ARRAY DIGITAL INFRASTRUCTURE, INC.AD
ARRAY DIGITAL INFRASTRUCTURE, INC. Income Taxes Disclosure
Note 4 Income Taxes
Array is included in a consolidated federal income tax return and in certain state income tax returns with other members of the TDS consolidated group. For financial statement purposes, Array and its subsidiaries compute their income tax expense as if they comprised a separate affiliated group and were not included in the TDS consolidated group.
Array’s current income taxes balances at December 31, 2025 and 2024, were as follows:
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in thousands) | |||||||||||
| Federal income taxes payable | $ | (3,421) | $ | (1,261) | |||||||
| Net state income taxes receivable (payable) | (292) | 123 | |||||||||
Income tax expense (benefit) from continuing operations is summarized as follows:
| Year Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 277 | $ | 245 | $ | (1,727) | |||||||||||
| State | 6,307 | (2,786) | 2,064 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 16,567 | (11,704) | 11,288 | ||||||||||||||
| Federal - valuation allowance adjustment | (35,341) | — | — | ||||||||||||||
| State | 24,653 | (5,011) | 21,230 | ||||||||||||||
| State - valuation allowance adjustment | (43,611) | — | — | ||||||||||||||
| Total income tax expense (benefit) | $ | (31,148) | $ | (19,256) | $ | 32,855 | |||||||||||
Array's cash tax payments (refunds) made to (received from) significant jurisdictions are as follows:
| Year Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Federal | $ | 246,817 | $ | 34,567 | $ | 879 | |||||||||||
| Maine | — | — | 464 | ||||||||||||||
| Oregon | — | — | 975 | ||||||||||||||
| Virginia | — | — | 740 | ||||||||||||||
| Other | 4,954 | 1,743 | 216 | ||||||||||||||
| Total income taxes paid (refunded) | $ | 251,771 | $ | 36,310 | $ | 3,274 | |||||||||||
A reconciliation of Array’s income tax expense from continuing operations computed at the statutory rate to the reported income tax expense from continuing operations, and the statutory federal income tax rate to Array’s effective income tax rate is as follows:
| Year Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Statutory federal income tax expense and rate | $ | 29,635 | 21.0 | % | $ | (20,941) | 21.0 | % | $ | 8,659 | 21.0 | % | |||||||||||||||||||||||
State income taxes, net of federal benefit1 | (14,617) | (10.4) | (3,881) | 3.9 | 17,261 | 41.9 | |||||||||||||||||||||||||||||
| Change in unrecognized tax benefits | 4,508 | 3.2 | (2,434) | 2.4 | (450) | (1.1) | |||||||||||||||||||||||||||||
Change in federal valuation allowance2 | (44,499) | (31.5) | 9,165 | (9.2) | 8,350 | 20.3 | |||||||||||||||||||||||||||||
| Compensation adjustments | (285) | (0.2) | 281 | (0.3) | 160 | 0.4 | |||||||||||||||||||||||||||||
| Dividends-received deduction | (6,654) | (4.7) | (2,008) | 2.0 | (1,202) | (2.9) | |||||||||||||||||||||||||||||
| Other differences, net | 764 | 0.5 | 562 | (0.5) | 77 | 0.1 | |||||||||||||||||||||||||||||
| Total income tax expense (benefit) and rate | $ | (31,148) | (22.1) | % | $ | (19,256) | 19.3 | % | $ | 32,855 | 79.7 | % | |||||||||||||||||||||||
1State income taxes, net of federal benefit, includes adjustments to state valuation allowances. State taxes in 2025 include tax benefits of $34.5 million related to expected realization of state tax attributes by the T-Mobile transaction as well as the sale of certain wireless spectrum licenses classified as held for sale, partially offset by $15.5 million of discrete expense related to state apportionment changes following the disposal of the wireless business. State taxes in 2023 include discrete valuation allowance adjustments that did not recur in 2024 or 2025.
The states that make up the majority of state income tax benefit in 2025 include Wisconsin and Illinois which are partially offset by California state tax expense. The states that make up the majority of state income taxes in 2024 include Wisconsin, California and Oregon. The states that make up the majority of state income taxes in 2023 include Wisconsin and Illinois.
2Change in federal valuation allowance in 2025 is due primarily to deferred tax assets that are now likely to be realized by the taxable income generated by the T-Mobile transaction, as well as the pending sale of certain wireless spectrum licenses classified as held for sale. The change in federal valuation allowance in 2024 and 2023 was due primarily to annual interest expense from partnership investments that carryforward but were not deemed likely to be realized.
Significant components of Array’s deferred income tax assets and liabilities at December 31, 2025 and 2024, were as follows:
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in thousands) | |||||||||||
| Deferred tax assets | |||||||||||
| Net operating loss (NOL) carryforwards | $ | 129,266 | $ | 142,494 | |||||||
| Lease liabilities | 134,832 | 237,797 | |||||||||
| Contract liabilities | — | 58,075 | |||||||||
| Interest expense carryforwards | 17,400 | 124,888 | |||||||||
| Asset retirement obligation | 48,863 | 84,416 | |||||||||
| Other | 53,768 | 64,609 | |||||||||
| Total deferred tax assets | 384,129 | 712,279 | |||||||||
| Less valuation allowance | (114,580) | (180,827) | |||||||||
| Net deferred tax assets | 269,549 | 531,452 | |||||||||
| Deferred tax liabilities | |||||||||||
| Property, plant and equipment | 70,588 | 389,459 | |||||||||
| Licenses/intangibles | 379,083 | 420,847 | |||||||||
| Partnership investments | 77,534 | 191,171 | |||||||||
| Lease assets | 122,518 | 223,603 | |||||||||
| Other | 1,869 | 34,482 | |||||||||
| Total deferred tax liabilities | 651,592 | 1,259,562 | |||||||||
| Net deferred income tax liability | $ | 382,043 | $ | 728,110 | |||||||
| Presented in the Consolidated Balance Sheet as: | |||||||||||
| Deferred income tax liability, net | $ | 387,030 | $ | 728,229 | |||||||
| Other assets and deferred charges | (4,987) | (119) | |||||||||
| Net deferred income tax liability | $ | 382,043 | $ | 728,110 | |||||||
At December 31, 2025, Array and certain subsidiaries had $24.2 million of federal NOL carryforwards (generating a $5.1 million deferred tax asset) available to offset future taxable income subject to certain limitations. The federal NOL carryforwards generally expire between 2026 and 2037, with the exception of federal NOLs generated after 2017, which do not expire. Array and certain subsidiaries had $2,953.5 million of state NOL carryforwards (generating a $124.0 million deferred tax asset) available to offset future taxable income. The state NOL carryforwards generally expire between 2026 and 2045. A valuation allowance was established for certain federal and state NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized.
At December 31, 2025, Array and certain subsidiaries had $5.0 million of federal interest expense carryforwards (generating a $1.1 million deferred tax asset) available to offset future taxable income. The federal interest expense carryforwards do not expire. Array and certain subsidiaries had $461.3 million of state interest expense carryforwards (generating a $16.3 million deferred tax asset) available to offset future taxable income. The state interest expense carryforwards generally do not expire. A valuation allowance was established for certain federal and state interest expense carryforwards since it is more likely than not that a portion of such carryforwards will not be utilized.
A summary of Array’s deferred tax asset valuation allowance is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Balance at beginning of year | $ | 180,827 | $ | 145,839 | $ | 114,850 | |||||||||||
| Charged (credited) to Income tax expense - continuing operations | (78,952) | 11,794 | 15,356 | ||||||||||||||
| Charged to Income tax expense - discontinued operations | 12,705 | 23,194 | 15,633 | ||||||||||||||
| Balance at end of year | $ | 114,580 | $ | 180,827 | $ | 145,839 | |||||||||||
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Unrecognized tax benefits balance at beginning of year | $ | 28,807 | $ | 35,713 | $ | 35,540 | |||||||||||
| Additions for tax positions of current year | 11,138 | 6,113 | 9,032 | ||||||||||||||
| Additions for tax positions of prior years | 239 | — | — | ||||||||||||||
| Reductions for tax positions of prior years | (1,902) | (6,276) | (2,992) | ||||||||||||||
| Reductions for settlements of tax positions | — | (11) | — | ||||||||||||||
| Reductions for lapses in statutes of limitations | (3,746) | (6,732) | (5,867) | ||||||||||||||
| Unrecognized tax benefits balance at end of year | $ | 34,536 | $ | 28,807 | $ | 35,713 | |||||||||||
Unrecognized tax benefits are included in Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized at each respective year end period, they would have reduced income tax expense by $27.3 million, $22.8 million and $28.2 million in 2025, 2024 and 2023, respectively, net of the federal benefit from state income taxes.
Array recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit). The amounts charged to income tax expense related to interest and penalties were immaterial in 2025, 2024 and 2023. Net accrued liabilities for interest and penalties were $13.0 million, $12.9 million and $13.1 million in 2025, 2024 and 2023, respectively, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.
Array and its subsidiaries are included in TDS’ consolidated federal and certain state income tax returns. Array also files certain state and local income tax returns separately from TDS. With limited exceptions, TDS and Array are no longer subject to federal and state income tax audits for the years prior to 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 16, 2024 | |
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.