EMCOR Group, Inc.EME
EMCOR Group, Inc. Income Taxes Disclosure
INCOME TAXES
For the years ended December 31, 2025, 2024, and 2023, our income tax provision was calculated based on income before income taxes as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 1,695,149 | $ | 1,349,469 | $ | 844,002 | |||||||||||
| Foreign | 26,475 | 27,913 | 28,851 | ||||||||||||||
| $ | 1,721,624 | $ | 1,377,382 | $ | 872,853 | ||||||||||||
Foreign income for each of the years presented was earned in the United Kingdom.
The income tax provision for the years ended December 31, 2025, 2024, and 2023 consisted of the following (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current provision: | |||||||||||||||||
| Federal | $ | 356,795 | $ | 299,203 | $ | 187,463 | |||||||||||
| State and local | 102,560 | 94,647 | 62,316 | ||||||||||||||
| Foreign | 5,507 | 5,502 | 6,396 | ||||||||||||||
| 464,862 | 399,352 | 256,175 | |||||||||||||||
Deferred provision (benefit): | |||||||||||||||||
| Federal | $ | (11,596) | $ | (24,024) | $ | (13,764) | |||||||||||
| State and local | (5,604) | (6,483) | (3,190) | ||||||||||||||
| Foreign | 1,145 | 1,392 | 303 | ||||||||||||||
| (16,055) | (29,115) | (16,651) | |||||||||||||||
Income tax provision | $ | 448,807 | $ | 370,237 | $ | 239,524 | |||||||||||
NOTE 11 - INCOME TAXES (Continued)
For the year ended December 31, 2025, our income tax provision was $448.8 million compared to $370.2 million for the year ended December 31, 2024 and $239.5 million for the year ended December 31, 2023. The increase in the income tax provision year-over-year was primarily due to increased income before income taxes, including a $144.9 million pre-tax gain on the sale of our United Kingdom operations, which resulted in $25.1 million of income taxes.
The income tax rates on income before income taxes for the years ended December 31, 2025, 2024, and 2023 were 26.1%, 26.9%, and 27.5%, respectively.
Items accounting for the differences between income taxes computed at the federal statutory rate and the income tax provision for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands, except for percentages):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 361,541 | 21.0 | % | $ | 289,250 | 21.0 | % | $ | 183,230 | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 75,588 | 4.4 | % | 69,202 | 5.0 | % | 46,752 | 5.4 | % | ||||||||||||||||||||||||||
Foreign tax effects (2) | 1,092 | 0.1 | % | 1,032 | 0.1 | % | 640 | 0.1 | % | ||||||||||||||||||||||||||
| Effect of cross-border tax laws: | |||||||||||||||||||||||||||||||||||
Global intangible low-taxed income (3) | 22,088 | 1.3 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Subpart F income inclusion | 3,054 | 0.2 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
Reversal of book gain on sale of United Kingdom operations | (30,424) | (1.8) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Other permanent differences | 17,122 | 1.0 | % | 12,221 | 0.9 | % | 9,513 | 1.1 | % | ||||||||||||||||||||||||||
| Other adjustments | (1,254) | (0.1) | % | (1,468) | (0.1) | % | (611) | (0.1) | % | ||||||||||||||||||||||||||
| Effective tax rate | $ | 448,807 | 26.1 | % | $ | 370,237 | 26.9 | % | $ | 239,524 | 27.5 | % | |||||||||||||||||||||||
_________________
(1)For the years ended December 31, 2025, 2024, and 2023, the jurisdictions making up the majority of state and local income taxes were:
2025: California, Virginia, Indiana, Oregon, New York, Georgia, and Massachusetts.
2024: California, Virginia, New Jersey, New York, New York City, Georgia, and Oregon.
2023: California, New York, New York City, Indiana, Oregon, Illinois, Pennsylvania, and Virginia.
(2)Represents the statutory rate difference between the United Kingdom and United States.
(3)The Company’s policy is to recognize the minimum tax on global intangible low-taxed income as an expense in the period incurred.
Income taxes paid (net of refunds received) for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 358,800 | $ | 306,300 | $ | 167,600 | |||||||||||
State and local | 119,404 | 97,681 | 55,981 | ||||||||||||||
| Foreign | 5,220 | 5,381 | 6,915 | ||||||||||||||
Total | $ | 483,424 | $ | 409,362 | $ | 230,496 | |||||||||||
We file a consolidated federal income tax return including all of our U.S. subsidiaries with the Internal Revenue Service. We additionally file income tax returns with various state, local, and foreign tax agencies. Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2021 through 2024.
On March 11, 2021, the American Rescue Plan Act was signed into law. Such act includes certain tax provisions that could have an impact on the Company in future periods, including expanded limits on compensation deductions under Section 162(m) of the Internal Revenue Code for tax years beginning after December 31, 2026. We are currently evaluating the impact that this act may have on our financial position and/or results of operations; however, we anticipate that the expanded provisions of Section 162(m) will result in an increase in our effective income tax rate for years beginning after December 31, 2026.
NOTE 11 - INCOME TAXES (Continued)
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. Such act created a 15% corporate alternative minimum tax on profits of corporations whose average annual adjusted financial statement income exceeds $1.0 billion for any consecutive three-tax-year period preceding the then current tax year. Based on our average annual adjusted financial statement income for the preceding three years, which was below the aforementioned $1.0 billion threshold, as well as the fact that our effective federal income tax rate is in excess of the 15% alternative minimum tax rate, this alternative minimum tax did not have an impact on our financial position and/or results of operations for the years ended December 31, 2025, 2024, and 2023.
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including accelerated bonus depreciation. The enactment of this legislation did not have a material impact on our annual effective tax rate for 2025.
Deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and income tax bases of assets and liabilities. The deferred income tax assets and deferred income tax liabilities recorded as of December 31, 2025 and 2024 were as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Excess of amounts expensed for financial statement purposes over amounts deducted for income tax purposes: | |||||||||||
| Insurance liabilities | $ | 69,064 | $ | 69,664 | |||||||
| Operating lease liabilities | 117,897 | 102,667 | |||||||||
| Deferred compensation | 85,020 | 76,042 | |||||||||
| Other (including liabilities and reserves) | 41,197 | 49,715 | |||||||||
| Total deferred income tax assets | 313,178 | 298,088 | |||||||||
| Valuation allowance for deferred tax assets | (4,148) | (5,076) | |||||||||
| Net deferred income tax assets | 309,030 | 293,012 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Costs capitalized for financial statement purposes and deducted for income tax purposes: | |||||||||||
| Goodwill and identifiable intangible assets | (147,496) | (172,613) | |||||||||
| Operating lease right-of-use assets | (110,550) | (94,800) | |||||||||
| Depreciation of property, plant, and equipment | (42,532) | (33,284) | |||||||||
| Pension asset | (202) | (6,082) | |||||||||
| Other | (12,819) | (14,664) | |||||||||
| Total deferred income tax liabilities | (313,599) | (321,443) | |||||||||
| Net deferred income tax liabilities | $ | (4,569) | $ | (28,431) | |||||||
Our net deferred income tax liabilities of $4.6 million and $28.4 million as of December 31, 2025 and 2024, respectively, were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheets.
Valuation allowances are established when necessary to reduce deferred income tax assets when it is more likely than not that a tax benefit will not be realized. As of December 31, 2025 and 2024, the total valuation allowance on deferred income tax assets, related to state and local net operating losses, foreign net operating losses, and foreign income tax credit carryovers, was approximately $4.1 million and $5.1 million, respectively. The year-over-year decrease was a result of the release of valuation allowances on deferred tax assets for state net operating loss carryovers that we determined are now likely to be utilized.
Realization of our deferred income tax assets is dependent on our generating sufficient taxable income in the jurisdictions in which such deferred tax assets will reverse. Although realization is not assured, based on current projections of future taxable income, we believe it is more likely than not that the deferred income tax assets, net of the valuation allowances discussed above, will be realized. However, revisions to our forecasts or declining macroeconomic conditions could result in changes to our assessment of the realization of these deferred income tax assets.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 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.