Climb Global Solutions Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2021

7. Income Taxes

Deferred tax attributes resulting from differences between the tax basis of assets and liabilities and the reported amounts in the Consolidated Balance Sheets are as follows:


	December 31,		December 31,
	2021		2020
Deferred tax assets:
Accruals and reserves	$	501	$	483
Deferred rent credit		163		175
Depreciation and amortization		24		7
Total deferred tax assets		688		665
Deferred tax liabilities:
Accruals and reserves		(67)		(9)
Depreciation and amortization		(2,212)		(2,010)
Total deferred tax liabilities		(2,279)		(2,019)
Net deferred tax (liabilities) asset	$	(1,591)	$	(1,354)

The provision for income taxes is as follows:


	Year ended December 31,
	2021			2020
Current:
Federal	$	1,692		$	1,339
State		572			263
Foreign		674			314
		2,938			1,916
Deferred:
Federal		(45)			(134)
State		(12)			(28)
Foreign		285			(8)
		228			(170)
	$	3,166		$	1,746
Effective Tax Rate		25.6	%		28.1	%

The reasons for the difference between total tax expense and the amount computed by applying the U.S. statutory federal income tax rate to income before income taxes are as follows:


	Year ended December 31,
	2021		2020
Statutory rate applied to pretax income	$	2,596	$	1,309
State income taxes, net of federal income tax benefit		442		182
Adjustment for foreign rate change		353		—
Other permanent items		19		19
Acquisition related costs		—		319
Dividends		(17)		(19)
Foreign income taxes over U.S. statutory rate		(18)		(1)
GILTI, net of foreign tax credits		(38)		—
Stock compensation		(135)		(59)
Other items		(36)		(4)
Income tax expense	$	3,166	$	1,746

The Company has analyzed filing positions in all the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal consolidated tax return, its state tax return in New Jersey, its Canadian tax return and its tax return in the United Kingdom as major tax jurisdictions. As of December 31, 2021, the Company’s 2018 through 2020 Federal tax returns remain open for

examination. The Company’s New Jersey and Canadian tax returns are open for examination for the years 2017 through 2020. The Company’s tax return in the United Kingdom is open for examination for the years 2019 and 2020. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including experience and interpretations of tax law applied to the facts of each matter.

For financial reporting purposes, income before income taxes includes the following components:


	Year ended December 31,
	2021		2020
United States	$	9,355	$	4,767
Foreign		3,009		1,453
	$	12,364	$	6,220

The Company has approximately $7.4 million of undistributed earnings in Canada and $2.2 million of undistributed earnings in the United Kingdom, which it continues to reinvest indefinitely, and therefore no withholding taxes related to its repatriation has been recorded.

The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2021 and 2020:


	2021		2020
Balance as of January 1	$	-	$	49
Additions related to prior period tax positions		-		-
Reductions related to settlements with tax authorities		-		(49)
Balance as of December 31	$	-	$	-

During the years ended December 31, 2021 and 2020, the Company incurred interest and penalties of zero and less than $0.1 million, respectively, related to these uncertain tax benefits.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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+ Details