ULTRALIFE CORP Income Taxes Disclosure

Note 7 - Income Taxes

 

For the years ended December 31, 2024 and 2023, we recognized an income tax provision of $1,892 and $1,951, respectively.

 

		Year ended December 31,
		2024				2023
Current:
Domestic		$	50			$	27
Foreign			610				623
			660				650
Deferred:
Domestic			1,371				1,466
Foreign			(139	)			(165	)
			1,232				1,301
Total income tax provision		$	1,892			$	1,951

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:

 

		December 31,
		2024				2023
Deferred tax assets:
Net operating loss carryforwards		$	5,817			$	8,515
Research and development			4,894				3,536
Tax credit carryforwards			3,180				2,898
Inventory reserves			2,859				1,794
Intangible assets			1,678				1,596
Accrued expenses and other			1,539				1,115
Total deferred tax assets			19,964				19,454
Valuation allowance for deferred tax assets			(2,404	)			(2,441	)
Net deferred tax assets			17,563				17,013
Deferred tax liabilities:
Intangible assets			(9,480	)			(8,095	)
Property, plant and equipment			(1,113	)			(65	)
Total deferred tax liabilities			(10,593	)			(8,160	)
Net deferred tax assets		$	6,970			$	8,853

 

Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:

 

		December 31,
		2024				2023
Deferred tax assets, net		$	8,413			$	10,567
Deferred tax liabilities			(1,443	)			(1,714	)
		$	6,970			$	8,853

 

 

For financial reporting purposes, net income from continuing operations before income taxes is as follows:

 

		Year ended December 31,
		2024				2023
United States		$	7,044			$	7,294
Foreign			1,257				1,823
		$	8,301			$	9,117

 

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 income from continuing operations before income taxes as follows:

 

		Year ended December 31,
		2024				2023
Statutory income tax rate			21.0	%			21.0	%
Increase (decrease) in tax provision resulting from:
Equity compensation			0.5				0.4
Global intangible low-taxed income			0.7				1.4
China R&D deduction			(1.1	)			(1.0	)
Income tax credits			(3.6	)			(3.3	)
Tax rate changes			(0.1	)			-
Foreign exchange loss			0.8				-
Foreign tax rates			2.3				1.7
States taxes			1.1				0.8
Transaction costs			0.7				-
Other			0.5				0.4
Effective income tax rate			22.8	%			21.4	%

 

As of December 31, 2024, it was concluded that it is more likely than not that our U.S. deferred tax assets will be fully realized based on management’s assessment. In evaluating the realizability of our U.S. deferred tax assets, management considered all available evidence, both positive and negative, weighted based on objective verifiability. Our assessment also considered our ability to fully utilize before expiration our domestic net operating loss carryforwards, which expire 2031 thru 2035, and our general business tax credit carryforwards, which expire 2028 thru 2044. As of December 31, 2024, our domestic net operating loss carryforwards and general business tax credits were $15,000 and $3,200, respectively.

 

As of December 31, 2024, for certain past operations in the U.K., we continue to report a valuation allowance for net operating loss carryforwards of approximately $9,600, nearly all of which can be carried forward indefinitely. Management has concluded that utilization of the U.K. net operating losses may be limited due to the change in the past U.K. operation, and that they cannot currently be used to reduce taxable income of our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations.

 

As of December 31, 2024, we have not recognized a valuation allowance against our other foreign deferred tax assets, including net operating loss carryforwards of $1,000 which expire 2029 thru 2033, as we believe that it is more likely than not that they will be fully realized.

 

There were no unrecognized tax benefits related to uncertain tax positions at December 31, 2024 and 2023.

 

As of December 31, 2024, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.

 

As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for 2021 thru 2023 remain subject to IRS examination. Our U.S. tax matters for 2001-2002, 2005-2007, 2009, and 2011-2015 also remain subject to IRS examination due to the remaining availability of net operating loss carryforwards generated in those years. Our U.S. tax matters for 2014 thru 2023 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years 2014 thru 2023 remain subject to examination by the respective foreign tax jurisdiction authorities.