Bally's CorpBALY
Bally's Corp Income Taxes Disclosure
INCOME TAXES
The components of income (loss) before taxes are as follows:
| Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2024 | 2023 | 2022 | ||||||||||||||
| Domestic | $ | (456,728) | $ | (244,412) | $ | (444,549) | |||||||||||
| Foreign | (95,774) | 58,674 | (9,920) | ||||||||||||||
| Total | $ | (552,502) | $ | (185,738) | $ | (454,469) | |||||||||||
The components of the provision (benefit) for income taxes are as follows:
| Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2024 | 2023 | 2022 | ||||||||||||||
| Current taxes | |||||||||||||||||
| Federal | $ | (3,219) | $ | (4,419) | $ | 9,318 | |||||||||||
| State | 1,390 | 3,673 | 8,289 | ||||||||||||||
| Foreign | (6,866) | 26,431 | 41,599 | ||||||||||||||
| (8,695) | 25,685 | 59,206 | |||||||||||||||
| Deferred taxes | |||||||||||||||||
| Federal | (18,326) | 11,302 | (32,304) | ||||||||||||||
| State | (10,789) | 720 | (9,429) | ||||||||||||||
| Foreign | 53,062 | (35,945) | (46,396) | ||||||||||||||
| 23,947 | (23,923) | (88,129) | |||||||||||||||
| Provision (benefit) for income taxes | $ | 15,252 | $ | 1,762 | $ | (28,923) | |||||||||||
The effective rate varies from the statutory US federal tax rate as follows:
| Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2024 | 2023 | 2022 | ||||||||||||||
| Income tax (benefit) expense at statutory federal rate | $ | (116,025) | $ | (39,009) | $ | (95,439) | |||||||||||
| State income taxes, net of federal effect | (30,390) | (14,716) | (10,096) | ||||||||||||||
| Foreign tax rate adjustment | 64,884 | (50,082) | (17,455) | ||||||||||||||
| Nondeductible professional fees | 3,117 | 430 | 1,370 | ||||||||||||||
| Other permanent differences including lobbying expense | (8,906) | 1,066 | 2,414 | ||||||||||||||
| Share-based compensation | 992 | 2,577 | 3,348 | ||||||||||||||
| Gain on bargain purchases | — | — | 22 | ||||||||||||||
| CARES Act | (3,153) | — | — | ||||||||||||||
| Return to provision adjustments | 6,455 | (8,810) | (2,275) | ||||||||||||||
| Global intangible low-tax income (“GILTI”) | 17,941 | 14,333 | 2,404 | ||||||||||||||
| Goodwill | — | — | 28,935 | ||||||||||||||
| Change in uncertain tax positions | 681 | 1,103 | (2,224) | ||||||||||||||
| Change in valuation allowance | 79,656 | 94,870 | 60,073 | ||||||||||||||
| Total provision (benefit) for income taxes | $ | 15,252 | $ | 1,762 | $ | (28,923) | |||||||||||
| Effective income tax rate on continuing operations | (2.8) | % | (0.9) | % | 6.4 | % | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income taxes at December 31, 2024 and 2023 are as follows:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2024 | 2023 | |||||||||
| Deferred tax assets: | |||||||||||
| Interest | 283,757 | 195,628 | |||||||||
| Net operating loss carryforwards | 44,510 | 28,468 | |||||||||
Property and equipment | 26,911 | — | |||||||||
Accrued and other current liabilities | 21,681 | 44,707 | |||||||||
Framework Agreement liabilities | 20,344 | 31,376 | |||||||||
| Share-based compensation | 5,876 | 7,818 | |||||||||
| Goodwill | — | — | |||||||||
| Valuation allowance | (234,599) | (154,943) | |||||||||
| Total deferred tax assets, net | 168,480 | 153,054 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Land | (4,167) | (4,142) | |||||||||
| Property and equipment | — | (46,472) | |||||||||
| Change in accounting method | (281) | (280) | |||||||||
| RI Joint Venture and GLPI Partnership | (175,614) | (108,598) | |||||||||
| Amortizable assets | (104,323) | (83,118) | |||||||||
| Total deferred tax liabilities | (284,385) | (242,610) | |||||||||
| Net deferred tax liabilities | $ | (115,905) | $ | (89,556) | |||||||
The Company will only recognize a deferred tax asset when, based on available evidence, realization is more likely than not. The Company has assessed its deferred tax liabilities arising from taxable temporary differences and has concluded such liabilities are not a sufficient source of income for the realization of deferred tax assets, including indefinite life taxable temporary differences which offset, subject to limitation, deferred tax assets with unlimited carryovers, such as the Section 163(j) interest limitation. Accordingly, a $234.6 million and $154.9 million valuation allowance has been established as of December 31, 2024 and 2023, respectively. The change in valuation allowance for the years ended December 31, 2024, 2023, and 2022 was $79.7 million, $94.9 million, and $60.1 million, respectively.
At December 31, 2024, the Company’s cash and cash equivalents totaled $171.2 million, of which approximately 7% was held in locations outside the US. The Company does not reinvest undistributed earnings, and accordingly, the Company has determined that no deferred tax liability is required for undistributed foreign earnings at December 31, 2024 and 2023 and will continue to monitor for future changes.
For the years ended December 31, 2024 and 2023 the net deferred tax liabilities increased by $26.3 million and decreased by $22.9 million, respectively. For the year ended December 31, 2024, an increase of $23.9 million was included in income from operations, offset by a decrease related to the foreign exchange remeasurement of $0.3 million, and an increase of $2.6 million was included in other comprehensive loss. For the year ended December 31, 2023, a decrease of $23.9 million was included in income from operations, a decrease related to the foreign exchange remeasurement of $1.2 million, and offset by an increase of $2.2 million included in other comprehensive loss.
As of December 31, 2024, the Company has $71.8 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period. There was $25.4 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period as of December 31, 2023. As of December 31, 2024 and 2023, the Company had $405.2 million and $310.3 million of state net operating loss carryforwards, respectively, which expire at various dates through 2041.
The Internal Revenue Code (IRC) Section 382 provides for a limitation of the annual use of net operating loss and tax credit carryforwards following certain ownership changes (as defined by the IRC Section 382) that limits the Company’s ability to utilize these carryforwards prior to expiration. Section 382 can also apply when we acquire subsidiaries with net operating loss carryforwards, as there may be limitations on the use of acquired net operating losses against our taxable income. As of December 31, 2024, the Company expects to utilize all acquired tax attributes prior to expiration.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees, including those that operate in the gaming area. The benefits of the CARES Act that were available to us included:
a.refund of federal income taxes due to five-year carryback of net operating loss incurred in 2020 when our 2020 tax return was filed in 2021;
b.relaxation of interest expense deduction limitation for income tax purposes; and
c.the employee retention credit, providing a refundable federal tax credit equal to 50% of the first $10,000 of qualified wages and benefits, including qualified medical plan contributions, paid to employees while they are not performing services after March 12, 2020 and before January 1, 2021.
During the year ended December 31, 2024, the Company realized a CARES Act tax benefit of $3.2 million. The Company realized no tax benefit during the years ended December 31, 2023 and 2022. The Company intends to continue to review and consider any available potential benefits under the CARES Act for which it qualifies, including those described above. The Company cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and the Company cannot provide assurances that it will be able to access such benefits in a timely manner or at all. If the US government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance, it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.
From time to time, the Company may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where the Company conducts business. While the Company believes that the tax returns filed and tax positions taken are supportable and accurate, some tax authorities may not agree with the positions taken. This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor. As of December 31, 2024, there was $24.8 million tax contingency accruals and deferred tax asset reductions for uncertain tax positions, of which $22.1 million would impact the effective tax rate, if recognized. A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows:
| (in thousands) | 2024 | 2023 | 2022 | ||||||||||||||
| Uncertain tax position liability at the beginning of the year | $ | 29,286 | $ | 11,277 | $ | 5,131 | |||||||||||
| Increases related to tax positions taken during the year | (4,462) | 18,009 | — | ||||||||||||||
| Increases related to tax positions taken during prior period | — | — | 11,277 | ||||||||||||||
| Decreases related to tax positions taken during prior periods | — | — | (5,131) | ||||||||||||||
| Uncertain tax position liability at the end of the year | $ | 24,824 | $ | 29,286 | $ | 11,277 | |||||||||||
It is reasonably possible that the Company’s unrecognized tax benefits could change in the next twelve months, however the Company is unable to estimate a range at this time.
The Company records interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). The Company has reserved interest and penalties on uncertain tax positions of $1.0 million and $0.7 million as of December 31, 2024 and 2023, respectively. The Company has recorded $0.3 million and $0.6 million of interest on uncertain tax positions on the consolidated statements of operations for the years ended December 31, 2024 and 2023, respectively.
The Company and its subsidiaries file tax returns in several jurisdictions including the US and various US state and foreign jurisdictions. The Company remains subject to examination for US federal income tax purposes for the years ended December 31, 2015 through 2024, as a result of a 2020 net operating loss carryback claim. The Company remains subject to examination for state and foreign income tax purposes for the years ended December 31, 2013 through 2024. The Company is currently appealing an audit by the State of Colorado for tax years ended December 31, 2012 through 2015. Based on the current status of the Colorado appeal, the Company believes no additional reserves are necessary. In addition, the disallowance of a loss carryforward generated in a period outside of the normal statute of limitations is generally open until the statute of limitations expires in the year of the utilization of the loss.
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.