COMMUNITY HEALTH SYSTEMS INC Income Taxes Disclosure
5. INCOME TAXES
The provision for income taxes consists of the following (in millions):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
262 |
|
|
$ |
182 |
|
|
$ |
149 |
|
State |
|
|
29 |
|
|
|
13 |
|
|
|
7 |
|
|
|
|
291 |
|
|
|
195 |
|
|
|
156 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(241 |
) |
|
|
(125 |
) |
|
|
(5 |
) |
State |
|
|
(2 |
) |
|
|
9 |
|
|
|
40 |
|
|
|
|
(243 |
) |
|
|
(116 |
) |
|
|
35 |
|
Total provision for income taxes for income |
|
$ |
48 |
|
|
$ |
79 |
|
|
$ |
191 |
|
The following table reconciles the differences between the statutory federal income tax rate and the effective tax rate for the year ended December 31, 2025 (dollars in millions):
|
|
|
|
|
|
|
||
|
|
Year Ended December 31, 2025 |
|
|||||
|
|
Amount |
|
|
% |
|
||
Provision for income taxes at statutory federal rate |
|
$ |
152 |
|
|
|
21.0 |
% |
State income taxes, net of federal income tax |
|
|
21 |
|
|
|
2.9 |
|
Nontaxable or Nondeductible Items |
|
|
|
|
|
|
||
Net income attributable to noncontrolling interests |
|
|
(35 |
) |
|
|
(4.8 |
) |
Nondeductible goodwill |
|
|
59 |
|
|
|
8.1 |
|
Permanent differences |
|
|
3 |
|
|
|
0.4 |
|
Change in valuation allowance |
|
|
(159 |
) |
|
|
(22.0 |
) |
Tax Credits |
|
|
|
|
|
|
||
Work opportunity tax credits |
|
|
(1 |
) |
|
|
(0.1 |
) |
Change in uncertain tax position |
|
|
3 |
|
|
|
0.4 |
|
Other |
|
|
5 |
|
|
|
0.7 |
|
Provision for income taxes and effective |
|
$ |
48 |
|
|
|
6.6 |
% |
As previously disclosed for the years ended December 31, 2024 and December 31, 2023, prior to the adoption of ASU 2023-09, the following table reconciles the differences between the statutory federal income tax rate to the effective income tax rate (dollars in millions):
|
|
Year Ended December 31, |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
||||
Provision for income taxes at statutory federal rate |
|
$ |
(60 |
) |
|
|
21.0 |
% |
|
$ |
44 |
|
|
|
21.0 |
% |
State income taxes, net of federal income tax |
|
|
17 |
|
|
|
(5.9 |
) |
|
|
37 |
|
|
|
17.9 |
|
Net income attributable to noncontrolling interests |
|
|
(32 |
) |
|
|
11.3 |
|
|
|
(31 |
) |
|
|
(14.9 |
) |
Change in valuation allowance |
|
|
144 |
|
|
|
(50.9 |
) |
|
|
88 |
|
|
|
42.5 |
|
Change in uncertain tax position |
|
|
6 |
|
|
|
(2.0 |
) |
|
|
10 |
|
|
|
4.9 |
|
Nondeductible goodwill |
|
|
15 |
|
|
|
(5.3 |
) |
|
|
29 |
|
|
|
14.1 |
|
Amended return adjustments |
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
4.3 |
|
Change in tax refunds |
|
|
(11 |
) |
|
|
3.9 |
|
|
|
— |
|
|
|
— |
|
Permanent differences |
|
|
7 |
|
|
|
(2.5 |
) |
|
|
4 |
|
|
|
1.9 |
|
Provision to return |
|
|
(6 |
) |
|
|
2.1 |
|
|
|
1 |
|
|
|
0.6 |
|
Other |
|
|
(1 |
) |
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
Provision for income taxes and effective |
|
$ |
79 |
|
|
|
(27.9 |
)% |
|
$ |
191 |
|
|
|
92.3 |
% |
The Company’s effective tax rates were 6.6%, (27.9)% and 92.3% for the years ended December 31, 2025, 2024 and 2023, respectively. The change in the Company’s effective tax rate for the year ended December 31, 2025, when compared to the year ended December 31, 2024, was primarily due to the tax effects of the federal budget reconciliation legislation, which was enacted on July 4, 2025 and the effects of which were recorded during the year ended December 31, 2025. A decrease in valuation allowances stemming from increased interest deductibility and increased bonus depreciation resulted in an income tax benefit of approximately $163 million during the year ended December 31, 2025. This income tax benefit reduced the effective tax rate by 22.5% for the year ended December 31, 2025. The decrease in the Company’s effective tax rate for the year ended December 31, 2024, when compared to the year ended December 31, 2023, was primarily due to a decrease in non-deductible goodwill related to divested hospitals and a decrease in (loss) income before income taxes in 2024 compared to 2023.
Deferred income taxes are based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities under the provisions of the enacted tax laws. Deferred income taxes at December 31, 2025 and 2024 consist of (in millions):
|
|
December 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
||||
Net operating loss and credit carryforwards |
|
$ |
581 |
|
|
$ |
— |
|
|
$ |
615 |
|
|
$ |
— |
|
Property and equipment |
|
|
— |
|
|
|
234 |
|
|
|
— |
|
|
|
261 |
|
Self-insurance liabilities |
|
|
29 |
|
|
|
— |
|
|
|
34 |
|
|
|
— |
|
Prepaid expenses |
|
|
— |
|
|
|
24 |
|
|
|
— |
|
|
|
28 |
|
Intangibles |
|
|
— |
|
|
|
143 |
|
|
|
— |
|
|
|
142 |
|
Investments in unconsolidated affiliates |
|
|
— |
|
|
|
33 |
|
|
|
— |
|
|
|
81 |
|
Other liabilities |
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
Long-term debt and interest |
|
|
— |
|
|
|
30 |
|
|
|
7 |
|
|
|
— |
|
Patient accounts receivable |
|
|
62 |
|
|
|
— |
|
|
|
54 |
|
|
|
— |
|
IRC Section 163(j) interest limitation |
|
|
746 |
|
|
|
— |
|
|
|
682 |
|
|
|
— |
|
Accrued vacation |
|
|
17 |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
Accrued bonus |
|
|
29 |
|
|
|
— |
|
|
|
31 |
|
|
|
— |
|
Other comprehensive income |
|
|
3 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Right-of-use assets |
|
|
— |
|
|
|
157 |
|
|
|
— |
|
|
|
128 |
|
Right-of-use liability |
|
|
165 |
|
|
|
— |
|
|
|
136 |
|
|
|
— |
|
Stock-based compensation |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Deferred compensation |
|
|
43 |
|
|
|
— |
|
|
|
41 |
|
|
|
— |
|
Other |
|
|
17 |
|
|
|
— |
|
|
|
23 |
|
|
|
— |
|
Total |
|
|
1,694 |
|
|
|
626 |
|
|
|
1,645 |
|
|
|
645 |
|
Valuation allowance |
|
|
(1,043 |
) |
|
|
— |
|
|
|
(1,218 |
) |
|
|
— |
|
Total deferred income taxes |
|
$ |
651 |
|
|
$ |
626 |
|
|
$ |
427 |
|
|
$ |
645 |
|
The Company believes that the net deferred tax assets will ultimately be realized, except as noted below. Its conclusion is based on its estimate of future taxable income and the expected timing of temporary difference reversals. The Company has gross federal net operating loss carryforwards of approximately $246 million and state net operating loss carryforwards of approximately $9.9 billion, which expire from through . The Company’s tax affected federal and state net operating loss and credit carryforwards are approximately $52 million and $529 million, respectively. A valuation allowance of approximately $1.0 billion has been recognized for federal and state net operating loss carryforwards, state credit carryforwards and federal and state deferred tax assets that the Company does not expect to be able to realize. With respect to the deferred tax liability pertaining to intangibles, as included above, goodwill purchased in connection with certain of the Company’s business acquisitions is amortizable for income tax reporting purposes. However, for financial reporting purposes, there is no corresponding amortization allowed with respect to such purchased goodwill.
The valuation allowance for federal and state jurisdictions where the Company concluded that the associated deferred tax assets would not be realized decreased by $158 million and $17 million, respectively, for the year ended December 31, 2025, and increased by $144 million and $91 million, respectively, for the year ended December 31, 2024.
The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was $45 million as of December 31, 2025. A total of $9 million of interest and penalties is included in the amount of the liability for uncertain tax positions at December 31, 2025. It is the Company’s policy to recognize interest and penalties related to unrecognized benefits in its consolidated statements of income (loss) as income tax expense.
The following is a tabular reconciliation of the total amount of unrecognized tax benefit for the years ended December 31, 2025, 2024 and 2023 (in millions):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Unrecognized tax benefit, beginning of year |
|
$ |
52 |
|
|
$ |
58 |
|
|
$ |
50 |
|
Gross increases — tax positions in current period |
|
|
— |
|
|
|
3 |
|
|
|
9 |
|
Reductions — tax positions in prior period |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Settlements |
|
|
— |
|
|
|
(9 |
) |
|
|
— |
|
Unrecognized tax benefit, end of year |
|
$ |
52 |
|
|
$ |
52 |
|
|
$ |
58 |
|
The Company’s income tax return for the 2018 tax year was effectively settled with the Internal Revenue Service in 2024. The settlement was not material to the Company’s consolidated results of operations or consolidated financial position. The Company’s income tax return for the tax years are under examination by the Internal Revenue Service. The Company believes the result of this examination will not be material to its consolidated results of operations or consolidated financial position. The Company has extended the federal statute of limitations through December 31, 2026 for Community Health Systems, Inc. for the tax periods ended December 31, 2021 and 2022.
Cash paid for income taxes, net of refunds received, were as follows (in millions):
|
|
Year Ended |
|
|
|
|
December 31, |
|
|
|
|
2025 |
|
|
Federal |
|
$ |
217 |
|
State |
|
|
32 |
|
Foreign |
|
|
— |
|
Total cash paid for income taxes, net of refunds received |
|
$ |
249 |
|
During the year ended December 31, 2025, the Company purchased $50 million of solar tax credits at a discounted amount of $47 million. Such solar tax credits are considered federal estimated income tax payments. The $3 million discount is recorded as a federal income tax benefit for the year ended December 31, 2025.
The state of Alabama was the only jurisdiction that exceeded 5 percent of the total cash paid for income taxes, net of refunds received, which was $14 million for the year ended December 31, 2025.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, cash paid for income taxes, net of refunds received, was $171 million and $91 million, respectively.
During the years ended December 31, 2025, 2024 and 2023, approximately $169 million, $17 million and $47 million, respectively, of cash paid for taxes related to gains on hospitals divested during the periods.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 17, 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.