Income Taxes |
6 Months Ended |
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Jun. 30, 2026 | |
| Income Taxes | |
| Income Taxes | Note 7. Income Taxes The federal statutory tax rate is 21%. Southland’s effective tax rate was 1.8% and 0.6% for the three months ended June 30, 2026 and 2025, respectively. The primary differences between the statutory rate and the effective rate for the three months ended June 30, 2026, were adjustments to valuation allowances recorded. The primary differences between the statutory rate and the effective rate for the three months ended June 30, 2025, were due to state income taxes, federal tax credits, valuation allowances recorded against certain subsidiaries’ net deferred tax assets, and income earned in a foreign jurisdiction with different income tax rates from the domestic rate; however, that foreign income is included within U.S. taxable income through Section 951A Global Intangible Low-Taxed Income (“GILTI”). The effective rate was 1.4% and 2.9% for the six months ended June 30, 2026 and 2025, respectively. The primary differences between the statutory rate and the effective rate for the six months ended June 30, 2026, were adjustments to valuation allowances recorded. The primary differences between the statutory rate and the effective rate for the six months ended June 30, 2025, were due to state income taxes, federal tax credits, valuation allowances recorded against certain subsidiaries’ net deferred tax assets, and income earned in a foreign jurisdiction with different income tax rates from the domestic rate; however, that foreign income is included within U.S. taxable income through GILTI. The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of June 30, 2026. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of June 30, 2026, the Company has recorded a valuation allowance of approximately $146.7 million related to its US federal and state net deferred tax assets, inclusive of current year activity, as they are determined to be more-likely-than-not to not be utilized. As a result of financial losses incurred within the Canadian operations at certain subsidiaries, the Company maintains a valuation allowance against the net deferred tax assets as they are determined to not be more-likely-than-not to be utilized. As of June 30, 2026, the Company has a valuation allowance in the amount of $8.4 million related to the net deferred tax assets on certain Canadian subsidiaries. The Company maintains a valuation allowance related to the net deferred tax assets recorded from United Kingdom operations from historic losses incurred that are determined to not be more-likely-than-not to be utilized. As of June 30, 2026, the valuation allowance related to United Kingdom operations is $16.1 million.
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