ALTA EQUIPMENT GROUP INC. Income Taxes Disclosure
NOTE 12 — INCOME TAXES
The income tax expense (benefit) were calculated based upon the following components of (loss) income before income taxes:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
U.S. (loss) income |
|
$ |
(59.8 |
) |
|
$ |
(64.5 |
) |
|
$ |
0.7 |
|
Foreign income (loss) - Canada |
|
|
1.0 |
|
|
|
(1.8 |
) |
|
|
1.8 |
|
Total (loss) income before taxes |
|
$ |
(58.8 |
) |
|
$ |
(66.3 |
) |
|
$ |
2.5 |
|
The income tax expense (benefit) consisted of the following:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
$ |
1.8 |
|
|
$ |
1.7 |
|
|
$ |
0.7 |
|
U.S. state and local |
|
|
(0.8 |
) |
|
|
3.9 |
|
|
|
1.7 |
|
Foreign - Canada |
|
|
1.9 |
|
|
|
— |
|
|
|
0.4 |
|
Deferred |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
|
5.9 |
|
|
|
(2.1 |
) |
|
|
(5.2 |
) |
U.S. state and local |
|
|
17.8 |
|
|
|
(7.5 |
) |
|
|
(5.3 |
) |
Foreign - Canada |
|
|
(5.1 |
) |
|
|
(0.2 |
) |
|
|
1.3 |
|
Total income tax expense (benefit) |
|
$ |
21.5 |
|
|
$ |
(4.2 |
) |
|
$ |
(6.4 |
) |
Reconciliation of the income tax expense (benefit) and effective rate to the U.S. federal statutory rate:
|
|
Year Ended December 31, |
||||
|
|
2025 |
||||
|
|
Amount |
|
|
Percent |
|
Income tax benefit at statutory U.S. federal rate |
|
$ |
(12.4 |
) |
|
21.0% |
Income tax expense at statutory U.S. state and local rates, net of federal income tax effect (1)(2) |
|
|
13.2 |
|
|
(22.3)% |
Foreign tax effects - Canada |
|
|
|
|
|
|
Foreign rate differential |
|
|
— |
|
|
(0.1)% |
Remeasurement of deferred items |
|
|
(2.9 |
) |
|
5.0% |
Effect of cross-border tax laws |
|
|
0.3 |
|
|
(0.5)% |
Changes in valuation allowances |
|
|
20.6 |
|
|
(34.9)% |
Nontaxable or nondeductible items |
|
|
1.6 |
|
|
(2.7)% |
Other |
|
|
1.1 |
|
|
(2.1)% |
Total income tax expense |
|
$ |
21.5 |
|
|
(36.6)% |
(1) Michigan, Illinois, and Florida, in aggregate, make up in 2025 |
||||||
(2) Category includes state and local jurisdictions valuation allowance changes |
||||||
|
|
Year Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Income tax (benefit) expense at statutory U.S. federal rate |
|
$ |
(13.9 |
) |
|
$ |
0.5 |
|
Income tax (benefit) expense at statutory U.S. states rate, net |
|
|
(2.8 |
) |
|
|
0.2 |
|
Permanent differences: |
|
|
|
|
|
|
||
Foreign rate differential |
|
|
(0.1 |
) |
|
|
0.1 |
|
Valuation allowance |
|
|
12.4 |
|
|
|
(8.8 |
) |
Other |
|
|
0.2 |
|
|
|
1.6 |
|
Total income tax benefit |
|
$ |
(4.2 |
) |
|
$ |
(6.4 |
) |
For the year ended December 31, 2025, the income tax expense was primarily attributable to an increase of the Company's valuation allowance. During the year ended December 31, 2024, the income tax benefit was primarily attributable to the Company's pre-tax losses partially offset by a valuation allowance against a portion of the deferred tax asset (“DTA”) relating to U.S. disallowed interest expense carryforwards created by the provisions of the TCJA.
During 2025, the OBBBA was enacted into law. Relevant key tax components of the OBBBA to the Company include extension of certain expiring tax provisions from the TCJA, the reinstatement of 100% bonus depreciation on purchases of qualified business property, and changing the interest expense limitation from EBIT to EBITDA, allowing more interest to be deductible in a given year, resulting in lower cash taxes and improved cash liquidity. The Company factored the tax law change into its valuation allowance assessment, reassessing the realizability of its DTAs. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the DTAs as well as the nature of the deferred tax attribute to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the DTAs will not be realized. The Company's ability to realize its DTAs is dependent on generating sufficient future taxable income. In the current period, after consideration of the OBBBA, an adjusted cumulative pretax loss has been determined based on a 12-quarter look-back period and is considered significant negative evidence under Topic 740. Although on a forecasted future income planning basis, we believe the Company may be able to utilize these DTAs, this positive factor is not enough to overcome the overall cumulative loss indication. As a result, management concluded that it is no longer more likely than not that certain DTAs will be realized; therefore, a full valuation allowance against those DTAs was deemed appropriate, leading to a $24.5 million increase in deferred income tax expense for the year ended December 31, 2025.
We regularly assess the need for a valuation allowance against our DTAs. The recognition of a valuation allowance is a significant estimate and a future change in judgment or circumstances could result in a material change to the valuation allowance and income tax expense. We will continue to monitor the need for a valuation allowance against our DTAs on a quarterly basis.
The effective tax rate for the years ended December 31, 2025, 2024 and 2023 was (36.6)%, 6.3% and (256.0)%, respectively. The effective income tax rates for 2025 and 2024 were primarily the result of the items noted above. The effective tax rate in 2023 was primarily attributable to the release of the valuation allowance on certain U.S. federal and state DTAs.
The Company intends to indefinitely reinvest the undistributed earnings of our foreign subsidiaries and expects future U.S. cash generation to be sufficient to meet future U.S. cash needs. The undistributed earnings of foreign subsidiaries and related unrecognized deferred tax liability are not material as of December 31, 2025 and 2024. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, the Company may be subject to foreign withholding taxes and U.S. state income taxes, beyond the one-time transition tax.
The components of deferred tax assets and liabilities were as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred Tax Assets |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
37.2 |
|
|
$ |
34.4 |
|
Deferred revenue |
|
|
0.6 |
|
|
|
0.5 |
|
Accounts receivable and inventories |
|
|
7.0 |
|
|
|
6.6 |
|
Accrued liabilities |
|
|
3.4 |
|
|
|
3.7 |
|
Lease liability |
|
|
40.1 |
|
|
|
39.9 |
|
Interest limitation carryforward |
|
|
7.6 |
|
|
|
35.6 |
|
Deferred payroll taxes and other |
|
|
3.2 |
|
|
|
3.6 |
|
Gross deferred tax assets |
|
|
99.1 |
|
|
|
124.3 |
|
Valuation allowance |
|
|
(36.9 |
) |
|
|
(12.4 |
) |
Deferred tax assets |
|
$ |
62.2 |
|
|
$ |
111.9 |
|
Deferred Tax Liabilities |
|
|
|
|
|
|
||
Property and equipment |
|
|
(36.0 |
) |
|
|
(62.9 |
) |
Goodwill & intangibles |
|
|
(1.2 |
) |
|
|
(1.2 |
) |
Prepaid expenses |
|
|
(2.1 |
) |
|
|
(1.7 |
) |
Lease right-of-use assets |
|
|
(37.5 |
) |
|
|
(39.2 |
) |
Gross deferred tax liabilities |
|
$ |
(76.8 |
) |
|
$ |
(105.0 |
) |
Deferred tax (liabilities) assets, net |
|
$ |
(14.6 |
) |
|
$ |
6.9 |
|
For the years ended December 31, 2025 and 2024, the net change in the valuation allowance was an increase of $24.5 million and $12.4 million, respectively.
As of December 31, 2025 and 2024, the Company had U.S. federal net operating tax loss carryforwards of approximately $175.1 million and $160.9 million, respectively, primarily due to taking bonus depreciation. These federal net operating tax loss carryforwards may be carried forward indefinitely and are eligible to offset 80% of future taxable income. As of December 31, 2025, the Company also had state net operating loss carryforwards of $174.7 million, with varying carryforward expiration periods ranging from 2041 to 2046 where limited. As of December 31, 2025, the Company had no Canadian net operating loss carryforwards.
We include interest accrued on the underpayment of income taxes in “Interest expense – other” and penalties, if any, related to unrecognized tax benefits in “Selling, general and administrative expenses” in our Consolidated Statements of Operations. The amounts of such interest or penalties were not material in each of the years ended December 31, 2025, 2024 and 2023.
The cash income taxes paid (net of refunds received) by jurisdiction for 2025 are as follows:
|
|
Year Ended December 31, |
|
|
|
|
2025 |
|
|
U.S. federal |
|
$ |
1.0 |
|
U.S. state and local: |
|
|
|
|
Michigan |
|
|
1.2 |
|
New York |
|
|
0.6 |
|
Florida |
|
|
0.5 |
|
Massachusetts |
|
|
0.4 |
|
Other (1) |
|
|
0.5 |
|
Foreign - Canada |
|
|
0.1 |
|
Total Net Payments |
|
$ |
4.3 |
|
(1) Represents aggregated individual state and local jurisdictions with net payments under 5% of total |
|
|||
Cash income taxes paid (net of refunds received) for the years ended December 31, 2024 and 2023 were $3.7 million and $5.7 million, respectively.
The Company has open tax years from 2022 through 2025 for U.S. federal and Canadian income taxes. The Company also files tax returns in numerous states for which various tax years are subject to examination and currently involved in audits. Typically states remain open for three years from filing, with the majority of the open years being 2022 to 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 18, 2021 | |
| 2019 | Mar 25, 2020 | |
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.