v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income Tax Provision (Benefit)
The provision for income taxes consists of the following:
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(in thousands)
Current Federal$868 $12,417 $6,102 $7,335 
Current State2,083 — 4,529 2,297 
Deferred Federal4,687 (8,399)10,670 (2,185)
Deferred State(1,450)— (2,847)$(238)
Income tax provision$6,188 $4,018 $18,454 $7,209 
The provision for income taxes differs from the amount computed by applying the statutory Federal income tax rate before the provision for income taxes.
Rate Reconciliation
The following table reconciles the U.S federal statutory income tax rate to the Company’s effective income tax rate for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Amount%Amount%Amount%Amount%
(in thousands)
Federal statutory rate$13,173 21.0 %$4,096 21.0 %$24,135 21.0 %$10,917 21.0 %
State income taxes, net of Federal benefit2,017 3.2 932 4.8 4,478 3.9 2,593 5.0 
State tax credits(1,728)(2.8)— — (2,227)(1.9)— — 
Changes in tax laws in current period119 0.2 — — 207 0.2 — — 
Excess tax benefits related to share-based compensation (Note 14)(11,591)(18.4)(1,856)(9.5)(12,394)(10.8)(9,020)(17.3)
Return to provision(1,568)(2.5)429 2.2 (1,568)(1.4)429 0.8 
Changes in valuation allowance1,945 3.1 — — 1,945 1.7 — — 
Non-deductible executive compensation4,584 7.3 756 3.9 5,375 4.7 3,069 5.9 
Research and development tax credits(670)(1.1)(775)(4.0)(1,195)(1.0)(1,550)(3.0)
Other(93)(0.2)436 2.2 (302)(0.3)771 1.5 
Effective tax rate6,188 9.8 %4,018 20.6 %18,454 16.1 %7,209 13.9 %
The Company’s effective tax rate differs from the statutory rate primarily due to the excess tax benefits of stock transactions and state taxes. Pretax income is all domestic and there are no foreign income effects. No state jurisdictions individually meet the 5% disaggregation threshold. State taxes in Oregon, Oklahoma, Virginia, and Pennsylvania for the three and six months ended June 30, 2026, and state taxes in Oregon, Indiana, Pennsylvania, and Virginia for the three and six months ended June 30, 2025, contributed to the majority (greater than 50%) of the tax effect in the state and local income tax category.
The Company’s estimated annual 2026 effective tax rate, excluding discrete events, is approximately 25.0%. We file income tax returns in the U.S., state and foreign income tax jurisdictions. We are subject to U.S. income tax examinations for the tax years 2023 to present, and to non-U.S. income tax examinations for the tax years 2022 to present. In addition, we are subject to state and local income tax examinations for tax years 2022 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.
Realization of deferred tax assets, including the associated credit carryforwards, is dependent upon generating sufficient taxable income in the appropriate tax jurisdiction. We believe that it is more likely than not that we may not realize the benefit of our Tennessee investment tax credit carryforward and, accordingly, have established a valuation allowance against this deferred tax asset.
Tax Law Changes
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, introducing significant amendments to the Internal Revenue Code. In accordance with ASC 740, Income Taxes, the Company recognized the tax effects of the enacted legislation in the period that includes the enactment date.
Impact of Tax Law Changes
The Company measured the effects of the tax law change using the enactment date approach, with a measurement date of June 30, 2025, from the Q2 2025 tax provision calculation as the closest date of measurement for deferred and current values. The measurement resulted in an increase in DTLs of $35.4 million, a decrease in current income tax payable of $36.2 million, and an increase in provision expense of $0.8 million due to the bonus depreciation change effect on Texas Franchise tax and the reduced R&D Tax Credit allowed with the §174A change. Significant provisions of OBBBA affecting the Company include:
•100% Bonus Depreciation: Effective for qualified property acquired after January 19, 2025, including manufacturing equipment, which reverses the previously scheduled phase-down of the bonus depreciation deduction to 40% for 2025 under prior law. This provision increased DTLs by $7.0 million, decreased current payable by $7.0 million, and increased provision expense due to the accelerated tax deductions for capital expenditures made in 2025 and the small provision effect from the change in Texas Franchise Tax and state bonus depreciation. This adjustment also decreased the DTL for the UNICAP inventory calculation by $0.6 million, offset against current income tax payable.
•Permanent Expensing of Domestic R&E Costs (Section 174A): Retroactive to January 1, 2025, resulting in decreased DTAs due to immediate tax deductibility of qualified domestic R&E costs as incurred. This provision decreased DTAs by $3.4 million, decreased current payables by $4.2 million, and increased provision expense by $0.8 million due to the reduction in the R&D tax credit (the Company will revert to the reduced credit method for calculation of the tax credit under the new law).
•Accelerated Deduction of Unamortized Domestic R&E Cost Originally Capitalized in Tax Years 2022, 2023, and 2024 (Section 174A): The Company has elected to deduct the unamortized amounts of Section 174 Costs as of December 31, 2024, fully in tax year 2025, which decreased DTAs and current payables by $25.5 million.
The impact of OBBBA enactment increased the Company’s effective tax rate by 0.7% for the year ended December 31, 2025. Effective January 1, 2026, the OBBBA enacted a 1% charitable contribution floor. The Company has included this permanent difference in the Q1 tax provision calculation, and the change increased the Company’s effective tax rate by 0.1% for the three months ended June 30, 2026.
Net Operating Loss
Due to the favorable changes in tax law related to the OBBBA, as of December 31, 2025, the Company generated Federal and State net operating loss (“NOL”) carryforwards of approximately $57.0 million and $22.5 million, respectively. The Federal NOLs have an indefinite carryforward period but are limited to offsetting 80% of taxable income in any given year under current tax law. The State NOLs have varying expiration dates.
The Company recorded deferred tax assets of $12.0 million (Federal) and $1.1 million (State) related to these NOL carryforwards as of December 31, 2025. As of June 30, 2026, the federal deferred tax asset balance has been fully
utilized and the remaining state deferred tax asset is negligible considering usage of the NOL’s in the first and second quarter of 2026. Accordingly, no valuation allowance has been recorded as of June 30, 2026.