Note 13 - Income Taxes |
3 Months Ended |
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Jun. 30, 2026 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
13. Income Taxes
The Company recorded income tax expense of $1.3 million in the three months ended June 30, 2026, and income tax expense of $0.2 million in the three months ended June 30, 2025.
The Company's effective tax rate was 11.7% and 2.9% for the three months ended June 30, 2026 and 2025, respectively. For three months ended June 30, 2026 the effective tax rate was lower than the statutory rate primarily as a result of excess tax benefits for the vesting of share-based compensation awards during the period. For the three months ended June 30, 2025 the effective tax rate was lower than the U.S. Statutory rate primarily due to the valuation allowance against U.S. deferred tax assets, a majority of which was subsequently released in fiscal 2025.
On a quarterly basis, the Company reassesses the valuation allowance on deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. A tax valuation allowance is established, as needed, to reduce deferred tax assets to the amount expected to be realized. In the period in which it becomes more likely than not that some or all of the deferred tax assets will be realized, the valuation allowance will be adjusted. As of June 30, 2026, the Company maintains a valuation allowance against certain deferred tax assets in the U.S. and Poland.
Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company re-evaluates these uncertain tax positions on a quarterly basis. The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The Company did identify any uncertain tax positions in the three months ended June 30, 2026 and did have any gross unrecognized tax benefits as of June 30, 2026.
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