Income Taxes |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | Income Taxes We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when temporary differences reverse. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. A valuation allowance is recorded to reduce the Company's deferred tax assets to the amount that is more likely than not to be realized. We had no recorded valuation allowance at June 30, 2026 and December 31, 2025. Our effective tax rate was 29.6% and 28.5% for the three months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate is primarily the result of permanent differences and changes in unrecognized tax benefits generating tax expense which are not correlated to the change in income. Our effective tax rate was 40.9% and 25.2% for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate is primarily the result of permanent differences and changes in unrecognized tax benefits generating tax expense which are not correlated to the change in income. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits in income tax expense. At June 30, 2026 and December 31, 2025, we had a total of $4.7 million and $4.5 million in gross unrecognized tax benefits, respectively included in long-term income taxes payable in the consolidated balance sheet. Of this amount, $3.8 million and $3.5 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate as of June 30, 2026 and December 31, 2025. The net change in unrecognized tax benefits was an increase of $0.1 million and a decrease of $0.9 million during the three months ended June 30, 2026 and June 30, 2025, respectively. The net change in unrecognized tax benefits was an increase of $0.2 million and a decrease of $1.0 million during the six months ended June 30, 2026 and June 30, 2025, respectively. The total net amount of accrued interest and penalties for such unrecognized tax benefits was $1.2 million and $0.9 million at June 30, 2026 and December 31, 2025, respectively, and is included in long-term income taxes payable in the consolidated balance sheets. These unrecognized tax benefits relate to state income tax filing positions. Income tax expense is increased each period for the accrual of interest on outstanding positions and penalties when the uncertain tax position is initially recorded. Income tax expense is reduced in periods by the amount of accrued interest and penalties associated with reversed uncertain tax positions due to lapse of applicable statute of limitations, when applicable or when a position is settled. Net interest and penalties included in income tax expense was nominal for both the three and six month periods ended June 30, 2026 and June 30, 2025. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
The federal statute of limitations remains open for the years 2023 and forward. Tax years 2016 and forward are subject to audit by state tax authorities depending on the tax code and administrative practice of each state.
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