Open Lending CorpLPRO
Open Lending Corp Income Taxes Disclosure
Income Taxes
The components of the Company’s income tax expense attributable to operations are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current tax expense (benefit) | |||||||||||||||||
| Federal | $ | 69 | $ | 10,091 | $ | 22,029 | |||||||||||
| State | 223 | 1,682 | 4,516 | ||||||||||||||
| Deferred tax expense (benefit) | |||||||||||||||||
| Federal | 57,037 | (2,821) | (4,165) | ||||||||||||||
| State | 13,076 | (2,164) | 4,540 | ||||||||||||||
| Income tax expense | $ | 70,405 | $ | 6,788 | $ | 26,920 | |||||||||||
The Company’s income tax expense attributable to operations differs from the expected tax expense (benefit) amount computed by applying the statutory federal income tax rate to income (loss) before taxes is as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| Income tax expense computed at the statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||||||||
| State income taxes | 4.5 | — | 7.7 | |||||||||||||||||
| Officer's compensation limitation under 162(m) | (1.3) | 2.5 | 0.7 | |||||||||||||||||
| Stock-based compensation | (0.7) | 1.1 | 0.5 | |||||||||||||||||
| Valuation allowance | (133.2) | — | — | |||||||||||||||||
| Other, net | 0.7 | (1.1) | (1.1) | |||||||||||||||||
Effective tax rate | (109.0) | % | 23.5 | % | 28.8 | % | ||||||||||||||
The effective tax rate for the year ended December 31, 2023 includes a decrease in state income tax expense associated with the remeasurement of the Company’s deferred tax assets for increases to estimated tax rates expected to be applied in future years.
The components of the Company’s deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets | |||||||||||
| Amortizable intangible assets | $ | 68,262 | $ | 73,650 | |||||||
| Operating lease liability | 996 | 995 | |||||||||
| Accrued expenses | 1,332 | 1,418 | |||||||||
| Excess profit share receipts | 11,692 | — | |||||||||
| Carryforwards | 6,839 | — | |||||||||
| Other | 26 | — | |||||||||
Total deferred tax assets(1) | 89,147 | 76,063 | |||||||||
| Valuation allowance | (86,050) | — | |||||||||
| Total deferred tax assets, net of valuation allowance | $ | 3,097 | $ | 76,063 | |||||||
| Deferred tax liabilities | |||||||||||
| Contract assets | (1,997) | (4,056) | |||||||||
| Operating lease right-of-use asset | (953) | (972) | |||||||||
| Property and equipment | (147) | (463) | |||||||||
| Other | — | (459) | |||||||||
| Total deferred tax liabilities | (3,097) | (5,950) | |||||||||
| Deferred tax asset, net | $ | — | $ | 70,113 | |||||||
As of December 31, 2024, the Company has assessed whether it is more likely than not that the Company’s deferred tax assets will be realized and given the magnitude of the current year losses related the Company’s profit share revenue change in estimate, recorded a full valuation allowance of $86.1 million. The valuation allowance will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances. The exact timing and amount of the valuation allowance release are subject to change based on the level of profitability the Company is able to achieve.
At December 31, 2024, the Company generated net operating loss (“NOL”) carry forwards for U.S. federal income tax purposes of approximately $26.5 million which will be available to offset future U.S. federal taxable income and do not expire.
At December 31, 2024, the Company generated NOL carry forwards for U.S. state income tax purposes of approximately $15.9 million, which will be available to offset future state taxable income and will begin to expire in various dates starting in 2039. At December 31, 2024, it is more likely than not that the benefit from Federal and state NOL carryforwards will not be realized.
The aggregate changes in the balance of unrecognized tax benefits were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Balance, beginning of year | $ | 3,968 | $ | 3,935 | $ | — | ||||||||||||||
| Increases for tax positions related to the current year | 68 | 109 | 77 | |||||||||||||||||
| Increases for tax positions related to prior years | 674 | 397 | 3,858 | |||||||||||||||||
| Decreases for tax positions related to prior years | — | (473) | — | |||||||||||||||||
| Balance, end of year | $ | 4,710 | $ | 3,968 | $ | 3,935 | ||||||||||||||
At December 31, 2024 and 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $0.6 million and $0.4 million, respectively.
As of December 31, 2024, the liability for unrecognized tax benefits includes certain tax uncertainties related to research tax credits and tax positions in various state jurisdictions. The Company believes it is not reasonably possible that the unrecognized tax benefits will significantly change during the next twelve months.
The Company files its federal and state income tax returns and some of these returns remain open for examination, with the earliest open years in its key jurisdictions as follows:
| U.S. Federal | 2016 | ||||
| State of Texas | 2016 | ||||
| State of New York | 2017 | ||||
| State of Illinois | 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.