AUTONATION, INC.AN
AUTONATION, INC. Income Taxes Disclosure
INCOME TAXES
The components of the income tax provision from continuing operations for the years ended December 31 are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 182.2 | $ | 185.8 | $ | 245.6 | |||||||||||
| State | 47.5 | 45.1 | 64.9 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 10.1 | (2.4) | 19.2 | ||||||||||||||
| State | (1.2) | (1.4) | (0.2) | ||||||||||||||
| Change in valuation allowance, net | 0.8 | 1.3 | 1.0 | ||||||||||||||
| Adjustments and settlements | (4.0) | (3.9) | (0.5) | ||||||||||||||
| Income tax provision | $ | 235.4 | $ | 224.5 | $ | 330.0 | |||||||||||
A reconciliation of the income tax provision calculated using the statutory federal income tax rate to our income tax provision from continuing operations for the years ended December 31 is as follows:
| 2025 | % | 2024 | % | 2023 | % | ||||||||||||||||||||||||||||||
| Income tax provision at statutory rate | $ | 185.7 | 21.0 | $ | 192.5 | 21.0 | $ | 283.5 | 21.0 | ||||||||||||||||||||||||||
Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Goodwill | 13.9 | 1.6 | — | — | — | — | |||||||||||||||||||||||||||||
Other | 4.1 | 0.5 | 4.5 | 0.5 | 0.5 | — | |||||||||||||||||||||||||||||
State and local income taxes, net of federal benefit (1) | 35.8 | 4.0 | 35.5 | 3.9 | 53.4 | 4.0 | |||||||||||||||||||||||||||||
| 239.5 | 27.1 | 232.5 | 25.4 | 337.4 | 25.0 | ||||||||||||||||||||||||||||||
| Change in valuation allowance, net | 0.8 | 0.1 | 1.3 | 0.1 | 1.0 | 0.1 | |||||||||||||||||||||||||||||
Changes to unrecognized tax benefits | (4.0) | (0.5) | (3.7) | (0.4) | (0.5) | — | |||||||||||||||||||||||||||||
| Federal and state tax credits | (1.0) | (0.1) | (2.9) | (0.3) | (2.8) | (0.2) | |||||||||||||||||||||||||||||
| Other, net | 0.1 | — | (2.7) | (0.3) | (5.1) | (0.5) | |||||||||||||||||||||||||||||
| Income tax provision | $ | 235.4 | 26.6 | $ | 224.5 | 24.5 | $ | 330.0 | 24.4 | ||||||||||||||||||||||||||
(1) Primarily comprised of state income taxes in California and Florida, net of the related federal benefit. | |||||||||||||||||||||||||||||||||||
Income tax cash payments, net of refunds for the years ended December 31 are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 247.0 | $ | 112.0 | $ | 238.0 | |||||||||||
State and Local: | |||||||||||||||||
| California | 18.7 | 14.5 | 20.4 | ||||||||||||||
| Florida | 13.6 | 11.0 | 18.5 | ||||||||||||||
| Other | 16.2 | 11.2 | 23.9 | ||||||||||||||
| $ | 48.5 | $ | 36.7 | $ | 62.8 | ||||||||||||
Total income taxes paid, net of refunds | $ | 295.5 | $ | 148.7 | $ | 300.8 | |||||||||||
Deferred income tax asset and liability components at December 31 are as follows:
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Inventory | $ | 30.6 | $ | 32.4 | |||||||
| Warranty, chargeback, and self-insurance liabilities | 80.5 | 78.6 | |||||||||
| Other accrued liabilities | 37.4 | 32.7 | |||||||||
| Deferred compensation | 38.6 | 33.9 | |||||||||
| Stock-based compensation | 8.8 | 8.9 | |||||||||
| Lease liabilities | 176.9 | 159.6 | |||||||||
Loss carryforwards— federal and state | 16.2 | 19.1 | |||||||||
Software development costs | 2.6 | 25.1 | |||||||||
| Other, net | 8.3 | 4.9 | |||||||||
| Total deferred income tax assets | 399.9 | 395.2 | |||||||||
| Valuation allowance | (9.1) | (8.3) | |||||||||
| Deferred income tax assets, net of valuation allowance | 390.8 | 386.9 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Long-lived assets (intangible assets and property) | (312.2) | (312.9) | |||||||||
| Right-of-use assets | (160.7) | (145.0) | |||||||||
| Other, net | (12.0) | (12.1) | |||||||||
| Total deferred income tax liabilities | (484.9) | (470.0) | |||||||||
| Net deferred income tax liabilities | $ | (94.1) | $ | (83.1) | |||||||
Our net deferred tax liability of $94.1 million as of December 31, 2025, and $83.1 million as of December 31, 2024, is classified as Deferred Income Taxes in the accompanying Consolidated Balance Sheets.
Income taxes payable included in Other Current Liabilities totaled $2.6 million at December 31, 2025 and $69.0 million at December 31, 2024.
At December 31, 2025, we had a $28.5 million gross domestic federal net operating loss carryforward, $192.6 million of gross domestic state net operating loss carryforwards and capital loss carryforwards, and $0.6 million of state tax credits. The federal net operating loss carryforward and $48.7 million of state net operating loss carryforwards have no expiration. The state tax credits and $143.9 million of state net operating loss carryforwards expire from 2026 through 2045.
The federal and state loss carryforwards and state tax credits result in a deferred tax asset of $16.2 million.
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We provide valuation allowances to offset portions of deferred tax assets due to uncertainty surrounding the future realization of such deferred tax assets. At December 31, 2025, we had $9.1 million of valuation allowance related to state net operating loss carryforwards. We adjust the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized.
We file income tax returns in the U.S. federal jurisdiction and various states. As a matter of course, various taxing authorities, including the IRS, regularly audit us. These audits may culminate in proposed assessments which may ultimately result in our owing additional taxes. With few exceptions, we are no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2021. Currently, no tax years are under examination by the IRS and tax years from 2021 to 2023 are under examination by U.S. state jurisdictions. We believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1 | $ | 5.9 | $ | 5.1 | $ | 5.5 | |||||||||||
| Additions based on tax positions related to the current year | 0.6 | — | — | ||||||||||||||
| Additions for tax positions of prior years | 2.4 | 2.5 | 1.2 | ||||||||||||||
| Reductions for tax positions of prior years | — | — | — | ||||||||||||||
| Reductions for expirations of statute of limitations | (1.9) | (1.7) | (1.6) | ||||||||||||||
| Settlements | (0.4) | — | — | ||||||||||||||
| Balance at December 31 | $ | 6.6 | $ | 5.9 | $ | 5.1 | |||||||||||
We had accumulated interest and penalties associated with these unrecognized tax benefits of $2.2 million at December 31, 2025, $7.6 million at December 31, 2024, and $10.7 million at December 31, 2023. We additionally had a deferred tax asset of $1.8 million at December 31, 2025, $3.0 million at December 31, 2024, and $3.6 million at December 31, 2023, related to these balances. The net of the unrecognized tax benefits, associated interest, penalties, and deferred tax asset was $7.0 million at December 31, 2025, $10.5 million at December 31, 2024, and $12.2 million at December 31, 2023, which if resolved favorably (in whole or in part) would reduce our effective tax rate. The unrecognized tax benefits, associated interest, penalties, and deferred tax asset are included as components of Other Liabilities and Deferred Income Taxes in the Consolidated Balance Sheets.
It is our policy to account for interest and penalties associated with income tax obligations as a component of income tax expense. We recognized a benefit of $4.0 million during 2025, a benefit of $2.3 million during 2024, and an expense of $0.8 million during 2023 related to interest and penalties (each net of tax effect) as part of the provision for income taxes in the Consolidated Statements of Income.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 9, 2017 | |
| 2015 | Feb 11, 2016 | |
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.