Quarterly report [Sections 13 or 15(d)]

Income taxes

v3.26.1
Income taxes
 3 Months Ended
Mar. 31, 2026
Income taxes  
Income taxes

18. Income taxes

The Company and its subsidiaries are subject to US federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.

The Company files a consolidated income tax return with subsidiaries in which the Company has an 80% or greater ownership interest. Subsidiaries in which the Company does not have an 80% or more ownership stake are not included in the Company’s consolidated income tax group and file their own separate income tax return(s). As a result, certain corporate entities included in these financial statements are not able to combine or offset their taxable income or losses with other entities’ tax attributes.

Income tax expense for the three months ended March 31, 2026 and 2025 is based on the estimated annual effective tax rate, and includes discrete tax impact primarily driven by 2026 federal and state income taxes related to the gain on sale of the PRV. For the three months ended March 31, 2026, the Company is recognizing an income tax expense of $5.1 million on a pre-tax income of $142.3 million, resulting in an effective tax rate of 3.6%. The Company expects a net deferred tax asset with a full valuation allowance and a 3.8% estimated annual effective tax rate for 2026. For the three months ended March 31, 2025, the Company recognized no income tax expense resulting in an effective tax rate of 0%.