ERIE INDEMNITY COERIE

ERIE INDEMNITY CO Income Taxes Disclosure

10-KFiled Feb 23, 20263 min read
Income Taxes
The provision for income taxes consists of the following for the years ended December 31:
(in thousands)
202520242023
Federal
Current income tax expense$131,645 $152,926 $116,874 
Deferred income tax expense (benefit)19,547 4,026 (1,002)
State
Current income tax expense76 13 3 
Deferred income tax expense— — — 
Income tax expense$151,268 $156,965 $115,875 

A reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rate to pre-tax income, is as follows for the years ended December 31:
(dollars in thousands)
202520242023
Amount%Amount%Amount%
U.S. federal tax at statutory rate$149,227 21.0 %$159,029 21.0 %$118,007 21.0 %
State and local income taxes, net of federal income tax effect (1)
60 0.0 10 0.0 2 0.0 
Tax credits(1,432)(0.2)(2,000)(0.3)(1,300)(0.2)
Nontaxable or nondeductible items2,703 0.4 569 0.1 651 0.1 
Other adjustments710 0.1 (643)(0.1)(1,485)(0.3)
Income tax provision$151,268 21.3 %$156,965 20.7 %$115,875 20.6 %
(1)    State taxes in Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.

Temporary differences and carry-forwards, which give rise to deferred tax assets and liabilities, are as follows as of December 31:
(in thousands)
20252024
Deferred tax assets:
Other employee benefits$18,213 $18,409 
Allowance for management fee returned on cancelled policies7,322 4,647 
Charitable contributions5,221 — 
Deferred revenue4,457 4,181 
Current expected credit loss allowance 3,647 2,966 
Unrealized losses on investments— 3,827 
Other 4,958 4,617 
   Total deferred tax assets43,818 38,647 
Deferred tax liabilities:
Depreciation47,017 27,089 
Pension and other postretirement benefits13,919 12,276 
Unrealized gains on investments2,532 — 
Prepaid expenses1,506 2,013 
Other3,632 3,687 
   Total deferred tax liabilities68,606 45,065 
   Net deferred tax liability$(24,788)$(6,418)
If we determine that any of our deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of the assets that are not expected to be realized. We had no valuation allowance recorded at December 31, 2025 or 2024.
We do not have any unrecognized tax benefit that, if recognized, would affect our effective tax rate as of December 31, 2025 and 2024. Any interest expense related to uncertain tax positions would be recognized in income tax expense.

New tax legislation, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was signed into law on July 4, 2025. The OBBBA included changes to the timing of tax deductions related to depreciation and software development expenditures in 2025. The legislation also introduced a 1% taxable income floor for charitable deductions effective January 1, 2026. The effects of the OBBBA are reflected in our income tax provisions and effective tax rate for the year ended December 31, 2025.

Federal income taxes paid were $106.5 million, $163.0 million, and $104.0 million in 2025, 2024, and 2023, respectively. Federal income tax refunds received were $2.6 million and $3.1 million in 2025 and 2024, respectively. State income taxes paid, net of state income tax refunds received, were $0.1 million in 2025.

Tax years ending December 31, 2024, 2023 and 2022 remain open to IRS examination. We are not currently under IRS audit, nor have we been notified of an upcoming IRS audit.

We are the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange.  In that capacity, we provide all services and facilities necessary to conduct the Exchange's insurance business.  Indemnity and the Exchange together constitute a single insurance business.  Consequently, we are not subject to state corporate income or franchise taxes in states where the Exchange conducts its business and the states collect premium tax in lieu of corporate income or franchise tax, as a result of the Exchange's remittance of premium taxes in those states.

Historical Timeline

Fiscal YearFiled
2025Feb 23, 2026Showing above
2020Feb 25, 2021

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.

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