Howard Hughes Holdings Inc.HHH
Howard Hughes Holdings Inc. Income Taxes Disclosure
14. Income Taxes | ||
Deferred income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities using enacted tax rates currently in effect. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards.
The following summarizes income tax expense (benefit) for the years ended December 31:
| thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 12,744 | $ | 15,534 | $ | 33,783 | |||||||||||
| State | 1,293 | 3,121 | 2,532 | ||||||||||||||
| Total current | 14,037 | 18,655 | 36,315 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 24,463 | 61,853 | (7,601) | ||||||||||||||
| State | (884) | (324) | (2,296) | ||||||||||||||
| Total deferred | 23,579 | 61,529 | (9,897) | ||||||||||||||
| Total | $ | 37,616 | $ | 80,184 | $ | 26,418 | |||||||||||
Reconciliation of the Income tax expense (benefit) if computed at the U.S. federal statutory income tax rate to the Company’s reported Income tax expense (benefit) for the years ended December 31 is as follows:
| thousands except percentages | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Tax computed at the U.S. federal statutory rate | $ | 33,906 | 21.0 | % | $ | 76,734 | 21.0 | % | $ | 23,064 | 21.0 | % | ||||||||||||||
| Increase (decrease) in valuation allowance, net | 148 | 0.1 | % | (20,736) | (5.7) | % | 4,003 | 3.7 | % | |||||||||||||||||
| State and local income tax expense (benefit), net of federal income tax (a) | 182 | 0.1 | % | 18,719 | 5.1 | % | (4,432) | (4.0) | % | |||||||||||||||||
| Tax expense on compensation disallowance | 4,380 | 2.7 | % | 1,920 | 0.5 | % | 2,133 | 1.9 | % | |||||||||||||||||
| Other, net | (1,000) | (0.6) | % | 3,547 | 1.0 | % | 1,650 | 1.5 | % | |||||||||||||||||
| Income tax expense (benefit) | $ | 37,616 | 23.3 | % | $ | 80,184 | 21.9 | % | $ | 26,418 | 24.1 | % | ||||||||||||||
(a)Tax in Maryland, Hawai‘i, Virginia, Texas, New York, and New York City comprise more than 50% of the tax effect in this category.
As of December 31, 2025, the amounts and expiration dates of operating loss carryforwards for tax purposes are as follows:
| thousands | Amount | Expiration Date | |||||||||
| Net operating loss carryforwards - Federal | $ | 708,566 | n/a | ||||||||
| Net operating loss carryforwards - State | 326,955 | 2025-2044 | |||||||||
| Net operating loss carryforwards - State | 304,402 | n/a | |||||||||
| Charitable contribution carryforwards - Federal | 3,432 | 2030 | |||||||||
| General business tax credit carryforwards | 1,095 | 2044 | |||||||||
The following summarizes tax effects of temporary differences and carryforwards included in the net deferred tax liabilities as of December 31:
| thousands | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Accrued expenses | $ | 10,192 | $ | 9,376 | |||||||
| Investments in unconsolidated ventures | 5,105 | — | |||||||||
| Other | 2,644 | 4,841 | |||||||||
| Accounts receivable | 1,049 | 1,283 | |||||||||
| Operating loss and tax carryforwards | 189,054 | 205,244 | |||||||||
| Total deferred tax assets | 208,044 | 220,744 | |||||||||
| Valuation allowance | (16,431) | (16,314) | |||||||||
| Total net deferred tax assets | $ | 191,613 | $ | 204,430 | |||||||
| Deferred tax liabilities: | |||||||||||
| Master Planned Communities properties | $ | (304,057) | $ | (297,889) | |||||||
| Operating and development properties and fixed assets | (32,045) | (25,675) | |||||||||
| Deferred income | (18,167) | (18,839) | |||||||||
| Prepaid expenses | (1,816) | (2,981) | |||||||||
| Investments in unconsolidated ventures | — | (1,146) | |||||||||
| Total deferred tax liabilities | (356,085) | (346,530) | |||||||||
| Total net deferred tax liabilities | $ | (164,472) | $ | (142,100) | |||||||
The deferred tax liability associated with the Company’s MPCs is largely attributable to the difference between the basis and value determined as of the date of the acquisition by its predecessors adjusted for sales that have occurred since that time. The recognition of these deferred tax liabilities is dependent upon the timing and sales price of future land sales and the method of accounting used for income tax purposes. The deferred tax liability related to deferred income represents the difference between the income tax method of accounting and the financial statement method of accounting for prior sales of land in the Company’s MPCs.
Generally, the Company is currently open to audit under the statute of limitations by the Internal Revenue Service as well as state taxing authorities for the years ended December 31, 2022 through 2024. In the Company’s opinion, it has made adequate tax provisions for years subject to examination. However, the final determination of tax examinations and any related litigation could be different from what was reported on the returns.
The Company applies the generally accepted accounting principle related to accounting for uncertainty in income taxes, which prescribes a recognition threshold that a tax position is required to meet before recognition in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition issues.
The Company recognizes and reports interest and penalties related to unrecognized tax benefits, if applicable, within the provision for income tax expense. The Company had no unrecognized tax benefits for the years ended December 31, 2025, 2024, or 2023, and therefore did not recognize any interest expense or penalties on unrecognized tax benefits.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 27, 2024 | |
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.