Andersen Group Inc.ANDG
Andersen Group Inc. Income Taxes Disclosure
Income Taxes
Andersen Group Inc. is taxed as a C corporation and is subject to U.S. federal, state and local income taxes on its share of allocable partnership income. Andersen Group Inc.’s sole material asset is its ownership in AT Umbrella LLC, which is a limited liability company that is taxed as a partnership for U.S. federal and certain state and local income tax purposes. AT Umbrella LLC’s allocable share of taxable income and related tax credits, if any, are passed through to its members, including Andersen Group Inc., and are included in the members’ tax returns.
Prior to Andersen Group Inc.’s investment in AT Umbrella LLC, the Company was a multi-member limited liability company taxed as a partnership and generally not subject to U.S. federal and state taxes. However, certain state and local jurisdictions impose an entity level income tax and these amounts are reflected as income taxes in the consolidated financial statements. Each member of the limited liability company is responsible for reporting and paying income tax on their share of income or loss to extent required by federal and state income tax regulations.
The components of income (loss) before income tax expense are as follows (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Domestic |
$ | (127,172) | $ | 137,196 | $ | 120,940 | |||||||||||
Foreign |
— | — | — | ||||||||||||||
Total |
$ | (127,172) | $ | 137,196 | $ | 120,940 | |||||||||||
Income tax expense (benefit) consists of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current taxes: |
|||||||||||||||||
Federal |
$ | — | $ | — | $ | — | |||||||||||
State |
3,136 | 2,275 | 1,999 | ||||||||||||||
Foreign |
372 | 222 | 87 | ||||||||||||||
Total current taxes |
3,508 | 2,497 | 2,086 | ||||||||||||||
| Deferred taxes: | |||||||||||||||||
Federal |
(316) | — | — | ||||||||||||||
State |
(195) | (102) | 171 | ||||||||||||||
Foreign |
— | — | — | ||||||||||||||
Total deferred taxes |
(511) | (102) | 171 | ||||||||||||||
Income tax expense |
$ | 2,997 | $ | 2,395 | $ | 2,257 | |||||||||||
The Company’s effective tax rate differs from the U.S. federal statutory rate of 21% for 2025, 2024, and 2023 as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Federal statutory rate |
21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Noncontrolling interest | (20.5) | % | — | % | — | % | |||||||||||
Other non-deductible expenses |
— | % | 0.6 | % | 0.7 | % | |||||||||||
State and local taxes |
(2.3) | % | 1.6 | % | 1.8 | % | |||||||||||
| Partnership income not subject to tax | — | % | (21.6) | % | (21.7) | % | |||||||||||
Valuation allowance |
(0.3) | % | — | % | — | % | |||||||||||
Foreign income and withholding taxes |
(0.3) | % | 0.2 | % | 0.1 | % | |||||||||||
Effective tax rate |
(2.4) | % | 1.8 | % | 1.9 | % | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets and liabilities were as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets: |
|||||||||||
Investment in partnership |
$ | 89,086 | $ | — | |||||||
U.S. federal and state net operating loss |
337 | — | |||||||||
Subtotal |
89,423 | — | |||||||||
Less valuation allowance |
(88,779) | — | |||||||||
Total deferred tax assets |
644 | — | |||||||||
| Deferred tax liabilities: | |||||||||||
Partnership level items |
(378) | (455) | |||||||||
Total deferred tax liabilities |
(378) | (455) | |||||||||
Net deferred tax asset (liability) |
$ | 266 | $ | (455) | |||||||
As of December 31, 2025, the Company recorded a $89.1 million deferred tax asset related to the investment in partnership which was offset with a valuation allowance of $88.8 million. The Company concluded that such asset is not more likely than not to be realized as the investment in AT Umbrella LLC is capital in nature and the Company does not have history of generating capital gain income.
In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income including appropriate character in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income.
The following table presents a reconciliation of the total change in the valuation allowance (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Balance at beginning of period |
$ |
— |
$ |
— |
$ |
— |
|||||||||||
Change charged to income tax expense |
97 |
— |
— |
||||||||||||||
Change charged to equity |
88,682 |
— |
— |
||||||||||||||
Balance at end of period |
$ |
88,779 |
$ |
— |
$ |
— |
|||||||||||
The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. The Company has no uncertain tax positions. There are no uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of December 31, 2025.
As of December 31, 2025, the Company's U.S. federal net operating loss carryforwards were $1.3 million, which may be carried forward indefinitely but are only available to offset 80% of future taxable income.
The only open tax year for the U.S. federal income tax return is 2025. The state income tax returns have varying statutes of limitations.
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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.