v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 11. INCOME TAXES

The following table summarizes the provision for income taxes for the six months ended June 30, 2026 and 2025:

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

 

(in thousands)

 

Federal:

 

 

 

 

 

 

Current

 

$

26,379

 

 

$

21,021

 

Deferred

 

 

1,271

 

 

 

(786

)

Provision for Federal income tax

 

 

27,650

 

 

 

20,235

 

State:

 

 

 

 

 

 

Current

 

$

5,249

 

 

$

4,419

 

Deferred

 

 

107

 

 

 

(152

)

Provision for State income tax expense

 

 

5,356

 

 

 

4,267

 

Provision for income taxes

 

$

33,006

 

 

$

24,502

 

For the three months ended June 30, 2026 and 2025, the Company recorded income tax expense of $20.5 million and $15.0 million, respectively, resulting in effective tax rates of 24.9% and 23.8%, respectively. For the six months ended June 30, 2026 and 2025, the Company recorded income tax expense of $33.0 million and $24.5 million respectively, resulting in effective tax rates of 25.2% and 23.8%, respectively. The effective tax rate for the six months ended June 30, 2026 was modestly higher than the effective tax rate for the comparable period in 2025. The increase was primarily attributable to differences in the estimated annual pre-tax income for 2026 and 2025 and the related impact of permanent tax differences on the Company's annual effective tax rate.

The Company has recorded its deferred tax assets and liabilities using the statutory federal tax rate of 21%. The Company believes it is more likely than not that all deferred tax assets will be recovered, given the carry back availability as well as the result of future operations, which the Company believes will generate sufficient taxable income to realize the deferred tax asset.

The below table summarizes the significant components of the Company's net deferred tax assets:

 

 

June 30, 2026

 

 

December 31, 2025

 

Deferred tax assets:

 

(in thousands)

 

Unearned premiums

 

$

19,822

 

 

$

19,342

 

Tax-related discount on loss reserve

 

 

4,185

 

 

 

4,399

 

Stock-based compensation

 

 

999

 

 

 

1,323

 

Accrued expenses

 

 

812

 

 

 

1,533

 

Leases

 

 

737

 

 

 

924

 

Unrealized losses

 

 

5,711

 

 

 

4,185

 

Other

 

 

530

 

 

 

488

 

Total deferred tax asset

 

 

32,796

 

 

 

32,194

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

Deferred acquisition costs

 

 

16,421

 

 

 

15,379

 

Prepaid expenses

 

 

262

 

 

 

152

 

Property and equipment

 

 

2,401

 

 

 

2,738

 

Basis in purchased investments

 

 

24

 

 

 

2

 

Basis in purchased intangibles

 

 

5,995

 

 

 

6,652

 

Other

 

 

1,690

 

 

 

1,416

 

Total deferred tax liabilities

 

 

26,793

 

 

 

26,339

 

Net deferred tax assets

 

$

6,003

 

 

$

5,855

 

On July 4, 2025, the "One Big Beautiful Bill Act" ("OBBBA") was signed into law in the United States. The OBBBA makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, including the immediate expensing of acquired business assets and a temporary suspension of the requirement to capitalize and amortize U.S. R&D expenditures. The tax effects of the enacted legislation are reflected in the 2025 financials and there was no material impact to the effective tax rate. The Company will continue to monitor the impact of the OBBBA on future financial statements.

The statute of limitations related to the Company’s federal and state income tax returns remains open from the Company’s filings for 2022 through 2025. There are currently no tax years under examination.

At June 30, 2026 and December 31, 2025, the Company had no significant uncertain tax positions or unrecognized tax benefits that, if recognized, would impact the effective income tax rate.