GRANITE CONSTRUCTION INCGVA
GRANITE CONSTRUCTION INC Income Taxes Disclosure
19. Income Taxes
The following is a summary of income before income taxes (in thousands):
| Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | 275,706 | $ | 195,059 | $ | 92,552 | |||||||||||
| Foreign and U.S. territories | 13,121 | 1,133 | (32,698) | ||||||||||||||
| Total income before income taxes | $ | 288,827 | $ | 196,192 | $ | 59,854 | |||||||||||
The following is a summary of the provision for income taxes (in thousands):
| Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Federal: | |||||||||||||||||
| Current | $ | 27,092 | $ | 29,754 | $ | 1,579 | |||||||||||
| Deferred | 23,999 | 11,803 | 23,331 | ||||||||||||||
| Total federal | 51,091 | 41,557 | 24,910 | ||||||||||||||
| State: | |||||||||||||||||
| Current | 15,274 | 10,612 | 3,565 | ||||||||||||||
| Deferred | 198 | 2,363 | 1,362 | ||||||||||||||
| Total state | 15,472 | 12,975 | 4,927 | ||||||||||||||
| Foreign and U.S. territories: | |||||||||||||||||
| Current | 2,309 | 1,824 | (1,432) | ||||||||||||||
| Deferred | (396) | (607) | 1,862 | ||||||||||||||
| Total foreign and U.S. territories | 1,913 | 1,217 | 430 | ||||||||||||||
| Total provision for income taxes | $ | 68,476 | $ | 55,749 | $ | 30,267 | |||||||||||
The following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):
| Years Ended December 31, | 2025 (1) | 2024 (2) | 2023 (2) | ||||||||||||||||||||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 60,654 | 21.0 | % | $ | 41,200 | 21.0 | % | $ | 12,569 | 21.0 | % | |||||||||||||||||||||||
| State and Local income Tax, Net of Federal (National) Income Tax Effect (3) | 12,264 | 4.3 | 10,746 | 5.5 | 4,180 | 7.0 | |||||||||||||||||||||||||||||
| Foreign and U.S. territories Tax Effects: | |||||||||||||||||||||||||||||||||||
| Mexico: | |||||||||||||||||||||||||||||||||||
| Nondeductible goodwill | — | — | — | — | 4,987 | 8.3 | |||||||||||||||||||||||||||||
| Change in valuation allowances | 587 | 0.2 | 1,666 | 0.8 | 2,807 | 4.7 | |||||||||||||||||||||||||||||
| Other items | (351) | (0.1) | (743) | (0.4) | (541) | (0.9) | |||||||||||||||||||||||||||||
| All other foreign jurisdictions | (168) | (0.1) | 396 | 0.2 | 1,444 | 2.4 | |||||||||||||||||||||||||||||
| Effect of Cross-Border Tax Laws | 13 | — | 579 | 0.3 | (134) | (0.2) | |||||||||||||||||||||||||||||
| Tax Credits | — | — | (847) | (0.4) | 297 | 0.5 | |||||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items: | |||||||||||||||||||||||||||||||||||
| Debt extinguishment costs | — | — | 5,537 | 2.8 | 10,360 | 17.3 | |||||||||||||||||||||||||||||
| Equity earnings of subsidiaries | (2,863) | (1.0) | (2,490) | (1.3) | (3,419) | (5.7) | |||||||||||||||||||||||||||||
| Noncontrolling interest | (4,765) | (1.6) | (2,465) | (1.3) | 2,651 | 4.4 | |||||||||||||||||||||||||||||
| Executive compensation | 3,515 | 1.2 | 2,314 | 1.2 | 790 | 1.3 | |||||||||||||||||||||||||||||
| Nondeductible meals and entertainment | 1,745 | 0.6 | 1,391 | 0.7 | 1,072 | 1.8 | |||||||||||||||||||||||||||||
| Percentage depletion deduction | (1,437) | (0.5) | (1,304) | (0.7) | (1,119) | (1.9) | |||||||||||||||||||||||||||||
| Nondeductible goodwill | — | — | — | — | (4,248) | (7.1) | |||||||||||||||||||||||||||||
| Other items | (817) | (0.3) | (136) | — | (1,201) | (1.9) | |||||||||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | 99 | — | (95) | — | (228) | (0.4) | |||||||||||||||||||||||||||||
| Total | $ | 68,476 | 23.7 | % | $ | 55,749 | 28.4 | % | $ | 30,267 | 50.6 | % | |||||||||||||||||||||||
(1)The variance from the U.S. federal statutory tax rate in 2025 is due primarily to the expense of state and local income taxes partially offset by the tax benefit of adjusting for noncontrolling interest.
(2)The prior years in the above table have been recast to meet the requirements of ASU 2023-09, which we retrospectively adopted (see Note 1 for additional details).
(3)In each year presented, California makes up greater than 50% of State and Local Income Tax, Net of Federal (National) Income Tax Effect.
The following is a summary of the deferred tax assets and liabilities:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Receivables | $ | 2,170 | $ | 1,270 | |||||||
| Insurance | 14,563 | 15,307 | |||||||||
| Deferred compensation | 13,647 | 11,884 | |||||||||
| Convertible debt - capped call amortization | 15,009 | 19,852 | |||||||||
| Accrued compensation | 6,198 | 5,048 | |||||||||
| Other accrued liabilities | 3,834 | 2,073 | |||||||||
| Contract income recognition | 12,308 | 16,822 | |||||||||
| Lease liabilities | 38,521 | 19,678 | |||||||||
| Net operating loss carryforwards | 28,134 | 29,182 | |||||||||
| Valuation allowance | (24,389) | (23,450) | |||||||||
| Other | 5,119 | 4,199 | |||||||||
| Total deferred tax assets | 115,114 | 101,865 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment | 187,075 | 78,553 | |||||||||
| Intangibles | 31,406 | 18,355 | |||||||||
| Right of use assets | 38,122 | 18,831 | |||||||||
| Total deferred tax liabilities | 256,603 | 115,739 | |||||||||
| Net deferred tax liability | $ | (141,489) | $ | (13,874) | |||||||
The following is a summary of the net operating loss carryforwards at December 31, 2025:
| (in thousands) | Expiration | Gross Carryforward | Tax Effected Carryforward | ||||||||||||||
| Federal net operating loss carryforwards | N/A | $ | 3,376 | $ | 709 | ||||||||||||
| State net operating loss carryforwards | 2026-2045 | $ | 253,397 | 11,095 | |||||||||||||
| Foreign tax loss carryforwards | 2026-2045 | $ | 55,818 | 16,330 | |||||||||||||
| Total net operating loss carryforwards | $ | 28,134 | |||||||||||||||
The federal, state and foreign net operating loss carryforwards above include unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. The federal and state net operating losses acquired during the Layne Christensen Company acquisition in 2018 are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use the federal net operating loss carryforwards prior to expiration we believe that it is more likely than not that these deferred tax assets will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is more likely than not that they will be realized.
The following is a summary of the change in valuation allowance:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Beginning balance | $ | 23,450 | $ | 24,569 | |||||||
| Additions (deductions), net | 939 | (1,119) | |||||||||
| Ending balance | $ | 24,389 | $ | 23,450 | |||||||
The change in the valuation allowance in 2025 is mainly due to losses incurred by our foreign operations which we do not believe are more likely than not to be used in future years.
We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates. There are generally no federal income taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding and local taxes, upon distribution of these earnings. We have $56.0 million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2025. It is not practicable to determine the amount of taxes that would be payable upon remittance of these earnings. Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries and foreign affiliates where the earnings are not considered to be invested indefinitely.
Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions.We are no longer subject to U.S. federal examinations by tax authorities for years before 2022. With few exceptions, as of December 31, 2025, we are no longer subject to state examinations by taxing authorities for years before 2018.
We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2016.
We had approximately $22.5 million and $22.4 million of total gross unrecognized tax benefits as of December 31, 2025 and 2024, respectively. There were approximately $5.3 million and $5.2 million of unrecognized tax benefits that would affect the effective tax rate in any future period at December 31, 2025 and 2024, respectively.
The following is a tabular reconciliation of unrecognized tax benefits (in thousands). The balances in the reconciliation are the gross amounts before considering reductions related to available net operating losses. The balance of unrecognized tax benefits net of available net operating losses is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:
| December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Beginning balance | $ | 22,359 | $ | 22,591 | $ | 22,756 | |||||||||||
| Gross increases – prior period tax positions | 99 | — | 77 | ||||||||||||||
| Gross decreases – prior period tax positions | — | (162) | — | ||||||||||||||
| Settlements with taxing authorities/lapse of statute of limitations | (2) | (70) | (242) | ||||||||||||||
| Ending balance | $ | 22,456 | $ | 22,359 | $ | 22,591 | |||||||||||
There were no gross increases or decreases associated with current period tax positions for any of the periods presented.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 30, 2021 | |
| 2019 | Feb 22, 2021 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 25, 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.