TopBuild Corp Income Taxes Disclosure
12. INCOME TAXES
(In thousands) | 2025 | 2024 | 2023 | ||||||
Income before income taxes: | |||||||||
U.S. | $ | 665,869 | $ | 810,616 | $ | 808,217 | |||
Foreign | 37,714 | 30,172 | 17,266 | ||||||
Total | $ | 703,583 | $ | 840,788 | $ | 825,483 | |||
Income tax expense (benefit): | |||||||||
Current: | |||||||||
U.S. Federal | $ | 144,330 | $ | 163,889 | $ | 166,175 | |||
State and local | 40,240 | 45,674 | 46,631 | ||||||
Foreign | 11,093 | 10,415 | 7,193 | ||||||
Deferred: | |||||||||
U.S. Federal | (9,410) | 22 | (5,307) | ||||||
State and local | (3,592) | 166 | (1,253) | ||||||
Foreign | (805) | (1,980) | (2,210) | ||||||
$ | 181,856 | $ | 218,186 | $ | 211,229 | ||||
Deferred tax assets at December 31: | |||||||||
Receivables, net | $ | 7,837 | $ | 4,786 | |||||
Inventories | 11,086 | 8,036 | |||||||
Other assets, principally share-based compensation | 2,748 | 1,659 | |||||||
Accrued liabilities | 18,931 | 17,038 | |||||||
Lease liability | 22,997 | 17,488 | |||||||
Long-term liabilities | 11,509 | 11,394 | |||||||
Long-term lease liability | 52,515 | 32,873 | |||||||
Net operating loss carryforward | 921 | 999 | |||||||
128,544 | 94,273 | ||||||||
Deferred tax liabilities at December 31: | |||||||||
Right of use assets | 71,598 | 48,057 | |||||||
Property and equipment, net | 46,880 | 43,842 | |||||||
Intangibles, net | 395,703 | 240,280 | |||||||
Other | 1,957 | 2,437 | |||||||
516,138 | 334,616 | ||||||||
Net deferred tax liability at December 31 | $ | 387,594 | $ | 240,343 | |||||
A valuation allowance must be established for deferred tax assets when it is more-likely-than-not that they will not be realized. After review of all available positive and negative evidence, the Company has determined that no valuation allowance was required for the deferred tax assets as of December 31, 2025 or December 31, 2024.
At December 31, 2025, the net deferred tax liability is $387.6 million, all of which is reported as long-term deferred tax liabilities. At December 31, 2024, the net deferred tax liability is $240.3 million, all of which is reported as long-term deferred tax liabilities. The deferred assets and deferred liabilities also include the state deferreds net of federal benefit.
Of the $0.9 million deferred tax asset related to the net operating loss carryforward at December 31, 2025, with few exceptions, $0.8 million will expire between 2026 and 2045. Of the $1.0 million deferred tax asset related to the net operating loss carryforward at December 31, 2024, $1.0 million will expire between 2026 and 2044.
A reconciliation of the U.S. Federal statutory tax rate to the income tax expense (benefit) on income was as follows:
Year Ended December 31, | ||||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||||
U.S. Federal statutory tax rate | $ | 147,753 | 21.0 | % | $ | 176,566 | 21.0 | % | $ | 173,351 | 21.0 | % | ||||||
28,952 | 4.1 | 36,214 | 4.3 | 35,848 | 4.3 | |||||||||||||
Foreign tax effects | 1,544 | 0.2 | 2,098 | 0.2 | 1,357 | 0.2 | ||||||||||||
Tax credits | (217) | (331) | (311) | |||||||||||||||
Non-deductible/non-taxable items | 3,538 | 0.5 | 3,109 | 0.4 | 1,330 | 0.2 | ||||||||||||
Changes in unrecognized tax benefits | (39) | |||||||||||||||||
Other reconciling items | 286 | 530 | 0.1 | (307) | (0.1) | |||||||||||||
$ | 181,856 | 25.8 | % | $ | 218,186 | 26.0 | % | $ | 211,229 | 25.6 | % | |||||||
In 2025, state and local income taxes in Arizona, California, Florida, New Jersey, New York, Pennsylvania, Texas, Utah, and Virginia comprise the majority of the domestic state and local income taxes, net of U.S. Federal tax benefit. In 2024, state and local income taxes in Arizona, California, Florida, New Jersey, Pennsylvania, Utah, and Virginia comprise the majority of the domestic state and local income taxes, net of U.S. Federal tax benefit. In 2023, state and local income taxes in Arizona, California, Florida, Illinois, New York, Oregon, Pennsylvania, Utah, and Virginia comprised the majority of the domestic state and local income taxes, net of U.S. Federal tax benefit.
A tax expense of $0.1 million and a tax benefit of $1.9 million and $1.4 million related to share-based compensation was recognized in income tax expense for the years ended December 31, 2025, 2024 and 2023, respectively.
We file income tax returns in the U.S. Federal jurisdiction, various U.S. state and local jurisdictions, and foreign jurisdictions. With few exceptions, we are no longer subject to income tax examinations on filed returns for years before 2021.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Mar 3, 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.