INCOME TAXES
The components of income tax expense are as follows:
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| | For the Year Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| | (In millions) |
| Current: | | | | | |
| Federal | $ | 115.4 | | | $ | 75.5 | | | $ | 128.9 | |
| State | 26.4 | | | 16.8 | | | 30.1 | |
| Total current income tax expense | 141.8 | | | 92.3 | | | 159.0 | |
| Deferred: | | | | | |
| Federal | 20.7 | | | 43.2 | | | 33.8 | |
| State | 7.7 | | | 9.5 | | | 6.0 | |
| Total deferred income tax expense | 28.4 | | | 52.7 | | | 39.8 | |
| Total income tax expense | $ | 170.2 | | | $ | 145.0 | | | $ | 198.8 | |
A reconciliation of the statutory federal rate to the effective tax rate is as follows (dollar amounts shown in millions):
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| | For the Year Ended December 31, |
| | 2025 | | % | | 2024 | | % | | 2023 | | % |
| Income tax provision at the statutory rate | $ | 139.0 | | | 21.0 | | | $ | 120.8 | | | 21.0 | | | $ | 168.3 | | | 21.0 | |
State income tax expense, net of federal benefit (a) | 28.6 | | | 4.3 | | | 22.8 | | | 4.0 | | | 29.8 | | | 3.7 | |
| Non-deductible items | 2.9 | | | 0.5 | | | 2.5 | | | 0.4 | | | 1.7 | | | 0.2 | |
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| Other, net | (0.3) | | | (0.1) | | | (1.1) | | | (0.2) | | | (1.0) | | | (0.1) | |
| Income tax expense | $ | 170.2 | | | 25.7 | | | $ | 145.0 | | | 25.2 | | | $ | 198.8 | | | 24.8 | |
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(a)State taxes in Massachusetts, Florida, and Virginia make up the majority (greater than 50 percent) of the tax effect in this category.
Deferred income tax asset and liability components consisted of the following: | | | | | | | | | | | |
| | As of December 31, |
| | 2025 | | 2024 |
| | (In millions) |
| Deferred income tax assets: | | | |
| | | |
| Deferred revenue | $ | 55.3 | | | $ | 41.5 | |
| F&I chargeback liabilities | 10.5 | | | 11.7 | |
| Other accrued liabilities | 5.4 | | | 4.2 | |
| Stock-based compensation | 3.6 | | | 4.0 | |
| | | |
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| Operating lease right-of-use assets | 62.3 | | | 56.2 | |
| Other, net | 12.5 | | | 11.6 | |
| Total deferred income tax assets | $ | 149.6 | | | $ | 129.2 | |
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| Deferred income tax liabilities: | | | |
| Intangible asset amortization | $ | 154.2 | | | $ | 135.3 | |
| Depreciation | 89.0 | | | 80.0 | |
| Operating lease liabilities | 60.5 | | | 54.2 | |
| | | |
| Investments, net | 13.4 | | | 18.6 | |
| Deferred sales commissions | 41.2 | | | 27.2 | |
| Other, net | 1.9 | | | 1.6 | |
| Total deferred income tax liabilities | $ | 360.2 | | | $ | 316.9 | |
| Net deferred income tax liabilities | $ | (210.6) | | | $ | (187.7) | |
There were no valuation allowances recorded against the deferred tax assets as of December 31, 2025 or 2024.
As of December 31, 2025, we had an income tax payable of $4.4 million included in accounts payable and other accrued liabilities.
As of December 31, 2024, we had an income tax receivable of $3.4 million, included in other current assets and an income tax payable of $5.7 million included in accounts payable and other accrued liabilities.
The statutes of limitation related to our consolidated Federal income tax returns are closed for all tax years up to and including 2021. The expiration of the statutes of limitation related to the various state income tax returns that we and our subsidiaries file varies by state. The 2020 through 2024 tax years generally remain subject to examination by most state tax authorities. We believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters.
During the years ended December 31, 2025, 2024, and 2023 we made income tax payments, net of refunds received, totaling $139.8 million, $78.7 million, and $191.9 million, respectively.
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| Income Taxes Paid | For the Year Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| | (In millions) |
| Federal | $ | 118.3 | | | $ | 63.7 | | | $ | 158.0 | |
| State (a) | 21.6 | | | 15.0 | | | 33.9 | |
| Total | $ | 139.8 | | | $ | 78.7 | | | $ | 191.9 | |
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(a)The amount of income taxes paid during the year for individual states does not meet the 5% disaggregation threshold.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.