GROUP 1 AUTOMOTIVE INCGPI
GROUP 1 AUTOMOTIVE INC Income Taxes Disclosure
INCOME TAXES
The Company has adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective for the year ended December 31, 2025. As a result of this adoption, the Company’s income tax disclosure below now includes additional information related to the effective tax rate reconciliation and income taxes paid. Income from continuing operations before income taxes by geographic area was as follows (in millions):
| Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Domestic | $ | 563.1 | $ | 652.2 | $ | 732.1 | ||||||||||||||
| Foreign | (113.2) | 6.3 | 68.1 | |||||||||||||||||
| Total income before income taxes | $ | 449.9 | $ | 658.5 | $ | 800.2 | ||||||||||||||
Federal, state and foreign income tax provisions from continuing operations were as follows (in millions):
| Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Federal: | ||||||||||||||||||||
| Current | $ | 75.6 | $ | 121.4 | $ | 142.9 | ||||||||||||||
| Deferred | 35.0 | 14.7 | 11.8 | |||||||||||||||||
| State: | ||||||||||||||||||||
| Current | 12.2 | 19.2 | 23.8 | |||||||||||||||||
| Deferred | 8.2 | 4.6 | 4.6 | |||||||||||||||||
| Foreign: | ||||||||||||||||||||
| Current | 13.6 | (2.7) | 12.8 | |||||||||||||||||
| Deferred | (18.4) | 4.3 | 2.3 | |||||||||||||||||
| Provision for income taxes | $ | 126.2 | $ | 161.5 | $ | 198.2 | ||||||||||||||
A reconciliation of the statutory federal rate to the effective tax rate on income before income taxes from continuing operations was as follows (in millions):
| Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PTI | Tax | % | PTI | Tax | % | PTI | Tax | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. federal statutory rate | $ | 449.9 | $ | 94.5 | 21.0 | % | $ | 658.5 | $ | 138.3 | 21.0 | % | $ | 800.2 | $ | 168.0 | 21.0 | % | ||||||||||||||||||||||||||||||||||||||
State income taxes, net of federal benefit (1) | 15.6 | 3.5 | % | 19.7 | 3.0 | % | 22.7 | 2.8 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.K. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill impairments | 22.7 | 5.0 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | (0.1) | — | % | 2.3 | 0.3 | % | 1.9 | 0.2 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Other Foreign Jurisdiction | (4.3) | (1.0) | % | (1.9) | (0.3) | % | (1.0) | (0.1) | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Effect of cross-border tax laws | — | — | % | 1.7 | 0.3 | % | 1.8 | 0.2 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Tax credits | (3.3) | (0.7) | % | (3.9) | (0.6) | % | (0.5) | (0.1) | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | 2.5 | 0.6 | % | 2.1 | 0.3 | % | 0.7 | 0.1 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | (1.4) | (0.3) | % | 3.2 | 0.5 | % | 4.6 | 0.6 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 449.9 | $ | 126.2 | 28.0 | % | $ | 658.5 | $ | 161.5 | 24.5 | % | $ | 800.2 | $ | 198.2 | 24.8 | % | ||||||||||||||||||||||||||||||||||||||
(1) State taxes in California, Massachusetts, Oklahoma and Texas made up the majority (greater than 50%) of the tax effect in this category.
Taxes paid, net of refunds, were as follows (in millions):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 91.1 | $ | 115.1 | $ | 143.7 | |||||||||||
| State | 15.6 | 20.7 | 22.1 | ||||||||||||||
| Foreign (U.K.) | 1.4 | 10.2 | 18.0 | ||||||||||||||
| $ | 108.1 | $ | 146.0 | $ | 183.8 | ||||||||||||
The components of deferred tax assets and liabilities were as follows (in millions):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Accrued liabilities | $ | 83.1 | $ | 66.7 | ||||||||||
Fixed asset basis differences | — | 1.9 | ||||||||||||
| Net operating losses | 7.0 | 9.0 | ||||||||||||
| Operating lease liabilities | 70.4 | 89.6 | ||||||||||||
| Deferred tax assets | 160.6 | 167.1 | ||||||||||||
| Less: valuation allowance on deferred tax assets | 4.7 | 6.0 | ||||||||||||
| Net deferred tax assets | $ | 155.9 | $ | 161.1 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
Goodwill and other intangibles | $ | 254.7 | $ | 239.9 | ||||||||||
| Fixed asset basis differences | 154.8 | 119.5 | ||||||||||||
| Interest rate swaps | 10.8 | 18.9 | ||||||||||||
| Operating lease ROU assets | 66.3 | 77.6 | ||||||||||||
| Other | 0.4 | 1.0 | ||||||||||||
| Deferred tax liabilities | 487.0 | 456.9 | ||||||||||||
| Net deferred tax liability | $ | 331.1 | $ | 295.8 | ||||||||||
The classification of the continued operations of the Company’s net deferred tax liability within the Consolidated Balance Sheets is as follows (in millions):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
Deferred tax assets, included in Other long-term assets | $ | — | $ | — | ||||||||||
Deferred tax liability, included in Deferred income taxes | 331.1 | 295.8 | ||||||||||||
| Net deferred tax liability | $ | 331.1 | $ | 295.8 | ||||||||||
As of December 31, 2025, the Company had state pre-tax net operating loss carryforwards in the U.S. of $122.3 million that will expire between 2026 and 2045 in certain states while some may be carried forward indefinitely. To the extent that the Company expects that net income will not be sufficient to realize these net operating losses in certain jurisdictions, a valuation allowance has been established.
The Company believes it is more-likely-than-not that its deferred tax assets, net of valuation allowances provided, will be realized, based primarily on its expectation of future taxable income and considering future reversals of existing taxable temporary differences.
As of December 31, 2025, the Company maintains a permanent reinvestment assertion on the Company’s foreign subsidiaries. An immaterial amount of tax would be payable upon any distribution of unremitted earnings or a recognition of any outside basis difference.
Based on the statutes of limitations in the applicable jurisdictions in which the Company operates, the Company is generally no longer subject to examinations by tax authorities in years prior to 2020.
A reconciliation of the Company’s unrecognized tax benefits is as follows (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1 | $ | 2.1 | $ | 2.2 | $ | 2.0 | |||||||||||
| Additions for current tax | 0.8 | 0.4 | 0.6 | ||||||||||||||
| Additions based on tax positions in prior years | — | — | — | ||||||||||||||
| Reductions for tax positions | — | — | — | ||||||||||||||
| Settlements with tax authorities | — | — | — | ||||||||||||||
Reductions due to lapse of statutes of limitations | (0.5) | (0.5) | (0.4) | ||||||||||||||
| Balance at December 31 | $ | 2.4 | $ | 2.1 | $ | 2.2 | |||||||||||
Included in the balance of unrecognized tax benefits as of December 31, 2025, 2024 and 2023, are $1.9 million, $1.7 million and $1.9 million, respectively, of tax benefits that would affect the effective tax rate if recognized.
For the years ended December 31, 2025, 2024 and 2023 the Company recorded approximately $0.5 million, $0.4 million and $0.3 million, respectively, of interest and penalty related to its uncertain tax positions. Consistent with prior practice, the Company recognizes interest and penalties related to uncertain tax positions within Provision for income taxes in the Consolidated Statements of Operations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 13, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 17, 2016 | |
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.