||
| (In thousands) | 2024 | Percent | 2023 | Percent | ||||||||||||||||||||||
| Tax provision (benefit) at statutory U.S. rate | $ | (3,906) | 21.0 | % | $ | (19,373) | 21.0 | % | ||||||||||||||||||
| Increase (decrease) in tax provision (benefit) resulting from: | ||||||||||||||||||||||||||
| Distribution of previously taxed foreign earnings and profits | — | — | (9,450) | 10.2 | ||||||||||||||||||||||
| Federal research and development credits | (816) | 4.3 | (1,043) | 1.1 | ||||||||||||||||||||||
| Foreign participation exemption | — | — | (12,571) | 13.6 | ||||||||||||||||||||||
| Foreign permanent benefit | (650) | 3.5 | % | (1,426) | 1.6 | |||||||||||||||||||||
| Foreign tax rate differential | (295) | 1.6 | 21,794 | (23.6) | ||||||||||||||||||||||
| Foreign undistributed earnings, net of credits | 6,231 | (33.2) | 7,198 | (7.8) | ||||||||||||||||||||||
| Goodwill impairment | — | — | 5,383 | (5.8) | ||||||||||||||||||||||
| Non-deductible items | 635 | (3.4) | 594 | (0.6) | ||||||||||||||||||||||
| Non-territorial income | (2,088) | 11.1 | (945) | 1.0 | ||||||||||||||||||||||
| Provision to return | (350) | 1.9 | (19) | — | ||||||||||||||||||||||
| State and local taxes, net | (992) | 5.3 | (2,629) | 2.9 | ||||||||||||||||||||||
| Stock-based compensation | 2,045 | (10.9) | 980 | (1.1) | ||||||||||||||||||||||
| Tax rate change | (2,286) | 12.2 | 1,648 | (1.8) | ||||||||||||||||||||||
| Valuation allowance | 5,943 | (31.8) | 15,090 | (16.4) | ||||||||||||||||||||||
| Withholding tax | 1,521 | (8.1) | 1,229 | (1.3) | ||||||||||||||||||||||
| Other | 439 | (2.2) | (476) | 0.5 | ||||||||||||||||||||||
| Tax provision | $ | 5,431 | (28.7) | % | $ | 5,984 | (6.5) | % | ||||||||||||||||||
Net deferred tax assets were comprised of the following:
| December 31, | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Accounts receivable | $ | 2,245 | $ | 464 | |||||||
| Accrued liabilities | 1,850 | 4,820 | |||||||||
| Amortization of intangible assets | 8,404 | 9,223 | |||||||||
| Capitalized inventory costs | 3,391 | 3,553 | |||||||||
| Capitalized research and development costs | 10,744 | 10,245 | |||||||||
| Depreciation | 3,510 | 3,797 | |||||||||
| Income tax credits | 21,560 | 20,375 | |||||||||
| Inventory reserves | 3,143 | 2,371 | |||||||||
| Net operating losses | 15,296 | 14,003 | |||||||||
| Operating lease obligations | 1,953 | 2,865 | |||||||||
| Stock-based compensation | 2,664 | 2,915 | |||||||||
| Total deferred tax assets | 74,760 | 74,631 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use assets | (2,026) | (3,175) | |||||||||
| Other | (1,386) | (1,333) | |||||||||
| Total deferred tax liabilities | (3,412) | (4,508) | |||||||||
| Net deferred tax assets before valuation allowance | 71,348 | 70,123 | |||||||||
| Less: Valuation allowance | (67,359) | (65,629) | |||||||||
| Net deferred tax assets | $ | 3,989 | $ | 4,494 | |||||||
At December 31, 2025, we had U.S. federal and state Research and Development ("R&D") income tax credit carryforwards of approximately $6.5 million and $18.4 million, respectively. The federal R&D income tax credits begin expiring in 2039. The state R&D income tax credits do not have an expiration date.
At December 31, 2025, we had U.S. federal, state and local, and foreign net operating loss carryforwards of approximately $38.7 million, $108.1 million and $1.3 million, respectively. The U.S. federal net operating loss carryforwards do not have an expiration date. The state and local and foreign net operating loss carryforwards begin to expire in 2025 and 2028, respectively.
At December 31, 2025, we assessed the realizability of the Company's deferred tax assets by considering whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We considered the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to cumulative operating losses for the three years ended December 31, 2025, we have recorded a valuation allowance against our U.S. federal, state, and foreign deferred tax assets of $41.9 million, $24.8 million, and $0.7 million respectively, as we have determined that it is more likely than not that the tax benefits will not be realized in the future. The valuation allowance increased by $1.7 million and $6.0 million during the years ended December 31, 2025 and 2024, respectively.
In general, under Section 382, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize pre-change net operating losses and tax credits to offset future taxable income. We do not believe that we have experienced such an ownership change and do not expect our net operating losses and tax credits to be subject to the limitations under Section 382.
Uncertain Tax Positions
At December 31, 2025 and 2024, we had gross unrecognized tax benefits of approximately $3.7 million including interest and penalties. In accordance with accounting guidance, we have elected to classify interest and penalties as components of tax expense. Interest and penalties were immaterial for the year ended December 31, 2025, 2024 and 2023. Interest and penalties are included in the unrecognized tax benefits.
Changes to our gross unrecognized tax benefits were as follows:
| Year Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 3,637 | $ | 3,315 | $ | 3,150 | |||||||||||
| Additions as a result of tax positions taken during the current year | 153 | 322 | 165 | ||||||||||||||
| Other | (150) | — | — | ||||||||||||||
| Balance at end of period | $ | 3,640 | $ | 3,637 | $ | 3,315 | |||||||||||
Approximately $3.7 million, $3.7 million and $3.3 million of the total amount of unrecognized tax benefits at December 31, 2025, 2024 and 2023, respectively, would favorably effect the annual effective tax rate if not for the valuation allowance. We have classified uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year.
We file income tax returns in the U.S. and in various state and foreign jurisdictions. As of December 31, 2025, the open statutes of limitations for our significant tax jurisdictions are as follows: U.S. federal for 2022 through 2024, state and local for 2021 through 2024, and non-U.S. for 2019 through 2024.
Income Taxes Paid
Disclosed below is a summary of income taxes paid by jurisdiction for the year ended December 31, 2025
| (In thousands) | Year Ended December 31, 2025 | ||||
| United States - Federal | $ | (316) | |||
| United States - State and local | (10) | ||||
| Brazil | 466 | ||||
| China | 237 | ||||
| Hong Kong | 1,223 | ||||
| India | 302 | ||||
| Mexico | 275 | ||||
| Vietnam | 260 | ||||
| Other | 187 | ||||
| Total income taxes paid, net | $ | 2,624 | |||
Indefinite Reinvestment Assertion
Beginning in 2018, the Tax Act generally provides a 100% federal deduction for dividends received from foreign subsidiaries. Nevertheless, companies must still apply the guidance of ASC Topic 740 to account for the tax consequences of outside basis differences and other tax impacts of their investments in foreign subsidiaries, including potential foreign withholding taxes on distributions. For the years ended December 31, 2025, 2024 and 2023, we recorded a deferred tax liability of $1.9 million, $0.4 million and $0.4 million, respectively, relating to state tax and foreign tax withholding liabilities on future distributions.
Enactment of H.R.1
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the U.S., which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international), and provisions allowing accelerated tax deductions for qualified property and research expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The legislation’s enactment did not materially impact our effective income tax rate or cash tax position for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 8, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Mar 5, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Mar 11, 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.