Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 13. Income Taxes The Company uses the liability method of accounting for income taxes as set forth in ASC 740, “Income Taxes.” Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. On an interim basis, the Company estimates what its anticipated annual effective tax rate will be and records a quarterly income tax provision in accordance with the estimated annual rate, plus the tax effect of certain discrete items that arise during the quarter. As the fiscal year progresses, the Company refines its estimates based on actual events and financial results during the quarter. This process can result in significant changes to the Company’s estimated effective tax rate. When this occurs, the income tax provision is adjusted during the quarter in which the estimates are refined, so that the year-to-date provision reflects the estimated annual effective tax rate. These changes, along with adjustments to the Company’s deferred taxes and related valuation allowance, may create fluctuations in the overall effective tax rate from quarter to quarter. The Company’s effective income tax rate was 32.4% and 39.3% for the three months ended June 30, 2026 and 2025, respectively, and 32.7% and 37.8% for the six months ended June 30, 2026 and 2025, respectively. The effective tax rates for the three and six months ended June 30, 2026 differed from the U.S. federal statutory rate of 21% primarily due to state and local income taxes and nondeductible officer and stock-based compensation, partially offset by income from flow-through entities and federal research and development credits. As of June 30, 2026, the Company had gross unrecognized tax benefits of $1.2 million that, if recognized, would reduce the annual effective tax rate. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. The Company recognized $0.1 million of interest and penalties for the six months ended June 30, 2026. The Company does not anticipate a material change to its unrecognized tax benefits within the next 12 months. The Company’s U.S. federal income tax returns for the years ended December 31, 2020 through December 31, 2025, and its California income tax returns for the years ended December 31, 2019 through December 31, 2025, remain open to examination, either because the applicable statute of limitations has not expired or because the year is under audit. The Internal Revenue Service is currently examining the Company’s 2024 federal income tax return and reviewing amended federal income tax returns for 2020 and 2021. The California Franchise Tax Board is currently examining the Company’s California income tax returns for 2019 through 2021. For the six months ended June 30, 2026, $10.9 million of payments were made for income taxes, net of tax refunds. |