BBSI · Barrett Business Services, Inc.

The U.S. Tax Court's opinion on March 30, 2026, represents a significant adverse development for Barrett Business Services, Inc., as it denies the company's motions for partial summary judgment on wage-based tax credits claimed for tax years 2017 through 2020. These credits, specifically the Work Opportunity Tax Credit and Empowerment Zone Employment Credit, are now invalidated by the ruling, which favored the IRS. While the decision does not quantify the tax deficiency, interest, or penalties, BBSI anticipates recording approximately $8.6 million in additional tax expense and $3.4 million in related interest during the first fiscal quarter of 2026. This charge extends to tax years 2021 and 2022, covering the full scope of the company's potential exposure on these credits. The company plans to avoid any penalty accrual, citing the novel legal nature of the issues involved. BBSI is actively reviewing the opinion and considering appeals, which could prolong uncertainty. Importantly, the ruling has no bearing on ongoing operations or client services, isolating the financial impact to prior periods' tax positions. Investors should monitor for appeal outcomes, as a reversal could restore these credits and reverse the charges.