EquipmentShare.com IncEQPT
EquipmentShare.com Inc Income Taxes Disclosure
INCOME TAXES
For financial reporting purposes, income before income taxes includes the following components (In millions):
Years Ended December 31, | |||||
2025 | 2024 | 2023 | |||
United States .................................................................................. | $53 | $5 | $21 | ||
Foreign ........................................................................................... | 1 | 1 | – | ||
Income before income taxes ........................................................... | $54 | $6 | $21 | ||
The components of the provision for income taxes are as follows (In millions):
Years Ended December 31, | |||||
2025 | 2024 | 2023 | |||
Current: | |||||
Federal ....................................................................................... | $(1) | $1 | $– | ||
State ........................................................................................... | 4 | 2 | – | ||
Total current .......................................................................... | 3 | 3 | – | ||
Deferred: | |||||
Federal ....................................................................................... | 13 | (1) | 3 | ||
State ........................................................................................... | (2) | 1 | 1 | ||
Total deferred ........................................................................ | 11 | – | 4 | ||
Total (current and deferred): | |||||
Federal ....................................................................................... | 12 | – | 3 | ||
State ........................................................................................... | 2 | 3 | 1 | ||
Total ...................................................................................... | $14 | $3 | $4 | ||
A reconciliation of the amount computed by applying the federal statutory income tax rate of 21% to pre-tax
income as compared to the total income tax provision recorded are as follows (In millions):
Years Ended December 31, | |||||||||||
2025 | 2024 | 2023 | |||||||||
$11 | 21% | $1 | 21% | $5 | 21% | ||||||
State income taxes, net of federal benefit(1) ......................... | – | – | 2 | 34 | 1 | 5 | |||||
Unrecognized tax benefits ................................................... | 1 | 1 | – | – | (4) | (14) | |||||
Research and development credit ........................................ | (1) | (2) | (2) | (38) | 1 | 3 | |||||
Nontaxable or nondeductible items: | |||||||||||
Meals and entertainment.................................................... | 2 | 4 | 1 | 23 | 1 | 5 | |||||
Stock based compensation expense ................................... | 1 | 1 | 1 | 11 | – | – | |||||
Total income tax provision .................................................. | $14 | 25% | $3 | 51% | $4 | 20% | |||||
________________
(1)The states that, in aggregate, accounting for over 50 percent of the effect of the state and location income taxes shown above were: (1) for
2025, California, Colorado, Missouri, New Jersey, Oklahoma and Texas.
The components of the deferred income tax assets (liabilities) are as follows (In millions):
December 31, 2025 | December 31, 2024 | ||
Deferred tax assets | |||
Allowance for doubtful accounts .......................................................................... | $16 | $10 | |
Tax credit carryforwards ....................................................................................... | 6 | 1 | |
Net operating loss carryforwards .......................................................................... | 357 | 109 | |
Non-deductible claims .......................................................................................... | 8 | – | |
Interest disallowance ............................................................................................. | 122 | 108 | |
Lease liability ........................................................................................................ | 174 | 148 | |
Deferred finance liability ...................................................................................... | 16 | 21 | |
Other deferred tax assets ....................................................................................... | 15 | 18 | |
Total deferred tax assets ................................................................................... | 714 | 415 | |
Deferred tax liabilities | |||
Rental equipment, property and other fixed assets ............................................... | (545) | (282) | |
Intangible assets .................................................................................................... | (34) | (13) | |
Right of use asset .................................................................................................. | (162) | (137) | |
Other deferred tax liabilities ................................................................................. | (16) | (14) | |
Total deferred tax liabilities ............................................................................. | (757) | (446) | |
Deferred tax liabilities, net ............................................................................... | $(43) | $(31) |
As of December 31, 2025, a deferred tax asset of $327 million was recorded for unutilized federal net operating
loss carryforwards ("NOL carryforwards"). The total federal NOL carryforwards are $1,555 million, of which
$1,538 million have an indefinite carryforward period, while the remainder expire in 2037. State NOL carryforwards
have generated a deferred tax asset of $31 million. While some state NOLs will not expire, others will expire
between 2028 and 2043.
In determining the valuation allowance, an assessment of positive and negative evidence was performed
regarding realization of the net deferred tax assets in accordance with Topic 740. This assessment included the
evaluation of scheduled reversals of deferred tax liabilities, the availability of carryforwards and estimates of
projected future taxable income. At December 31, 2025, no valuation allowance was recorded against deferred tax
assets. The Company concluded that the deferred tax assets of $714 million will be realized and as such, no
valuation allowance was recorded.
The Company also has income tax credits for research and development. These credits have a twenty-year
carryforward life and expire in 2044.
The following table summarizes the gross amounts of unrecognized tax benefits without regard to reduction in
tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled (In
millions):
December 31, 2025 | December 31, 2024 | ||
Beginning balance ..................................................................................................... | $– | $– | |
Additions based on tax positions related to current year ...................................... | 1 | – | |
Additions based on tax positions related to prior years ........................................ | – | – | |
Reductions based on tax positions related to prior years ...................................... | – | – | |
Ending balance .......................................................................................................... | $1 | $– |
The Company had $1 million and $0.1 million of unrecognized tax benefits at December 31, 2025 and 2024,
respectively, of which $1 million and $0.1 million, respectively, would affect the effective tax rate if recognized.
The Company did not accrue interest or penalties related to current additions of unrecognized tax benefits based on
the nature of the position.
For the year ended December 31, 2025, the Company paid $6 million in income taxes, net of refunds, consisting
of zero to U.S. federal authorities and $6 million to U.S. state authorities. U.S. state incomes taxes for states that
exceeded five percent of total income taxes paid were: Texas ($2 million), Florida ($2 million), Virginia ($0.3
million), Ohio ($0.3 million) and New Jersey ($0.3 million), with the remaining balance paid to other states.
The Company files income tax returns in the U.S. and various state and local jurisdictions where the statutes of
limitations generally range from to five years. As of December 31, 2025, the Company is no longer subject to
U.S. federal and state examinations by tax authorities for years before fiscal 2021.
On July 4, 2025, the One Big Beautiful Bill Act (“OB3 Act”) was signed into law. Among other changes, the
OB3 Act includes key provisions that make 100% bonus depreciation permanent, allow for the expensing of
domestic research costs, and modify the business interest expense limitation calculation. The OB3 Act had an
immaterial impact to the Company’s effective tax rate for the year ended December 31, 2025.
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.