Income Taxes

12 Months Ended

Dec. 31, 2024

Note 11. Income Taxes

The domestic and foreign components of net income (loss) before income tax were as follows (in thousands):


	Year Ended December 31,
	2024			2023			2022
Domestic	$	(8,277	)	$	(1,596	)	$	7,583
Foreign		(125	)		82			(31	)
Net income (loss) before income tax	$	(8,402	)	$	(1,514	)	$	7,552

The provision (benefit) for income tax consists of the following (in thousands):


	Year Ended December 31,
	2024		2023		2022
Current:
Federal	$	—	$	—	$	—
State		485		656		455
Foreign		158		7		27
Total		643		663		482
Deferred:
Federal		75		277		316
State		60		264		369
Foreign		—		—		—
Total		135		541		685
Total provision for income tax	$	778	$	1,204	$	1,167

A reconciliation of income taxes at the statutory federal income tax rate to income tax expense included in the accompanying consolidated statements of operations is as follows (in thousands):


	December 31,
	2024			2023			2022
Income tax (benefit) at statutory rate	$	(1,748	)	$	(312	)	$	1,545
Change in valuation allowance		2,284			(76	)		(1,715	)
Indefinite-lived asset (goodwill)		135			541			685
State tax		(226	)		354			239
Change in deferred		(87	)		616			415
Stock-based compensation		462			197			111
Research and development credits		(371	)		(369	)		(271	)
Foreign rate differential		191			23			43
Other		138			230			115
Total	$	778		$	1,204		$	1,167

Temporary differences that gave rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows (in thousands):


	Year Ended December 31,
	2024			2023
Deferred tax assets:
Net operating losses	$	13,492		$	15,302
Stock-based compensation		5,713			4,094
Section 174 capitalized expenditures		5,585			3,820
Research and development credits		3,982			3,359
Accruals and reserves		1,870			1,127
Deferred revenue and contract costs		432			482
Gross deferred tax assets		31,074			28,184
Valuation allowance		(28,372	)		(25,953	)
Net deferred tax assets		2,702			2,231
Deferred tax liabilities:
Fixed assets and intangibles		(406	)		(317	)
Goodwill		(3,657	)		(3,140	)
Total deferred tax liabilities, net	$	(1,361	)	$	(1,226	)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred taxes to an amount that is more likely than not able to be realized. Based upon the Company’s assessment of all available evidence, including the previous three years of U.S.-based taxable income and loss after permanent items, estimates of future profitability, and the Company’s overall prospects of future business, the Company determined that it is more likely than not that the Company will not be able to realize a portion of the deferred tax assets in the future. The Company will continue to assess the potential realization of deferred tax assets on an annual basis, or an interim basis if circumstances warrant. If the Company’s actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to change the valuation allowance against the gross deferred tax assets. Management determined that a valuation allowance of $28.4 million and $26.0 million was required as of December 31, 2024 and 2023, respectively.

The valuation allowance changed by $2.4 million during the year ended December 31, 2024. which includes an increase to certain changes in temporary differences that give rise to deferred tax liabilities related to indefinite-lived intangible assets.

At December 31, 2024 and 2023, the Company had available net operating loss carryforwards of approximately $50.0 million and $57.9 million, respectively, for federal income tax purposes, of which $45.1 million were generated before 2018 and will begin to expire in 2030. The remaining net operating losses of $4.9 million can be carried forward indefinitely under the Tax Cuts and Jobs Act. The Company continually monitors all positive and negative evidence regarding the realization of its deferred tax assets and may record assets when it becomes more likely than not, than they will be realized, which may impact the expense or benefit from income taxes.

At December 31, 2024 and 2023, the net operating losses for state purposes are $41.5 million and $42.7 million, respectively, and will begin to expire in 2025 if not utilized.

As of December 31, 2024, the Company had available for carryover, research and experimental credits of approximately $2.5 million for federal income tax purposes and $1.9 million for California income tax purposes, which are available to reduce future income taxes. The federal research and experimental tax credits will begin to expire, if not utilized, in 2027. The California research and experimental tax credits carry forward indefinitely until utilized.

Section 382 of the Internal Revenue Code of 1986 (the “Code”), as amended, and similar California regulations impose substantial restrictions on the utilization of net operating losses and tax credits in the event of an “ownership change” of a corporation. Accordingly, the Company’s ability to utilize net operating losses and credit carryforwards may be limited as the result of such an “ownership change” as defined in the Code.

Uncertain Tax Positions

The Company applied FASB ASC 740-10-50, Accounting for Uncertainty in Income Tax, which prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

A reconciliation of the beginning and ending amounts of unrecognized uncertain tax positions is as follows (in thousands):


Balance as of December 31, 2022	$	1,083
Increases for current year tax positions		187
Decreases for prior year tax positions		(29	)
Balance as of December 31, 2023		1,241
Increases for current year tax positions		178
Increases for prior year tax positions		40
Balance as of December 31, 2024	$	1,459

Of the total unrecognized tax benefits at December 31, 2024, no amount will impact the Company's effective tax rate because the uncertain amounts have a valuation allowance recorded against them. The Company does not anticipate that there will be a substantial change in unrecognized tax benefits within the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax positions within the income tax expense line in the accompanying consolidated statements of operations. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2024 and 2023.

The Company files federal and state income tax returns in the United States, certain United States territories, and certain foreign jurisdictions. The statues of limitations remain open for 2010 through 2024 for federal and state purposes in the United States. and certain U.S. territories. Years beyond the normal statutes of limitations remain open to audit by tax authorities due to tax attributes generated in earlier years which are being carried forward and may be audited in subsequent years when utilized.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 231
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482663/740-10-55-231

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12C
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12B
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477891/740-270-50-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479360/740-10-S99-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-13

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/740/tableOfContent

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-14

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-21

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-17

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479360/740-10-S99-2

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482603/740-30-50-2

+ Details

SOUNDTHINKING, INC. 10-K