Graham Holdings CoGHC
Graham Holdings Co Income Taxes Disclosure
INCOME TAXES
Income before income taxes consists of the following:
| Year Ended December 31 | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. | $ | 326,275 | $ | 950,675 | $ | 219,240 | |||||||||||
| Non-U.S. | 123,392 | 74,035 | 79,764 | ||||||||||||||
| $ | 449,667 | $ | 1,024,710 | $ | 299,004 | ||||||||||||
The provision for income taxes consists of the following:
| (in thousands) | Current | Deferred | Total | ||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||
| U.S. Federal | $ | 8,782 | $ | 66,842 | $ | 75,624 | |||||||||||
| State and Local | 8,531 | 25,765 | 34,296 | ||||||||||||||
| Non-U.S. | 36,598 | (118) | 36,480 | ||||||||||||||
| $ | 53,911 | $ | 92,489 | $ | 146,400 | ||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||
| U.S. Federal | $ | 37,783 | $ | 170,380 | $ | 208,163 | |||||||||||
| State and Local | 7,142 | 52,928 | 60,070 | ||||||||||||||
| Non-U.S. | 19,775 | 4,092 | 23,867 | ||||||||||||||
| $ | 64,700 | $ | 227,400 | $ | 292,100 | ||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||
| U.S. Federal | $ | 19,752 | $ | 36,640 | $ | 56,392 | |||||||||||
| State and Local | 5,886 | 10,044 | 15,930 | ||||||||||||||
| Non-U.S. | 17,897 | (2,919) | 14,978 | ||||||||||||||
| $ | 43,535 | $ | 43,765 | $ | 87,300 | ||||||||||||
The provision for income taxes differs from the amount of income tax determined by applying the U.S. Federal statutory rate of 21% to the income before taxes as a result of the following:
| Year Ended December 31 | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| (in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||
| $ | 94,430 | 21.00 | % | $ | 215,189 | 21.00 | % | $ | 62,791 | 21.00 | % | |||||||||||||||
State and local taxes, net of U.S. Federal tax (1) | 27,211 | 6.05 | % | 47,133 | 4.60 | % | 12,590 | 4.21 | % | |||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||
| Australia | ||||||||||||||||||||||||||
| Change in valuation allowance | 31 | 0.01 | % | 3,217 | 0.31 | % | (4,010) | (1.34) | % | |||||||||||||||||
| Other | 2,996 | 0.67 | % | (305) | (0.03) | % | 2,016 | 0.67 | % | |||||||||||||||||
| United Kingdom | 5,123 | 1.14 | % | 3,787 | 0.37 | % | 1,323 | 0.44 | % | |||||||||||||||||
| Other non-U.S. jurisdictions | 2,419 | 0.54 | % | 1,624 | 0.16 | % | (1,101) | (0.37) | % | |||||||||||||||||
| Nontaxable or nondeductible Items | ||||||||||||||||||||||||||
| Goodwill impairments | — | — | % | 1,148 | 0.11 | % | 10,864 | 3.63 | % | |||||||||||||||||
| Mandatorily redeemable noncontrolling interest | 8,526 | 1.90 | % | 20,189 | 1.97 | % | 1,612 | 0.54 | % | |||||||||||||||||
| Other | 2,148 | 0.48 | % | 710 | 0.07 | % | 518 | 0.17 | % | |||||||||||||||||
| Other, net | 3,516 | 0.77 | % | (592) | (0.05) | % | 697 | 0.25 | % | |||||||||||||||||
| Provision for Income Taxes | $ | 146,400 | 32.56 | % | $ | 292,100 | 28.51 | % | $ | 87,300 | 29.20 | % | ||||||||||||||
____________
(1) | |||||
The Company’s effective tax rate for 2025 was impacted by a $9.9 million deferred tax adjustment arising from a change in the estimated deferred state income tax rate attributable to the apportionment formula used in the calculation of deferred taxes related to the Company’s pension and other postretirement plans. This expense is included in the overall state tax provision for 2025 of $27.2 million reflected above.
Deferred income taxes consist of the following:
| As of December 31 | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Employee benefit obligations | $ | 52,717 | $ | 52,145 | |||||||
| State income tax loss carryforwards | 75,911 | 67,703 | |||||||||
| State income tax credit carryforwards | 22 | 131 | |||||||||
| U.S. Federal income tax loss carryforwards | 47,236 | 52,557 | |||||||||
| U.S. Federal foreign income tax credit carryforwards | 402 | 545 | |||||||||
| Non-U.S. income tax loss carryforwards | 14,448 | 16,438 | |||||||||
| Non-U.S. capital loss carryforwards | 9,057 | 5,990 | |||||||||
| Leases | 70,255 | 61,497 | |||||||||
| Other | 31,681 | 44,727 | |||||||||
| Deferred Tax Assets | 301,729 | 301,733 | |||||||||
| Valuation allowances | (82,963) | (74,793) | |||||||||
| Deferred Tax Assets, Net | 218,766 | 226,940 | |||||||||
| Prepaid pension cost | 720,945 | 642,589 | |||||||||
| Unrealized gain on marketable equity securities | 208,155 | 157,717 | |||||||||
| Goodwill and other intangible assets | 73,034 | 60,652 | |||||||||
| Leases | 60,851 | 53,380 | |||||||||
| Non-U.S. withholding tax | 3,192 | 2,800 | |||||||||
| Other | 33,883 | 40,154 | |||||||||
| Deferred Tax Liabilities | 1,100,060 | 957,292 | |||||||||
| Deferred Income Tax Liabilities, Net | $ | 881,294 | $ | 730,352 | |||||||
Cash income taxes paid, net of refunds, by jurisdiction consist of the following:
| Year Ended December 31 | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. Federal | $ | 17,204 | $ | 36,035 | $ | 17,500 | |||||||||||
| State | 8,503 | 8,418 | 7,135 | ||||||||||||||
| Non-U.S. | |||||||||||||||||
| Australia | 12,025 | 6,474 | 925 | ||||||||||||||
| Singapore | 2,115 | 1,916 | 2,158 | ||||||||||||||
| United Kingdom | 16,734 | 5,708 | 7,666 | ||||||||||||||
| Other non-U.S. | 6,250 | 4,752 | 3,899 | ||||||||||||||
| Total non-U.S. | 37,124 | 18,850 | 14,648 | ||||||||||||||
| Total | $ | 62,831 | $ | 63,303 | $ | 39,283 | |||||||||||
The Company has $1,318.6 million of state income tax net operating loss carryforwards available to offset future state taxable income as of December 31, 2025. State income tax loss carryforwards, if unutilized, will start to expire approximately as follows:
| (in millions) | |||||
| 2026 | $ | 11.5 | |||
| 2027 | 16.1 | ||||
| 2028 | 22.5 | ||||
| 2029 | 30.2 | ||||
| 2030 | 44.5 | ||||
| 2031 and after | 1,193.8 | ||||
| Total | $ | 1,318.6 | |||
The Company has recorded $75.9 million in deferred state income tax assets, net of U.S. Federal income tax, with respect to these state income tax loss carryforwards as of December 31, 2025. The Company has established $56.2 million in valuation allowances against these deferred state income tax assets, since the Company has determined that it is more likely than not that some of these state income tax losses may not be fully utilized in the future to reduce state taxable income.
The Company has $224.9 million of U.S. Federal income tax loss carryforwards obtained as a result of prior stock acquisitions as of December 31, 2025. U.S. Federal income tax loss carryforwards are expected to be fully utilized as follows:
| (in millions) | |||||
| 2026 | $ | 14.0 | |||
| 2027 | 6.4 | ||||
| 2028 | 6.3 | ||||
| 2029 | 6.3 | ||||
| 2030 | 6.3 | ||||
| 2031 and after | 185.6 | ||||
| Total | $ | 224.9 | |||
The Company has established $47.2 million in U.S. Federal deferred tax assets with respect to these U.S. Federal income tax loss carryforwards as of December 31, 2025.
For U.S. Federal income tax purposes, the Company has established U.S. Federal deferred tax assets with respect to $0.4 million of foreign tax credits available to be credited against future U.S. Federal income tax liabilities that will start to expire in 2031 if unutilized. The Company has recorded $0.1 million in valuation allowances against these deferred tax assets since the Company determined that it is more likely than not that these foreign tax credit carryforwards may not be utilized in the future to reduce U.S. Federal income taxes.
The Company has $78.5 million of non-U.S. income tax loss carryforwards as a result of operating losses and carryforwards that were obtained in part through prior stock acquisitions that are available to offset future non-U.S. taxable income and has recorded, with respect to these losses, $14.4 million in non-U.S. deferred income tax assets. The Company has established $11.1 million in valuation allowances against the deferred tax assets for the portion of non-U.S. tax losses that may not be utilized to reduce future non-U.S. taxable income. The $78.5 million of non-U.S. income tax loss carryforwards consist of $24.5 million in losses that may be carried forward indefinitely; $44.3 million of losses that, if unutilized, will expire in varying amounts through 2030; and $9.7 million of losses that, if unutilized, will start to expire after 2030.
The Company has $32.0 million of non-U.S. capital loss carryforwards that may be carried forward indefinitely and are available to offset future non-U.S. capital gains. The Company recorded a $9.0 million non-U.S. deferred income tax asset for these non-U.S. capital loss carryforwards and has established a full valuation allowance against this non-U.S. deferred tax asset since the Company has determined that it is more likely than not that the capital loss carryforwards may not be utilized to reduce taxable income in the future.
Deferred tax valuation allowances and changes in deferred tax valuation allowances were as follows:
| (in thousands) | Balance at Beginning of Period | Tax Expense and Revaluation | Deductions | Balance at End of Period | |||||||||||||||||||
| Year Ended | |||||||||||||||||||||||
| December 31, 2025 | $ | 74,793 | $ | 11,788 | $ | (3,618) | $ | 82,963 | |||||||||||||||
| December 31, 2024 | 66,298 | 9,389 | (894) | 74,793 | |||||||||||||||||||
| December 31, 2023 | 62,816 | 9,786 | (6,304) | 66,298 | |||||||||||||||||||
The Company has established $62.0 million in valuation allowances against deferred state tax assets recognized, net of U.S. Federal tax. As stated above, approximately $56.2 million of the valuation allowances, net of U.S. Federal income tax, relate to state income tax loss carryforwards. In most instances, the Company has established valuation allowances against deferred state income tax assets without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing those deferred state tax assets recognized because these temporary differences are not likely to reverse in the foreseeable future. However, certain deferred state tax assets have an indefinite life. As a result, the Company has considered deferred tax liabilities for prepaid pension cost and goodwill as a source of future taxable income for realizing those deferred state tax assets with indefinite lives. The valuation allowances established against deferred state income tax assets may increase or decrease within the next 12 months, based on operating results or the market value of investment holdings. The Company will monitor future results on a quarterly basis to determine whether the valuation allowances provided against deferred state tax assets should be increased or decreased as future circumstances warrant.
The Company has established $20.5 million in valuation allowances against non-U.S. deferred tax assets, and as stated above, $11.1 million of the non-U.S. valuation allowances relate to non-U.S. income tax loss carryforwards and $9.0 million relate to non-U.S. capital loss carryforwards. Valuation allowances established against non-U.S. deferred tax assets are recorded at the education division and other businesses. These non-U.S. valuation allowances may increase or decrease within the next 12 months, based on operating results. As a result, the Company is unable to estimate the potential tax impact, given the uncertain operating environment. The Company will monitor future education division and other businesses’ operating results and projected future operating results on a quarterly basis to determine whether the valuation allowances provided against non-U.S. deferred tax assets should be increased or decreased as future circumstances warrant.
The Company estimates that unremitted non-U.S. subsidiary earnings, when distributed, will not be subject to tax except to the extent non-U.S. withholding taxes are imposed. Approximately $3.2 million of deferred tax liabilities remain recorded on the books at December 31, 2025, with respect to future non-U.S. withholding taxes the Company estimated may be imposed on future cash distributions.
U.S. Federal and state tax liabilities may be recorded if the investment in non-U.S. subsidiaries becomes held for sale instead of being held indefinitely, but the calculation of the tax due is not practicable.
The Company files income tax returns with the U.S. Federal government and in various state, local and non-U.S. governmental jurisdictions, with the U.S. and the U.K. representing its major tax jurisdictions. The 2022 U.S. Federal tax return and subsequent years remain open to Internal Revenue Service examination. The 2022 U.K. corporation tax return and subsequent years remain open to examination by His Majesty’s Revenue and Customs (HMRC). There are currently no ongoing tax examinations in either jurisdiction.
The Company endeavors to comply with tax laws and regulations where it does business, but cannot guarantee that, if challenged, the Company’s interpretation of all relevant tax laws and regulations will prevail and that all tax benefits recorded in the financial statements will ultimately be recognized in full.
The following summarizes the Company’s unrecognized tax benefits, excluding interest and penalties, for the respective periods:
| Year Ended December 31 | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Beginning unrecognized tax benefits | $ | 3,309 | $ | 3,263 | $ | 3,897 | |||||||||||
| Increases related to current year tax positions | 233 | 235 | 135 | ||||||||||||||
| Increases related to prior year tax positions | — | 990 | — | ||||||||||||||
| Decreases related to prior year tax positions | (3) | (43) | (165) | ||||||||||||||
| Decreases related to settlement with tax authorities | (4) | — | — | ||||||||||||||
| Decreases due to lapse of applicable statutes of limitations | (474) | (1,136) | (604) | ||||||||||||||
| Ending unrecognized tax benefits | $ | 3,061 | $ | 3,309 | $ | 3,263 | |||||||||||
The unrecognized tax benefits relate to federal and state research and development tax credits applicable to the 2022 to 2025 tax periods, as well as state income tax filing positions applicable to the 2012 to 2020 tax periods. In making these determinations, the Company presumes that taxing authorities pursuing examinations of the Company’s compliance with tax law filing requirements will have full knowledge of all relevant information, and, if necessary, the Company will pursue resolution of disputed tax positions by appeals or litigation. Although the Company cannot predict the timing of resolution with tax authorities, the Company estimates that some of the unrecognized tax benefits may change in the next 12 months due to settlement with the tax authorities. The Company expects that a $0.8 million federal tax benefit and a $2.2 million state tax benefit, net of $0.5 million federal tax expense, will reduce the effective tax rate in the future if the unrecognized tax benefits are recognized.
The Company classifies interest and penalties related to uncertain tax positions as a component of interest and other expenses, respectively. As of December 31, 2025, the Company has accrued $0.5 million of interest related to the unrecognized tax benefits. The Company has not accrued any penalties related to the unrecognized tax benefits.
In December 2021, the Organization for Economic Co-operation and Development (OECD) issued a set of rules known as “Pillar Two” with the intent to ensure that global companies pay a minimum corporate income tax of 15% in jurisdictions in which the global companies operate. Many non-U.S. countries (including the U.K. and European Union member countries) enacted legislation to adopt certain aspects of Pillar Two effective January 1, 2024. While the U.S. has not adopted Pillar Two, rules implemented by participating countries apply to the Company’s worldwide operations. The Company does not have material operations in jurisdictions with tax rates lower than 15%. The amount of Pillar Two tax recorded as of December 31, 2025 is not material. The Company will continue to monitor legislative changes as it relates to Pillar Two.
On July 4, 2025, legislation known as "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" (the Act) was enacted in the U.S., which includes, among other things, many corporate income tax provisions that will impact the Company. The Company has considered the Act in its full year 2025 effective tax rate, and continues to analyze its various provisions. The Act resulted in a significant decline in federal taxable income for 2025 as a result of changes to the income tax treatment of certain research and development costs and accelerated income tax deductions for certain capital expenditures.
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.