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

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Balance as of January 1

Additions related to prior period tax positions

Reductions related to settlements with tax authorities

Balance as of December 31

Income Taxes

12 Months Ended

Dec. 31, 2022

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,
	2022		2021
Deferred tax assets:
Accruals and reserves	$	631	$	501
Deferred rent credit		146		163
Depreciation and amortization		38		24
Total deferred tax assets		815		688
Deferred tax liabilities:
Accruals and reserves		—		(67)
Depreciation and amortization		(4,604)		(2,212)
Total deferred tax liabilities		(4,604)		(2,279)
Net deferred tax liabilities	$	(3,789)	$	(1,591)

The provision for income taxes is as follows:


	Year ended December 31,
	2022			2021
Current:
Federal	$	2,694		$	1,692
State		622			572
Foreign		1,254			674
		4,570			2,938
Deferred:
Federal		(124)			(45)
State		(30)			(12)
Foreign		(381)			285
		(535)			228
	$	4,035		$	3,166
Effective Tax Rate		24.4	%		25.6	%

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,
	2022		2021
Statutory rate applied to pretax income	$	3,472	$	2,596
State income taxes, net of federal income tax benefit		468		442
Other permanent items		156		19
Foreign income taxes over U.S. statutory rate		137		(18)
Other items		11		(36)
Adjustment for foreign rate change		—		353
Dividends		(9)		(17)
GILTI, net of foreign tax credits		(50)		(38)
Stock compensation		(150)		(135)
Income tax expense	$	4,035	$	3,166

The Company has analyzed filing positions in all the federal, state and foreign 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 returns, its Canadian tax return and its tax return in the United Kingdom as major tax jurisdictions. As of December 31, 2022, the Company’s 2019 through 2021 Federal tax returns remain open for examination. The Company’s various states and Canadian tax returns are open for examination for the years 2018 through 2021. The Company’s tax return in the United Kingdom is open for examination for the years 2020 and 2021. 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,
	2022		2021
United States	$	12,968	$	9,355
Foreign		3,564		3,009
	$	16,532	$	12,364

The Company has approximately $8.0 million of undistributed earnings in Canada and $1.5 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.

There was no activity related to the Company’s unrecognized tax benefits during the year ended December 31, 2022. The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2021:

During the years ended December 31, 2022 and 2021, the Company incurred interest and penalties of zero, 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

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
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-Section S99
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details