Arhaus, Inc.ARHS

Arhaus, Inc. Income Taxes Disclosure

10-KFiled Feb 26, 20263 min read
Income Taxes
Components of income before provision for income taxes include (amounts in thousands):
Year Ended
December 31,
202520242023
Domestic$91,979 $90,922 $168,689 
Foreign— — — 
Income before taxes$91,979 $90,922 $168,689 
The components of the provision for income taxes include (amounts in thousands):
Year Ended
December 31,
202520242023
Current
     Federal$16,983 $16,264 $35,015 
     State6,194 8,072 10,721 
Total current expense23,177 24,336 45,736 
Deferred
     Federal1,850 581 (792)
     State(304)(2,545)(1,494)
Total deferred expense (benefit) 1,546 (1,964)(2,286)
Income tax expense$24,723 $22,372 $43,450 
The difference between income taxes expected at the United States federal statutory income tax rate of 21% and the provision for income taxes is summarized as follows (amounts in thousands):
Year Ended
December 31,
202520242023
AmountPercentageAmountPercentageAmountPercentage
Federal statutory income tax rate$19,318 21.0 %$19,094 21.0 %$35,425 21.0 %
State and local income taxes, net of federal income tax effect (1)
4,653 5.1 %4,366 4.8 %7,518 4.5 %
Tax credits
Research and development tax credits
(486)(0.5)%(1,328)(1.5)%(886)(0.5)%
Changes in valuation allowance— — %(11)— %10 — %
Nontaxable or nondeductible items452 0.5 %409 0.5 %532 0.3 %
Other adjustments786 0.8 %(158)(0.2)%851 0.5 %
Provision for income taxes$24,723 26.9 %$22,372 24.6 %$43,450 25.8 %
(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include New Jersey, California, New York, Illinois, Florida, and Pennsylvania for 2025, California, New Jersey, Florida, New York, and Illinois for 2024, and California, New Jersey, Florida, New York, Illinois, and Ohio for 2023.
Components of our deferred tax assets and liabilities include (amounts in thousands):
December 31,
20252024
Deferred tax assets
FS Arhaus investment in LLC$9,310 $10,419 
Homeworks investment in LLC10,235 10,672 
Total deferred tax assets$19,545 $21,091 
Based on available evidence (namely, a three-year cumulative income position), management believes it is more-likely-than-not that the net United States federal and state deferred tax assets will be fully realizable. We have not recorded a valuation allowance against deferred tax assets.
No unrecognized tax benefits have been recognized as of December 31, 2025 and 2024. We recognize accrued interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statements of operations. There were no amounts of interest and penalties accrued as of December 31, 2025 and 2024.
We file income tax returns in the United States federal and various state and local jurisdictions. The tax years after 2021 remain open to examination by the state taxing jurisdictions in which the Company is subject to tax. As of December 31, 2025, the Company was not under examination by the Internal Revenue Service.
On July 4, 2025, the United States enacted H.R. 1, commonly referred to as the One Big Beautiful Bill Act (OBBBA). The OBBBA includes a broad range of changes, including 100% initial-year bonus depreciation on qualifying property, as well as the immediate deduction for domestic research and development expenses. The impacts of the OBBBA are reflected in our results for the year ended December 31, 2025. The OBBBA has minimal impact on the effective tax rate but results in favorable cash tax impacts in fiscal 2025 as a result of accelerated tax deductions.
Cash paid for income taxes are as follows (amounts in thousands):

December 31,
202520242023
Federal$15,502 $16,312 $34,820 
State
California1,697 **
Other states7,269 7,458 12,312 
Income taxes paid, net of refunds$24,468 $23,770 $47,132 
*Jurisdiction below the threshold for the period presented.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 26, 2025
2023Mar 11, 2024
2022Mar 9, 2023
2021Mar 30, 2022

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.

Other Available Disclosures

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