AMERICAN PUBLIC EDUCATION INCAPEI
AMERICAN PUBLIC EDUCATION INC Income Taxes Disclosure
Income Taxes
The components of income tax (benefit) expense were as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||
| Current income tax expense: | ||||||||||||||||||||
| Federal | $ | 2,384 | $ | 3,141 | $ | 1,575 | ||||||||||||||
| State | 2,430 | 2,688 | 2,432 | |||||||||||||||||
| 4,814 | 5,829 | 4,007 | ||||||||||||||||||
| Deferred income tax (benefit) expense: | ||||||||||||||||||||
| Federal | (12,713) | 3,722 | 7,575 | |||||||||||||||||
| State | (2,816) | 868 | 566 | |||||||||||||||||
| (15,529) | 4,590 | 8,141 | ||||||||||||||||||
| Income tax (benefit) expense | $ | (10,715) | $ | 10,419 | $ | 12,148 | ||||||||||||||
The tax effects of principal temporary differences are as follows (in thousands):
| As of December 31, | ||||||||||||||
| 2024 | 2025 | |||||||||||||
| Deferred tax assets | ||||||||||||||
| Goodwill and intangibles | $ | 41,872 | $ | 36,521 | ||||||||||
| Operating lease liability | 26,638 | 17,132 | ||||||||||||
| Allowance for doubtful accounts | 3,737 | 4,487 | ||||||||||||
| Restricted stock | 1,801 | 2,013 | ||||||||||||
| Accrued vacation and severance | 475 | 768 | ||||||||||||
| Investments | 4,098 | 4,171 | ||||||||||||
| Stock compensation expense | 38 | — | ||||||||||||
| Other comprehensive income - unrealized loss on interest rate cap | — | 6 | ||||||||||||
| Other | 909 | 688 | ||||||||||||
| Total gross deferred tax assets | 79,568 | 65,786 | ||||||||||||
| Valuation allowance | (4,409) | (4,596) | ||||||||||||
| Total net deferred tax assets | 75,159 | 61,190 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Income tax deductible capitalized software development costs | (534) | (3,298) | ||||||||||||
| Operating lease asset | (23,668) | (14,552) | ||||||||||||
| Property and equipment | (3,597) | (2,837) | ||||||||||||
| Prepaid expenses | (49) | (1,032) | ||||||||||||
| Stock compensation expense | — | (295) | ||||||||||||
| Total deferred tax liabilities | (27,848) | (22,014) | ||||||||||||
| Deferred tax assets, net | $ | 47,311 | $ | 39,176 | ||||||||||
At December 31, 2024 and 2025, the Company had apportioned state net operating loss carryforwards of $6.4 million and $9.3 million, respectively, and federal capital loss carryforwards of $12.8 million in both years, which are available to offset future taxable income. The federal capital loss carryforwards will begin to expire in 2026 while the state net operating loss carryforwards will begin to expire in various years from 2036 through 2045. The amount of state net operating losses that can be carried forward indefinitely is $6.7 million. The Company’s utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change provisions of Section 382 of Internal Revenue Code of 1986, as amended.
Income tax (benefit) expense differs from the amount of tax determined by applying the U.S. federal income tax rates to pretax loss and income due to the application of state apportionment laws, permanent tax differences, and other temporary differences (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||||||||||
| U.S. federal Statutory tax rate | $ | (12,180) | 21.00 | % | $ | 5,572 | 21.00 | % | $ | 9,178 | 21.00 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1)(2)(3) | (897) | 1.55 | % | 2,991 | 11.27 | % | 2,571 | 5.88 | % | |||||||||||||||||||||||||||||
| Changes in Valuation allowance | 1,265 | (2.18) | % | 1,838 | 6.93 | % | — | — | % | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||||||||||||||
| Loss on equity investment | — | — | % | (812) | (3.06) | % | — | — | % | |||||||||||||||||||||||||||||
| Equity-based compensation benefits | 837 | (1.44) | % | 194 | 0.73 | % | (1,083) | (2.47) | % | |||||||||||||||||||||||||||||
| Executive compensation | 172 | (0.31) | % | 395 | 1.49 | % | 1,315 | 3.01 | % | |||||||||||||||||||||||||||||
| Other permanent differences | 98 | (0.17) | % | 97 | 0.37 | % | 127 | 0.29 | % | |||||||||||||||||||||||||||||
| Other adjustments | (10) | 0.02 | % | 144 | 0.54 | % | 40 | 0.09 | % | |||||||||||||||||||||||||||||
| Effective tax rate | $ | (10,715) | 18.47 | % | $ | 10,419 | 39.27 | % | $ | 12,148 | 27.80 | % | ||||||||||||||||||||||||||
(1) In 2023, state taxes in Minnesota, Florida, Illinois, Georgia, California, and Virginia made up the majority (greater than 50%) of the tax effect in this category.
(2) In 2024, state taxes in Georgia, Florida, Minnesota, Illinois, Maryland, North Carolina, and Texas made up the majority (greater than 50%) of the tax effect in this category.
(3) In 2025, state taxes in Florida, Minnesota, Illinois, Georgia, Mississippi, Maryland, and Texas made up the majority (greater than 50%) of the tax effect in this category.
The Company paid cash taxes for the years ended December 31, 2023, 2024, or 2025 as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||
| Cash paid for U.S. federal income taxes, net | $ | — | $ | 2,700 | $ | 4,000 | ||||||||||||||
| Cash paid for state and local income taxes, net | 2,417 | 3,604 | 2,516 | |||||||||||||||||
| $ | 2,417 | $ | 6,304 | $ | 6,516 | |||||||||||||||
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| State | |||||||||||||||||
| Georgia | $ | 267 | $ | 427 | * | ||||||||||||
| Minnesota | 233 | * | * | ||||||||||||||
| Maryland | 210 | * | * | ||||||||||||||
| Florida | 207 | * | * | ||||||||||||||
| North Carolina | 148 | * | * | ||||||||||||||
| Texas | 142 | * | * | ||||||||||||||
| Pennsylvania | 129 | * | * | ||||||||||||||
* Jurisdiction below the threshold for the period presented | |||||||||||||||||
There were no material uncertain tax positions as of December 31, 2023, 2024, or 2025. Interest and penalties associated with uncertain income tax positions would be classified as income tax expense. The Company has not recorded any material interest or penalties during any of the years presented.
The Company is subject to U.S. federal income taxes as well as income tax of multiple state jurisdictions. For U.S. federal and state tax purposes, tax years 2022-2024 remain open to examination.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Mar 2, 2022 | |
| 2020 | Mar 9, 2021 | |
| 2019 | Mar 10, 2020 | |
| 2018 | Mar 12, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 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.