Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Note 5 – Income Taxes Under ASC 740, “Income Taxes,” management evaluates the realizability of the deferred tax assets on a quarterly basis under a “more-likely-than-not” standard. As part of this evaluation, management reviews all evidence both positive and negative to determine if a valuation allowance is needed. One component of this analysis is to determine whether the Company was in a cumulative loss position for the most recent 12 quarters. The Company was in a cumulative income position for the 12 quarters ended March 31, 2026. At March 31, 2026 and December 31, 2025, the Company had not recorded a valuation allowance against its deferred tax assets. The Company is subject to income taxes in U.S. federal and multiple state and local tax jurisdictions. The Internal Revenue Service (the “IRS”) examined the Company’s federal tax returns for the years ended December 31, 2017 through 2021 and issued notices of disallowance for certain wage-based tax credits claimed by the Company. The Company filed petitions in the United States Tax Court (the “Tax Court”) challenging the IRS’s determinations. On March 30, 2026, the Tax Court issued a decision granting the IRS’s motion for partial summary judgment and denying the Company’s motion for partial summary judgment with respect to the Company’s claims for wage‑based tax credits for tax years 2017 through 2020. As a result of the Tax Court’s decision, the Company recorded charges of $8.6 million of additional income tax expense and $4.1 million of related interest during the first quarter of 2026. The net impact of these charges, after considering the associated tax benefit on interest, resulted in an $11.6 million increase in net loss. These charges were recorded within provision for (benefit from) income taxes on the Company’s consolidated statements of operations and relate to the tax years addressed by the Tax Court’s decision, as well as tax years , which represent the remaining periods of the Company’s potential exposure related to wage‑based tax credits. The Company did not record penalties related to these matters, which are approximately $1.8 million for the tax years covered by the Tax Court’s decision, as the Company believes that the position involves novel legal issues for which penalties should not apply. The Company disagrees with the Tax Court’s decision and is continuing to evaluate the available legal options, including any rights to appeal. The Company does not expect the decision to have an effect on its current business operations or services provided to clients. In the major jurisdictions where it operates, the Company is generally no longer subject to income tax examinations by tax authorities for tax years before 2017. As of March 31, 2026 and December 31, 2025, total gross unrecognized tax benefits, excluding interest and penalties, of $1.0 million and $0.8 million, respectively, would affect the Company’s effective tax rate if recognized in future periods. A portion of the consolidated income the Company generates is not subject to state income tax. Depending on the percentage of this income as compared to total consolidated income, the Company’s state effective tax rate could fluctuate from expectations. At March 31, 2026, the Company had no operating loss carryforwards or tax credit carryforwards. |