v3.26.1
Provision for (Benefit from) Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Provision for (Benefit from) Income Taxes
13.
Provision for (Benefit from) Income Taxes

Income Before Taxes

The following are the pre-tax book income for the years ended December 31, 2025, 2024 and 2023:

 

 

Years Ended December 31,

 

 

2025

 

 

2024

 

 

2023

 

 

(in thousands)

 

Pre-tax book income:

 

 

 

 

 

 

 

 

Domestic

$

32,522

 

 

$

14,329

 

 

$

1,190

 

Foreign

 

—

 

 

 

—

 

 

 

—

 

Total

$

32,522

 

 

$

14,329

 

 

$

1,190

 

 

Income Tax Expense (Benefit)

The provision for (benefit from) income taxes for the years ended December 31, 2025, 2024 and 2023 consists of the following:

 

 

Years Ended December 31,

 

 

2025

 

 

2024

 

 

2023

 

 

(in thousands)

 

Current income taxes:

 

 

 

 

 

 

 

 

Federal

$

673

 

 

$

10,977

 

 

$

7,752

 

State

 

3,967

 

 

 

2,161

 

 

 

(214

)

Foreign

 

—

 

 

 

—

 

 

 

—

 

Total current

$

4,640

 

 

$

13,138

 

 

$

7,538

 

Deferred income taxes:

 

 

 

 

 

 

 

 

Federal

 

9,707

 

 

 

(10,087

)

 

 

(9,724

)

State

 

809

 

 

 

(1,423

)

 

 

(983

)

Foreign

 

—

 

 

 

—

 

 

 

—

 

Total deferred

$

10,516

 

 

$

(11,510

)

 

$

(10,707

)

Provision for (benefit from) income taxes

$

15,156

 

 

$

1,628

 

 

$

(3,169

)

Effective Tax Rate

A reconciliation of the Company’s effective tax rate and federal statutory tax rate after the adoption of ASU 2023-09 is summarized as follows. See Note 2. Summary Significant Accounting Policies - Recently Issued Accounting Pronouncements Adopted for additional details on the adoption of ASU 2023-09.

 

 

Year Ended December 31, 2025

 

 

(in thousands, except percent)

 

Income taxes (benefit) at statutory federal rate

$

6,830

 

 

 

21.0

%

State and local taxes, net of federal income tax effect1

 

2,983

 

 

 

9.2

%

Tax credits

 

 

 

 

 

R&D credit

 

(792

)

 

 

(2.4

%)

Changes in valuation allowance

 

—

 

 

 

0.0

%

Nontaxable or nondeductible items

 

 

 

 

 

Other

 

279

 

 

 

0.9

%

Section 162(m) officer's compensation

 

1,052

 

 

 

3.2

%

Transaction costs

 

793

 

 

 

2.4

%

Penalties and Interest

 

1,464

 

 

 

4.5

%

Changes in unrecognized tax benefits

 

809

 

 

 

2.5

%

Other

 

 

 

 

 

Change in the tax status of an entity

 

1,401

 

 

 

4.3

%

Other

 

337

 

 

 

1.0

%

Total effective rate

$

15,156

 

 

 

46.5

%
1.
The state that contributes to the majority (greater than 50%) of the tax effect in this category is California for the years ended December 31, 2025.

The amounts of cash taxes paid by the Company for the year ended December 31, 2025 are as follows:

 

 

Year Ended December 31,

 

 

2025

 

 

(in thousands)

 

Federal income taxes paid, net of refunds received

$

15,954

 

State income taxes paid, net of refunds received

 

 

California

 

900

 

Other

 

66

 

Foreign income taxes paid, net of refunds received

 

—

 

Total income taxes paid, net of refunds received

$

16,920

 

 

A reconciliation of the Company’s effective tax rate and federal statutory tax rate as previously disclosed for the year ended December 31, 2024 and 2023 is summarized as follows:

 

Years Ended December 31,

 

 

2024

 

 

2023

 

 

(in thousands, except percent)

 

Federal income taxes

 

21.0

%

 

 

21.0

%

State income taxes, net of federal benefit

 

0.7

%

 

 

(3.0

%)

Rate differential

 

(3.4

%)

 

 

(2.3

%)

Permanent and other differences

 

1.0

%

 

 

9.0

%

Profits Interest

 

1.3

%

 

 

20.1

%

Research and development tax credits

 

(5.5

%)

 

 

(79.2

%)

Uncertain tax positions

 

9.8

%

 

 

11.2

%

Income from passthrough entities

 

(15.9

%)

 

 

(87.9

%)

Return to provision2

 

(1.8

%)

 

 

(155.0

%)

Interest and penalties

 

4.3

%

 

 

0.0

%

Other

 

0.0

%

 

 

0.0

%

Effective Tax Rate

 

11.5

%

 

 

(266.1

%)
2.
The return to provision line item included in the rate reconciliation relates to changes in estimates related to transfer pricing, net costs in excess of billings, research and development tax credits, other deferred tax and income tax payable true-ups

Deferred Taxes

Deferred tax assets and liabilities reflect the net tax effects of tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for tax purposes. Significant components of the Company’s deferred tax assets and liabilities are summarized as follows:

 

Years Ended December 31,

 

 

2025

 

 

2024

 

 

(in thousands)

 

Deferred tax assets:

 

 

 

 

 

Accrued Compensation

$

694

 

 

$

673

 

State income tax

 

1,136

 

 

 

475

 

Interest expense limitation

 

13,208

 

 

 

13,441

 

Capitalized Research

 

100

 

 

 

8,209

 

Lease Liability

 

22,673

 

 

 

20,703

 

Other

 

759

 

 

 

648

 

Total deferred tax assets

$

38,570

 

 

$

44,149

 

Less: Valuation allowance

 

—

 

 

 

—

 

Total deferred tax assets, net of valuation allowance

$

38,570

 

 

$

44,149

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

ROU Asset

$

(18,571

)

 

$

(17,647

)

Percentage of Completion Contracts

 

(915

)

 

 

(148

)

Fixed Assets

 

(14,540

)

 

 

(8,343

)

Intangibles

 

(52,375

)

 

 

(43,381

)

Total deferred tax liabilities

$

(86,401

)

 

$

(69,519

)

Net deferred tax liabilities

$

(47,831

)

 

$

(25,370

)

Our deferred tax liabilities increased by $22.5 million of which $11.9 million was recorded to goodwill as a result of our acquisitions (See Note 4, Business Combinations).

The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Because of the Company’s history of net taxable income, the Company believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently likely to be realized and, accordingly, has not provided a valuation allowance on its deferred tax assets.

Utilization of the interest expense carryforwards may be subject to annual limitations due to ownership changes that have occurred or that could occur in the future, as required by Sections 382 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as similar state provisions. These ownership changes may limit the amount of interest expense that can be utilized annually to offset future taxable income. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of outstanding stock of a company by certain stockholders.

Tax Carryforwards

Tax credit carryforwards as of December 31, 2025 are as follows:

 

 

Amount

 

 

Expiration Years

 

(in thousands)

 

 

 

Research and development tax credits, federal

 

176

 

 

2045

Research and development tax credits, state

 

8

 

 

Indefinite

Uncertain Tax Provisions

A reconciliation of the beginning and ending balance of total gross unrecognized tax benefits is as follows:

 

 

Years Ended December 31,

 

 

2025

 

 

2024

 

 

2023

 

 

(in thousands)

 

Beginning balance of unrecognized tax benefits

$

2,015

 

 

$

579

 

 

$

466

 

Gross increases (decreases) based on tax positions related to current year

 

1,845

 

 

 

801

 

 

 

283

 

Gross increases (decreases) based on tax positions related to prior years

 

157

 

 

 

635

 

 

 

(170

)

Expiration of statute of limitations

 

(60

)

 

 

—

 

 

 

—

 

Ending balance of unrecognized tax benefits

$

3,957

 

 

$

2,015

 

 

$

579

 

Included in the balance of unrecognized tax benefits as of December 31, 2025, 2024 and 2023 are $3.5 million, $1.7 million and $0.6 million respectively, of unrecognized tax benefits that would affect the ETR.

The Company recognized interest expense related to uncertain tax positions as tax expense of $0.4 million and $0.3 million for the years ended December 31, 2025 and 2024 respectively. The total accrued interest liability was $0.7 million and $0.4 million for the years ended December 31, 2025 and 2024 respectively. Interest expense related to uncertain tax positions and accrued interest liability for the year ended December 31, 2023 was immaterial.

The Company files income tax returns in the United States, California, Alabama, and Texas. The Company is subject to income tax examination by federal and state tax authorities for years beginning in 2022 and 2021, respectively.