Income taxes |
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income taxes | Income taxes MediaAlpha, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from QLH based upon MediaAlpha, Inc.’s economic interest held in QLH. QLH is treated as a pass-through partnership for income tax reporting purposes and is not subject to federal income tax. Instead, QLH’s taxable income or loss is passed through to its members, including MediaAlpha, Inc. Accordingly, the Company is not liable for income taxes on the portion of QLH’s earnings not allocated to it. MediaAlpha, Inc. files and pays corporate income taxes for U.S. federal and state income tax purposes and its corporate subsidiary, Skytiger Studio, Ltd., is subject to taxation in Taiwan. The Company expects this structure to remain in existence for the foreseeable future. The Company estimates the annual effective tax rate for the full year to be applied to actual year-to-date income (loss) and adds the tax effects of any discrete items in the reporting period in which they occur. The following table summarizes the Company's income tax expense (benefit):
The Company's effective tax rate of 31.6% for the three months ended March 31, 2026 differed from the U.S. federal statutory tax rate of 21% due primarily to the tax impacts of income not taxable to the Company associated with the non-controlling interest, nondeductible officers' compensation, state taxes, and nondeductible equity-based compensation. The Company's effective tax rate of 2.1% for the three months ended March 31, 2025 differed from the U.S. federal statutory tax rate of 21% due primarily to the tax impacts of changes in valuation allowance. There were no material changes to the Company’s unrecognized tax benefits during the three months ended March 31, 2026. The Company is currently under examination by various tax authorities in the United States. These examinations are in preliminary stages and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of the fiscal year. As of March 31, 2026 and December 31, 2025, the Company had a valuation allowance of $3.5 million against certain state net operating losses, federal and state capital loss carryforwards, and foreign tax credits that the Company expects will expire unutilized. The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of March 31, 2026, there were no changes to the Company's valuation allowance. Tax Receivables Agreement In connection with the Reorganization Transactions and the IPO, the Company entered into the TRA with Insignia, Senior Executives, and White Mountains. The Company expects to obtain an increase in its share of the tax basis in the net assets of QLH as Class B-1 units, together with shares of Class B common stock, are exchanged for shares of Class A common stock (or, at the Company’s election, redeemed for cash of an equivalent value). The Company intends to treat any redemptions and exchanges of Class B-1 units as direct purchases for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that it would otherwise pay in the future to various tax authorities. The Company believes it can generate sufficient future taxable income and determined that making payments under the TRA is probable under ASC 450 — Contingencies. The Company recorded a liability of $123.4 million and $131.1 million as of March 31, 2026 and December 31, 2025, respectively, of which $6.8 million and $6.9 million, respectively, were classified as current within accrued expenses in the consolidated balance sheets. During the three months ended March 31, 2026 and 2025, holders of Class B-1 units exchanged zero units. Payments of $7.0 million were made pursuant to the TRA during the three months ended March 31, 2026. No payments were made pursuant to the TRA during the three months ended March 31, 2025.
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