COMFORT SYSTEMS USA INC Income Taxes Disclosure

​

11. Income Taxes

​

Provision for Income Taxes

​

Our provision for income taxes relating to continuing operations consists of the following (in thousands):

​

​

​

Rate Reconciliation

​

The provision for income taxes for the years ended December 31, 2025, 2024 and 2023 resulted in effective tax rates on continuing operations of 20.9%, 21.6% and 16.7%, respectively. The reasons for the differences between these effective tax rates and the federal statutory tax rates are as follows (in thousands, except percentages):

​

(a) State taxes in Virginia, North Carolina, Arizona, New York, Alabama, Tennessee and Utah made up the majority (greater than 50%) of the tax effect of this category in 2025.

In February 2023, we filed amended federal tax returns for 2019 and 2020 requesting refunds primarily from claiming the credit for increasing research activities (the “R&D tax credit”). We previously recorded benefits of $18.9 million for such refund claims in the year 2022. Our refund claims are currently under examination by the Internal Revenue Service (the “IRS”) which, if allowed, would require review and approval by the Joint Committee on Taxation (the “JCT”). We do not expect the conclusion of the IRS examination and JCT review to have a material impact on our financial statements.

​

In early September 2023, the IRS issued interim guidance addressing, together with other topics, the treatment of research and experimental (“R&E”) expenditures for taxpayers using the percentage of completion method to account for taxable income from long-term contracts. We relied on such guidance for the 2022 tax year, and the resulting reduction in taxable revenue offsets the deferral of tax deductions for R&E expenditures pursuant to the Tax Cuts and Jobs Act (2017) for the 2022 tax year. We filed our 2022 federal tax return in October 2023 requesting a refund of our $107.1 million overpayment, which was received in April 2025. Along with the refund, we received $11.3 million (or $8.9 million, net of tax) of interest income that reduced our provision for income taxes in the first quarter of 2025.

​

The One Big Beautiful Bill Act was enacted into law on July 4, 2025. The primary provisions of the law impacting us are the (i) reinstatement of immediate expensing of domestic R&E expenditures, together with conforming amendments to the R&D tax credit, (ii) reinstatement of 100% bonus depreciation, and (iii) termination of the energy efficient commercial buildings deduction. However, these provisions did not, and we expect they will not, have a material effect on our operating results, cash flows or financial condition.

​

Deferred Tax Assets (Liabilities)

Significant components of the deferred tax assets and deferred tax liabilities as reflected on the Consolidated Balance Sheets are as follows (in thousands):

​

The deferred tax assets and deferred tax liabilities reflected above are included in the Consolidated Balance Sheets as follows (in thousands):

​

As of December 31, 2025, our deferred tax assets were primarily attributable to accrued liabilities and expenses, goodwill, and intangible assets. All of the net operating loss (“NOL”) and tax credit carryforwards are for various state jurisdictions, the more significant amounts of which begin to expire after the year 2035.

We believe, however, that it is more likely than not that the benefits from the various state NOL and tax credit carryforwards will not all be realized. In recognition of this risk, we have provided a valuation allowance of $0.1 million on the deferred tax assets related to those state NOL and tax credit carryforwards. If or when recognized, the benefits related to any reversal of the valuation allowance on deferred tax assets as of December 31, 2025 will be recognized as a reduction in our provision for income taxes.

​

Certain of the state NOL and tax credit carryforwards shown in our income tax returns included unrecognized tax benefits. The deferred tax assets recognized for these NOL and tax credits are presented net of unrecognized tax benefits.

​

Liabilities for Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):

​

As of December 31, 2025, 2024 and 2023, we had $37.1 million, $30.1 million and $20.6 million, respectively, of unrecognized tax benefits, which if recognized in future periods, would impact our effective tax rates. We also accrued $3.6 million, $1.8 million and $0.6 million for potential interest and penalties related to the unrecognized tax benefits as of December 31, 2025, 2024, and 2023, respectively. We recognize potential interest and penalties related to unrecognized tax benefits in our provision for income taxes.

We are subject to taxation in the federal and various state jurisdictions. As of December 31, 2025, we remain open to IRS examination for the 2022 tax year forward.

State income tax returns are generally subject to examination for a period of three to four years after filing the returns. However, the state impact of any federal audit adjustments and/or amendments remains subject to examination by various states for up to one year after formal notification to the states. As of December 31, 2025, we generally remain open to examination by various state taxing authorities for the 2021 tax year forward.