GRAY MEDIA, INC Income Taxes Disclosure

10.	Income Taxes

 

On July 4, 2025, the United Stated enacted tax reform legislation through the One Big Beautiful Bill Act, which changed existing U.S. tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act, and easing the interest expense limitation rules of Section 163(j) of the Internal Revenue Code, in addition to other changes.

 

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change.

 

Under certain circumstances, we recognize liabilities in our financial statements for positions taken on uncertain tax issues. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits on the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as income tax expense in the statements of operations.

 

Federal and state and local income tax expense is summarized as follows (in millions):

 

 

		Year Ended December 31,
		2025				2024				2023
Current:
Federal		$	27			$	106			$	73
State and local			1				20				12
Current income tax expense			28				126				85
Deferred:
Federal			(40	)			(6	)			(76	)
State and local			(16	)			(3	)			(15	)
Deferred income tax benefit			(56	)			(9	)			(91	)
Total income tax (benefit) expense		$	(28	)		$	117			$	(6	)

 

Significant components of our deferred tax liabilities and assets are as follows (in millions):

 

		December 31,
		2025				2024
Deferred tax liabilities:
Net book value of property and equipment		$	121			$	135
Broadcast licenses, goodwill and other intangible assets			1,336				1,340
ROU assets			17				18
Other			13				6
Total deferred tax liabilities			1,487				1,499
Deferred tax assets:
Liability for compensated absences			6				6
Liability for accrued bonus			11				12
Liability under self-insured plans			3				2
State and local operating loss carryforwards			12				11
Unearned income			2				4
Restricted stock			-				3
Lease liability			17				18
Investments			12				7
Interest expense limitation			117				76
Other comprehensive income			-				8
Other			14				12
Total deferred tax assets			194				159
Valuation allowance for deferred tax assets			(7	)			(7	)
Net deferred tax assets			187				152
Net deferred tax liabilities		$	1,300			$	1,347

 

As of December 31, 2025, we have an aggregate of approximately $258 million of various state operating loss carryforwards, of which we expect that a portion of these will not be utilized. We expect that the unutilized portion of these state net operating loss carryforwards will not be utilized due to Internal Revenue Code section 382 limitations and those that will expire prior to utilization. After applying our state effective tax rate, this amount is included in our valuation allowance for deferred tax assets.

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to the income before income taxes after the adoption of ASU 2023-09 is as follows (in millions, except for percentages):

 

		Year Ended December 31, 2025
Statutory federal rate applied to income before income tax expense		$	(24	)			21	%
Nondeductible expenses			3				(3	)%
Nondeductible compensation			8				(7	)%
Investments			(2	)			2	%
State and local taxes, net of federal tax benefit(1)			(11	)			10	%
Other items, net			(2	)			2	%
Income tax benefit as recorded		$	(28	)			25	%
Effective income tax rate							25	%

 

(1) The majority (greater than 50%) of the tax effect in this category is attributable to Louisiana.

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to the income before income taxes for the years prior to the adoption of ASU 2023-09 is as follows (in millions):

 

		Year Ended December 31,
		2024				2023
Statutory federal rate applied to income before income tax expense		$	103			$	(17	)
Nondeductible expenses			6				11
State and local taxes, net of federal tax benefit			21				(4	)
Change in valuation allowance			(1	)			(1	)
Reserve for uncertain tax positions			(14	)			1
Other items, net			2				4
Income tax (benefit) expense as recorded		$	117			$	(6	)
Effective income tax rate			24	%			7	%

 

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 1, Recent Accounting Pronouncements, cash paid for income taxes, net of refunds, during the year ended December 31, 2025 was the following (in millions):

 

		December 31, 2025
U.S. federal income taxes, net		$	35
State and local income taxes, net			3
Total cash paid for income taxes		$	38

 

The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $135 million and $50 million, respectively.

 

Each year, we adjust our other comprehensive income on a net of tax basis. During 2025, we recorded a $4 million adjustment to our pension asset; we recorded an adjustment of the fair value of our interest rate caps of $31 million that expired on December 31, 2025; and we recorded a $9 million tax expense. During 2024, we increased our recorded non-current pension asset by $1 million; we recorded an adjustment of the fair value of our interest rate caps of $8 million; and together, we recorded a $2 million tax benefit. During 2023, we increased our recorded non-current pension asset by $7 million; we recorded an adjustment of the fair value of our interest rate caps of $23 million; and we recorded a $5 million tax benefit.

 

We file a federal consolidated income tax return in the United States and state or local consolidated income tax returns in various state or local jurisdictions. Certain of our subsidiaries file separate tax returns in other various state and local jurisdictions. Generally, we are no longer subject to federal, state and local tax examinations for years before 2021.

 

The following table summarizes the activity related to our reserve for uncertain tax positions (in millions):

 

		Year Ended December 31,
		2025				2024				2023
Balance at beginning of period		$	-			$	14			$	15
Statute expirations			-				(14	)			(1	)
Balance at end of period		$	-			$	-			$	14

 

We recognize accrued interest and penalties related to uncertain tax positions in income tax expense in the accompanying Consolidated Statements of Operations and Consolidated Statements of Comprehensive (Loss) Income. During the years ended December 31, 2025, 2024 and 2023, our penalty and interest expense related to uncertain tax positions was not material. At December 31, 2025, 2024 and 2023, the total accrual for interest and penalties related to uncertain tax positions was not material.