GPGI, Inc.GPGI
GPGI, Inc. Income Taxes Disclosure
INCOME TAXES
The Company recorded income tax provision of $39,026, $2,187 and $4,556 for the years ended December 31, 2025, 2024 and 2023. Federal, state and local income tax returns for years prior to 2019 are no longer subject to examination by tax authorities. As of December 31, 2025, the Company had no open IRS or state income tax audits. There were no proposed adjustments resulting from the examination. All components of income tax expense relate to continuing operations.
(Loss) income before the provision for income taxes, substantially all of which is attributable to United States or domestic operations, is presented in the accompanying consolidated statements of operations as follows:
Year Ended December 31, | ||||||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||||||
(Loss) income before income taxes and equity method investment | $ | (96,979) | $ | (80,975) | $ | 117,076 | ||||||||||||||
The components of the provision for income taxes for the year ended December 31, 2025, 2024 and 2023 consisted of the following:
Year Ended December 31, | ||||||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||||||
Current: | ||||||||||||||||||||
Federal | $ | 23,126 | $ | 4,454 | $ | 1,810 | ||||||||||||||
State | 1,157 | 202 | 79 | |||||||||||||||||
24,283 | 4,656 | 1,889 | ||||||||||||||||||
Deferred: | ||||||||||||||||||||
Federal | 17,102 | (2,387) | 3,091 | |||||||||||||||||
State | (2,359) | (82) | (424) | |||||||||||||||||
14,743 | (2,469) | 2,667 | ||||||||||||||||||
Total provision for income taxes | $ | 39,026 | $ | 2,187 | 4,556 | |||||||||||||||
The Company adopted ASU 2023‑09 on a prospective basis beginning with the year ended December 31, 2025. A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate for the year ended December 31, 2025 is presented accordingly as follows
Year Ended December 31, 2025 | ||||||||||||||
U.S. federal statutory tax rate | $ | (20,366) | 21.00 | % | ||||||||||
Tax credits — R&D credit | (639) | 0.66 | % | |||||||||||
Effect of cross‑border tax laws — FDII deduction | (416) | 0.43 | % | |||||||||||
State and local income taxes, net of federal (national) income tax effect | (953) | 0.98 | % | |||||||||||
Effect of changes in tax laws or rates enacted in the current period | (3,159) | 3.26 | % | |||||||||||
Nontaxable or nondeductible items — Fair value adjustments (warrants & earnouts) | 45,738 | (47.16) | % | |||||||||||
Nontaxable or nondeductible items — IRC §311(b) gain | 21,186 | (21.85) | % | |||||||||||
Nontaxable or nondeductible items — §162(m) executive compensation limitation | 6,827 | (7.04) | % | |||||||||||
Nontaxable or nondeductible items — Stock‑based compensation (permanent) | (7,221) | 7.45 | % | |||||||||||
Nontaxable or nondeductible items — Loss on remeasurement of TRA liability | 762 | (0.79) | % | |||||||||||
Other items — prior‑year return‑to‑provision (current and deferred), other permanents (net) | (2,733) | 2.82 | % | |||||||||||
Effective income tax | 39,026 | (40.24) | % | |||||||||||
The reconciliation of income taxes at the federal statutory income tax rate to the effective income tax rate, applying ASC740 prior to the adoption of ASU 2023-09 for the years ended December 31, 2024, and 2023 were as follows:
Year Ended December 31, | ||||||||||||||
2024 | 2023 | |||||||||||||
U.S. federal statutory tax rate | 21.00 | % | 21.00 | % | ||||||||||
State taxes | 0.72 | % | 0.72 | % | ||||||||||
Valuation allowances | 13.82 | % | 3.26 | % | ||||||||||
NCI adjustment | (15.29) | % | (17.37) | % | ||||||||||
Permanent differences | 3.80 | % | (3.82) | % | ||||||||||
Fair Value Adjustments: Warrants & Liabilities | (26.84) | % | — | % | ||||||||||
OCI Adjustment | (0.08) | % | 0.09 | % | ||||||||||
Other temporary differences | 0.17 | % | 0.01 | % | ||||||||||
Effective income tax rate | (2.70) | % | 3.89 | % | ||||||||||
The 2025 effective tax rate differs from the statutory rate primarily due to (i) fair value adjustments to warrants and liabilities, (ii) the IRC 311(b) gain recognized for tax purposes, (iii) stock-based compensation, (iv) §162(m) executive compensation limitation, and (v) other permanent items and discrete true‑ups, including the remeasurement of the TRA liability.
During the year ended December 31, 2025, the Company updated its blended state income tax rate based on revised apportionment and statutory changes. The revised rate increased from approximately 0.72% to 0.98%, resulting in higher expected tax benefits and a corresponding increase in the Company’s liability under the Tax Receivable Agreement. The change in blended state rate resulted in a $3,465 loss recognized in Loss on remeasurement of Tax Receivable Agreement liability, with a corresponding increase to the TRA liability. The TRA liability totaled $271,353 at December 31, 2025, inclusive of this remeasurement. Additional information regarding the TRA is provided in Note 16.
The Company’s overall effective tax rate is affected by the Tungsten Transactions. As a result of the Tungsten Transactions, Holdings became 100 percent owned by the Company, thereby eliminating the Company's legacy Up-C structure. This resulted in the release of certain valuation allowances and changes in tax benefit allocations during the year ended December 31, 2024. There was no change in valuation allowances during the year ended December 31, 2025.
Provisions have been made for deferred taxes based on the differences between the basis of the assets and liabilities for financial statement purposes and the basis of the assets and liabilities for tax purposes using currently enacted tax rates and regulations that will be in effect when the differences are expected to be recovered or settled.
The components of the deferred tax assets were as follows:
Year Ended December 31, | ||||||||||||||
2025 | 2024 | |||||||||||||
Deferred Tax Assets: | ||||||||||||||
IRC 755 -Intangible Assets | $ | 266,334 | $ | 257,867 | ||||||||||
IRC 755 - Fixed Assets | 556 | 838 | ||||||||||||
Inventory - 263A | 48 | 74 | ||||||||||||
Inventory Reserve | 1,062 | 609 | ||||||||||||
R&D Capitalized Costs | — | 5,328 | ||||||||||||
Accrued Expenses | 3,184 | 2,453 | ||||||||||||
Equity Compensation | 1,635 | 1,962 | ||||||||||||
Transaction Costs | 3,045 | — | ||||||||||||
Total deferred tax assets | $ | 275,864 | $ | 269,131 | ||||||||||
Prepaid Insurance | (229) | (564) | ||||||||||||
Fixed Assets | (3,783) | (3,607) | ||||||||||||
Right of Use Assets, net of lease liability | (128) | (145) | ||||||||||||
Total deferred tax assets, net of valuation allowance and deferred liability | $ | 271,724 | $ | 264,815 | ||||||||||
All deferred tax assets and liabilities are classified as non‑current in accordance with ASC 740. Deferred taxes primarily result from the Roman Business Combination where the Company recorded a carryover basis on all assets for financial accounting purposes and a fair value step-up on a portion of the assets for income tax purposes. As a result of the Tungsten Transactions, the Company owned 100 percent of Holdings, which triggered the conversion from Investment in Holdings in deferred tax assets into specific deferred tax items, most notably the increase in IRC 755 - Intangible Assets. The Company’s deferred tax asset was reviewed for expected utilization using a “more likely than not” approach by assessing the available positive and negative evidence surrounding its recoverability. No valuation allowance was recorded for the years ended December 31, 2025 and 2024, and there was no valuation allowance activity during the periods presented. The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately at such time when it is determined that the “more likely than not” criteria is satisfied. All deferred tax assets and liabilities relate to U.S. federal and state jurisdictions; the Company had no foreign deferred tax balances. Federal deferred tax assets totaled $259,573 and state deferred tax assets totaled $12,151 as of December 31, 2025, both of which are net of valuation allowance and deferred liability.
The One Big Beautiful Bill Act (the "OBBB"), which was signed into law on July 4, 2025, extends and modifies certain key provisions of the U.S. Tax Cuts and Jobs Act of 2017 (the "TCJA"). The OBBB makes permanent certain provisions of the TCJA that were expiring, most notably bonus depreciation and R&D expensing. The OBBB permanently extends 100% bonus depreciation for qualified property placed in service after January 19, 2025. Starting in 2022, the TCJA required businesses to capitalize and amortize domestic research and development expenditures over five years. The OBBB reinstated immediate expensing for domestic research and experimental expenditures under IRC §174A and provided transition relief for previously capitalized domestic §174 amounts. The adoption of the OBBB resulted in a current-year tax benefit and a corresponding reduction of deferred tax assets related to previously capitalized domestic §174 expenditures of $3,159.
Cash income taxes paid during 2025 totaled approximately $24,310 consisting of $23,300 of U.S. federal income tax payments and $1,010 of state and local income tax payments, with no material foreign income tax payments made during the period. The increase in tax expense was primarily attributable to the Company being subject to tax on 100% of Holdings’ taxable income following the Tungsten Transactions, as well as a taxable gain on appreciated property resulting from the Spin‑Off.
The Company did not record unrecognized tax benefits for 2025, 2024, or 2023 and does not expect significant changes to unrecognized tax benefits within the next 12 months; no interest or penalties related to income taxes were recognized.
Tax effects related to components of other comprehensive income were not material for 2025; any such amounts were recorded through intra‑period tax allocation consistent with ASC 740.
There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded on the Company’s financial statements for the years ended December 31, 2025, 2024 and 2023. Additionally, there were no interest or penalties outstanding as of the fiscal year ended December 31, 2025, 2024 and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 29, 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.