Vishay Precision Group, Inc. Income Taxes Disclosure

Note 6 – Income Taxes

 

The Company is subject to U.S. federal tax at the rate of 21%.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into law making significant changes to U.S. income tax law.

 

On  July 4, 2025, the OBBBA was enacted into law, extending key provisions of the 2017 Tax Cuts and Jobs Act. The OBBBA restores expensing of domestic research expenditures for years beginning after  December 31, 2024. Additionally, the OBBBA restores the EBITDA-based interest expense limitation and includes changes related to the U.S. taxation of the income of our foreign subsidiaries and certain foreign derived income, and the base erosion and anti-abuse tax, and provides for accelerated depreciation for property acquired and placed in service after  January 19, 2025. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. Due to the OBBBA provisions, the Company recorded tax benefit for the year as a decrease in valuation allowance on part of our deferred tax assets.

 

The Company recognized approximately $7.6 million and $8.1 million of GILTI for the years ended December 31, 2025 and 2024, respectively. The U.S. tax on Global Intangible Low-taxed Income ("GILTI"), net of foreign tax credits and other credits, was less than $0.1 million for each of the years ended December 31, 2025 and 2024.

 

For financial reporting purposes, income before taxes includes the following components (in thousands):

 

		Years ended December 31,
		2025				2024				2023
Domestic		$	5,976			$	11,651			$	(4,111	)
Foreign			2,820				5,913				42,547
		$	8,796			$	17,564			$	38,436

 

Note 6 – Income Taxes (continued)

 

The expense (benefit) for income taxes is comprised of (in thousands):

 

		Years ended December 31,
		2025				2024				2023
Current:
Federal		$	11			$	331			$	517
State and local			192				75				162
Foreign			5,176				7,255				11,903
			5,379				7,661				12,582
Deferred:
Federal			126				19				154
State and local			331				(63	)			(628	)
Foreign			(2,382	)			113				318
			(1,925	)			69				(156	)
Total income tax expense		$	3,454			$	7,730			$	12,426

 

Note 6 – Income Taxes (continued)

 

The Company adopted ASU 2023‑09 prospectively for the year ended December 31, 2025, and a reconciliation of the income tax provision and the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes was as follows (in thousands):

 

		Years ended December 31,
		2025
		Amount				%
Tax at statutory rate		$	1,883				21	%
State income taxes			348				4	%
Foreign Tax Effect
Canada
Statutory tax rate difference			104				1	%
Other			75				1	%
Germany
Statutory tax rate difference			(69	)			(1	%)
Changes in valuation allowances			787				9	%
Prior period provision to return adjustments			263				3	%
Other			(71	)			(1	%)
India
Other nontaxable or nondeductible items			154				2	%
Foreign Exchange			(138	)			(2	%)
Other			44				1	%
Israel
Statutory tax rate difference			(219	)			(2	%)
Prior period provision to return adjustments			98				1	%
Other			(142	)			(2	%)
Japan
Statutory tax rate difference			610				7	%
Withholding taxes			185				2	%
Foreign Exchange			182				2	%
Prior period provision to return adjustments			(190	)			(2	%)
Other			(36	)			0	%
United Kingdom
Statutory tax rate difference			(207	)			(2	%)
Other			(87	)			(1	%)
Other foreign jurisdictions			(28	)			0	%
Effect of changes in tax laws or rates enacted in the current period			—				0	%
Effect of cross-border tax laws			898				10	%
Tax credits
Research and development tax credits			(269	)			(3.1	%)
Other			(2	)			0	%
Changes in valuation allowances			(1,272	)			(14	%)
Nontaxable or nondeductible items			108				1	%
Change in unrecognized tax benefits, net			82				1	%
Other adjustments
Withholding taxes			240				3	%
Other			123				1	%
Total income tax expense		$	3,454				39.3	%

 

 

Note 6 – Income Taxes (continued)

 

A reconciliation of the income tax provision, prior to the adoption of ASU 2023-09, to the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes for the years presented was as follows:

 

		Years ended December 31,
		2024				2023
Tax at statutory rate		$	3,688			$	8,072
State income taxes, net of U.S. federal tax benefit			9				(368	)
U.S. GILTI tax, net of foreign tax credits			41				72
Effect of foreign operations			2,688				2,378
Residual U.S. tax on foreign earnings			49				899
Change in valuation allowance			1,330				1,270
Change in unrecognized tax benefits, net			99				476
Specialty tax credits			(502	)			(520	)
Statutory rate changes			172				56
Effect of foreign exchange			(20	)			128
Other			176				(37	)
Total income tax expense		$	7,730			$	12,426

 

 

In 2025, the Company recognized deferred tax benefits of $2.3 million on net operating loss carryforwards generated in certain foreign jurisdictions, which is included in deferred tax expense (benefit) above.

 

Deferred income taxes represent the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

 

Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

 

		December 31,
		2025				2024
Deferred tax assets:
Pension and other postretirement costs		$	956			$	1,056
Inventories			6,289				5,066
Net operating/capital loss and interest carryforwards			15,771				12,668
Tax credit carryforwards			2,188				1,952
Deferred compensation			3,316				3,116
Research and development costs			4,150				5,402
Other accruals and reserves			1,457				3,221
Total gross deferred tax assets			34,127				32,481
Less: valuation allowance			(15,640	)			(15,380	)
			18,487				17,101
Deferred tax liabilities:
Tax over book depreciation			(2,440	)			(2,387	)
Investment in subsidiary			(2,087	)			(2,271	)
Intangible assets, including tax deductible goodwill			(10,940	)			(11,241	)
Total gross deferred tax liabilities			(15,467	)			(15,899	)
Net deferred tax assets		$	3,020			$	1,202

 

Note 6 – Income Taxes (continued)

 

The Company established a valuation allowance with respect to substantially all of its U.S. deferred tax assets due to uncertainty regarding the realization of these assets. Throughout 2024 and 2025, the Company reassessed its ability to realize its U.S. and other deferred tax assets by considering both positive and negative evidence regarding realization. The most significant negative evidence is continuing cumulative operating losses in the U.S. The impact of its US companies acquisitions was also considered in determining the realization of the U.S. deferred tax assets. Other aspects, such as operating results, additional interest expense and additional tax deductions related to the acquisitions, were also considered. The Company also considered positive evidence such as tax planning strategies and the projected benefits of our restructuring efforts. However, there was insufficient positive evidence to overcome the negative evidence.

Overall, the cumulative losses and the acquisition impacts still indicate that realization of our U.S. deferred tax assets remains uncertain such that the Company cannot conclude that it is "more likely than not" that the deferred tax assets will be recoverable.

We will continue to monitor the realization of U.S. deferred tax assets and reduce the valuation allowance if, and when, sufficient positive evidence of realization exists.

 

On September 30, 2024, the Company acquired Nokra, a German entity. Nokra's opening balance sheet included $1.0 million of gross deferred tax assets, and $1.2 million of indefinite-lived liabilities as a result of the purchase price allocation. The acquisition contributed to a less than $0.1 million net increase in valuation allowance and deferred tax expense for the Company in 2024. In 2025 Nokra’s valuation allowance net increase was $0.8 million.

 

At December 31, 2025 and 2024, the valuation allowance on U.S. deferred tax assets was approximately $12.7 million and $13.3 million, respectively. The net change in this valuation allowance was approximately $(0.6) million, mostly related to net federal valuation allowances.

 

The Company also has valuation allowances of $2.9 million and $2.1 million at December 31, 2025 and 2024, respectively, with respect to certain foreign net operating loss and capital loss carryforwards.

 

Significant valuation allowances are as follows (in thousands):

 

		December 31,
Jurisdiction		2025				2024
U.S. federal		$	4,913			$	6,185
U.S. state (net of U.S. federal tax benefit)			7,812				7,122
Israel - capital losses			1,351				1,364
Germany			820				28

 

The following table summarizes significant net operating losses, capital losses and credit carryforwards as of December 31, 2025 (in thousands):

 

		December 31,
Jurisdiction		2025				Expiring
U.S. federal net operating losses		$	2,035			No expiration
U.S. federal interest expense carryover			21,352			No expiration
U.S. foreign tax credit			408			2029-2035
U.S. state net operating losses			130,588			2025-2045
Israel capital losses			5,874			No expiration
Germany			4,179			No expiration

 

Utilization of U.S. federal net operating losses is taken into account before the GILTI deduction allowable by IRC Section 250.

 

Note 6 – Income Taxes (continued)

 

Undistributed earnings of the Company’s foreign subsidiaries were approximately $304.2 million at December 31, 2025 compared to $300.5 million at December 31, 2024. As of December 31, 2025, the Company had provided for a deferred tax liability of approximately $2.1 million of withholding tax associated with $21 million of unremitted, non-permanently reinvested earnings. Substantially all of the remaining undistributed earnings are considered to be indefinitely reinvested and accordingly no provision has been made with respect to these earnings for incremental foreign income taxes, state income taxes or foreign withholding taxes. If those earnings were distributed to the U.S., the Company could be subject to incremental foreign income taxes, state income taxes, and withholding taxes. Determination of the amount of unrecognized deferred tax liability is not practicable because of the uncertainty regarding the timing of any such distribution and the impact on existing valuation allowances. In addition to the $2.1 million, additional withholding taxes of approximately $32.5 million are estimated to be payable upon distribution of the remaining previously unremitted earnings as of December 31, 2025.

 

Net income taxes paid were $8 million, $14.5 million and $10.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

 

		December 31,
The amount of income taxes paid (net of refunds received) were:		2025
U.S. Federal		$	(145	)
U.S. State			134
Foreign:
Canada			1,884
France			509
Germany			1,141
Israel			1,391
Japan			1,501
Sweden			716
Other			889
Total		$	8,020

 

The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties.

 

The following table summarizes changes in the Company's gross liabilities, excluding interest and penalties, associated with unrecognized tax benefits (in thousands):

 

		December 31,
		2025				2024				2023
Balance at beginning of year		$	844			$	798			$	439
Addition based on tax positions related to current year			241				105				589
Reduction based on tax positions related to prior years			—				—				(128	)
Currency translation adjustments			—				(5	)			(8	)
Reduction for payments made			—				—				(94	)
Reduction for lapses of statute of limitations			(135	)			(54	)			—
Balance at end of year		$	950			$	844			$	798

 

Note 6 – Income Taxes (continued)

 

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Related to the unrecognized tax benefits noted above, for the years ended December 31, 2025, 2024 and 2023, the Company accrued penalties and interest annually in a Insignificant amounts (lower than $0.1 million annually). As of December 31, 2025, 2024 and 2023, accrued penalties and interest were $0.1 million, each year.

 

Included in the balance of unrecognized tax benefits as of December 31, 2025, 2024 and 2023 is $1.0 million, $0.8 million, and $0.8 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. Furthermore, as of December 31, 2025, the Company does not anticipate that any of its current unrecognized tax benefits will reverse within the next calendar year due to the expiration of the statute of limitations.

 

The Company and its subsidiaries file U.S. federal income tax returns, as well as income tax returns in various state, local, and foreign jurisdictions. The Company files federal, state, and local income tax returns on a combined, unitary, or stand-alone basis. The statute of limitations in those jurisdictions generally ranges from 3 to 4 years. Additionally, the Company's foreign subsidiaries file income tax returns in the countries in which they have operations and the statutes of limitations in those jurisdictions generally range from 3 to 10 years.

 

During the first quarter of 2024, a tax examination began of one its subsidiaries in Israel covering the years 2019-2023.

 

During the second quarter of 2024, the Company concluded a tax examination in France for one of its subsidiaries covering the years 2021 and 2022, which resulted in no change in tax.

 

During the fourth quarter of 2024, a tax examination began in Germany of three of the Company's subsidiaries. The Company also concluded a tax examination in Taiwan for one of its subsidiaries covering the year 2022, which resulted in no change in tax.

 

The Company is subject to ongoing income tax audits, administrative appeals and judicial proceedings in India spanning a number of years.