UFP TECHNOLOGIES INCUFPT
UFP TECHNOLOGIES INC Income Taxes Disclosure
Income Tax
The Company’s domestic and foreign net income before provision for income taxes for the years ended December 31, 2025, 2024, and 2023 consists of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 31,495 | $ | 30,266 | $ | 26,545 | |||||||||||
| Foreign | 51,018 | 42,759 | 27,357 | ||||||||||||||
| Total | $ | 82,513 | $ | 73,025 | $ | 53,902 | |||||||||||
The Company’s income tax provision for the years ended December 31, 2025, 2024, and 2023 consists of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 3,347 | $ | 6,841 | $ | 6,099 | |||||||||||
| State | 402 | 2,471 | 1,784 | ||||||||||||||
| Foreign | 5,328 | 3,449 | 272 | ||||||||||||||
| Total Current | 9,077 | 12,761 | 8,155 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 4,536 | 1,044 | 841 | ||||||||||||||
| State | 852 | 230 | 2 | ||||||||||||||
| Foreign | (265) | 9 | (20) | ||||||||||||||
| Total Deferred | 5,123 | 1,283 | 823 | ||||||||||||||
| Total income tax provision | $ | 14,200 | $ | 14,044 | $ | 8,978 | |||||||||||
The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accruals | $ | 846 | $ | 753 | |||||||
| Tax credits | 499 | 183 | |||||||||
| Compensation programs | 2,167 | 2,202 | |||||||||
| Equity-based compensation | 1,024 | 928 | |||||||||
| Lease liability | 5,040 | 4,306 | |||||||||
| Intangible assets | 434 | 2,558 | |||||||||
| Deferred revenue | 627 | 705 | |||||||||
| Other | 21 | 12 | |||||||||
| Gross deferred tax assets | 10,658 | 11,647 | |||||||||
| Valuation allowance | — | — | |||||||||
| Net deferred tax assets | 10,658 | 11,647 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Excess of book over tax basis of fixed assets | $ | (3,115) | $ | (2,846) | |||||||
| Goodwill | (7,643) | (4,975) | |||||||||
| Right of use asset | (4,887) | (4,175) | |||||||||
| Intangible assets | (3,703) | (2,882) | |||||||||
| Tax on unremitted foreign earnings | (406) | — | |||||||||
| Inventory capitalization | (115) | (65) | |||||||||
| Total deferred tax liabilities | (19,869) | (14,943) | |||||||||
| Net long-term deferred tax liabilities | $ | (9,211) | $ | (3,296) | |||||||
The amounts recorded as deferred tax assets as of December 31, 2025 and 2024 represent the amount of tax benefits of existing deductible temporary differences that are more likely than not to be realized through the generation of sufficient future taxable income. The Company had gross deferred tax assets of approximately $10.7 million on December 31, 2025, which it believes are more likely than not to be realized. Management reviews the recoverability of deferred tax assets during each reporting period.
The actual tax provision for the years presented differs from that derived from using a U.S federal statutory rate of 21% to income before income tax expense as follows:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| U.S. federal statutory rate | $ | 17,328 | 21.0 | % | $ | 15,335 | 21.0 | % | $ | 11,321 | 21.0 | % | |||||||||||||||||||||||
| Increase (decrease) in income taxes resulting from: | |||||||||||||||||||||||||||||||||||
| State and local income tax, net of federal income tax effect | 1,897 | 2.3 | 2,104 | 2.9 | 1,304 | 2.4 | |||||||||||||||||||||||||||||
| Foreign Tax Effects: | |||||||||||||||||||||||||||||||||||
| Dominican Republic: | |||||||||||||||||||||||||||||||||||
| Statutory tax rate difference | 2,494 | 3.0 | 2,417 | 3.3 | 1,038 | 1.9 | |||||||||||||||||||||||||||||
| Withholding taxes | 4,611 | 5.6 | 2,789 | 3.8 | 322 | 0.6 | |||||||||||||||||||||||||||||
| Free trade zone impact | (11,223) | (13.5) | (10,265) | (14.0) | (6,609) | (12.2) | |||||||||||||||||||||||||||||
| Other items | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | (1,532) | (1.9) | (463) | (0.6) | (246) | (0.5) | |||||||||||||||||||||||||||||
| Effect of cross border transactions: | |||||||||||||||||||||||||||||||||||
| Global Intangible low-taxed income | 693 | 0.8 | 617 | 0.7 | 2,124 | 4.0 | |||||||||||||||||||||||||||||
| Foreign-derived intangible income | (120) | (0.1) | 37 | 0.1 | (1,522) | (2.8) | |||||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items: | |||||||||||||||||||||||||||||||||||
| Stock Compensation | (915) | (1.1) | (1,291) | (1.8) | (1,041) | (1.9) | |||||||||||||||||||||||||||||
| 162m Limitations | 1,685 | 2.0 | 1,957 | 2.7 | 1,043 | 1.9 | |||||||||||||||||||||||||||||
| Tax credits | — | — | — | — | 264 | 0.5 | |||||||||||||||||||||||||||||
| Other | (718) | (0.9) | 650 | 0.9 | 310 | 0.6 | |||||||||||||||||||||||||||||
| Change in uncertain tax positions | — | — | 157 | 0.2 | 670 | 1.2 | |||||||||||||||||||||||||||||
| Change in valuation allowance | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Effective tax rate | $ | 14,200 | 17.2 | % | $ | 14,044 | 19.2 | % | $ | 8,978 | 16.7 | % | |||||||||||||||||||||||
The state and local tax jurisdictions that make up the majority of the effect of the state and local income tax line item in 2025 are Illinois and Massachusetts. The state and local tax jurisdictions that make up the majority of the effect of the state and local income tax line item in 2024 are Massachusetts, California, and Texas. The state and local tax jurisdictions that make up the majority of the effect of the state and local income tax line item in 2023 are Massachusetts, California, and Michigan.
The Company’s foreign subsidiary earnings are subject to current U.S. taxation under the Tax Cuts and Jobs Act of 2017, which also repealed U.S. taxation on the subsequent repatriation of those earnings. The Company intends to repatriate substantially all of its future foreign subsidiary earnings. The repatriation of earnings outside of the U.S. generally does not represent a material net tax impact to the Company. The withholding taxes associated with the Company’s earnings in the Dominican Republic are creditable against the Company US tax liability and therefore do not produce any material incremental tax consequences. The earnings of the Company’s other foreign subsidiaries, and therefore the withholding taxes associated with those earnings, are not material for the year ended December 31, 2025.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, as well as in Ireland, Puerto Rico, and Costa Rica. It currently does not have a local filing obligation with respect to its subsidiaries in the Dominican Republic. The Company has been audited by the following states: income tax returns
filed in Michigan through 2004, income tax returns filed in Massachusetts through 2021, income tax returns filed in Florida through 2019, income tax returns filed in New Jersey through 2012, income tax returns in Colorado through 2017, income tax returns in Iowa through 2019, and income tax returns in Illinois through 2021. The Company has been audited by the Internal Revenue Service for income tax returns filed from 2019 through 2021. Federal and state tax returns for the years 2022 through 2024 remain open to examination by the IRS and various state jurisdictions. The Company’s non-US tax returns in Ireland, Puerto Rico, and Costa Rica remain open for the years 2021 through 2024.
The Company applies the accounting guidance in ASC 740 to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions, is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. The following is a roll forward of the Company’s unrecognized tax benefits (“UTB”) (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Gross UTB balance at beginning of fiscal year | $ | — | $ | 670 | |||||||
| Gross increases - tax positions of prior years | — | 106 | |||||||||
| Settlement of tax positions | — | (776) | |||||||||
| Gross UTB balance at end of fiscal year | $ | — | $ | — | |||||||
As of December 31, 2025, the Company had recorded zero unrecognized tax benefits. For the year ended December 31, 2024, the Company recorded zero unrecognized tax benefits. The Company closed audits with the IRS and the state of Massachusetts during the year ended December 31, 2024 and reduced previously recorded uncertain tax benefits to zero as a result of closing those audits.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 10, 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.