MEDALLION FINANCIAL CORP Income Taxes Disclosure
(7) INCOME TAXES
The Company is subject to federal and applicable state corporate income taxes on its taxable ordinary income and capital gains. As a corporation taxed under Subchapter C of the Internal Revenue Code, the Company is able, and intends, to file a consolidated federal income tax return with corporate subsidiaries in which it holds 80% or more of the outstanding equity interest measured by both vote and fair value.
The following table presents the significant components of the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024.
|
|
December 31, |
|
|||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Provision for credit losses |
|
$ |
17,700 |
|
|
$ |
14,530 |
|
Accrued expenses, compensation, and other assets |
|
|
5,868 |
|
|
|
5,612 |
|
Net operating loss carryforwards (1) |
|
|
2,648 |
|
|
|
3,168 |
|
Other investments and investment securities |
|
|
2,553 |
|
|
|
2,885 |
|
Valuation allowance |
|
|
(5,957 |
) |
|
|
(4,418 |
) |
Total deferred tax assets |
|
|
22,812 |
|
|
|
21,777 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Goodwill and other intangibles |
|
|
42,408 |
|
|
|
42,772 |
|
Total deferred tax liabilities |
|
|
42,408 |
|
|
|
42,772 |
|
Deferred tax liability, net |
|
$ |
19,596 |
|
|
$ |
20,995 |
|
The following table presents the components of the Company's tax provision for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
19,532 |
|
|
$ |
15,634 |
|
|
$ |
18,634 |
|
State |
|
|
7,928 |
|
|
|
4,789 |
|
|
|
6,014 |
|
Deferred |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(2,010 |
) |
|
|
1,455 |
|
|
|
(52 |
) |
State |
|
|
(906 |
) |
|
|
(867 |
) |
|
|
314 |
|
Net provision for income taxes |
|
$ |
24,544 |
|
|
$ |
21,011 |
|
|
$ |
24,910 |
|
The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax provision reported for the years ended December 31, 2025, 2024, and 2023.
|
|
Year Ended December 31, |
|
|||||||||||||||||||||
(Dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
Amount |
|
|
Percent (1) |
|
|
Amount |
|
|
Percent (1) |
|
|
Amount |
|
|
Percent (1) |
|
||||||
|
$ |
16,776 |
|
|
|
21 |
% |
|
$ |
13,217 |
|
|
|
21 |
% |
|
$ |
18,068 |
|
|
|
21 |
% |
|
State and local income taxes, net of federal income tax benefit |
|
|
4,525 |
|
|
|
6 |
|
|
|
2,623 |
|
|
|
4 |
|
|
|
3,534 |
|
|
|
4 |
|
Valuation allowance against deferred tax assets |
|
|
1,539 |
|
|
|
2 |
|
|
|
558 |
|
|
|
1 |
|
|
|
1,565 |
|
|
|
2 |
|
Change in effective state income tax rates and accrual |
|
|
424 |
|
|
|
1 |
|
|
|
109 |
|
|
* |
|
|
|
(222 |
) |
|
* |
|
||
Non-deductible expenses |
|
|
457 |
|
|
|
1 |
|
|
|
3,899 |
|
|
|
6 |
|
|
|
2,024 |
|
|
|
2 |
|
Other |
|
|
823 |
|
|
|
1 |
|
|
|
605 |
|
|
|
1 |
|
|
|
(59 |
) |
|
* |
|
|
Total income tax provision |
|
$ |
24,544 |
|
|
|
31 |
% |
|
$ |
21,011 |
|
|
|
33 |
% |
|
$ |
24,910 |
|
|
|
29 |
% |
(1) Percentage may not foot due to rounding.
(*) Less than 1%.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible pursuant to ASC 740. The Company considers the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company’s evaluation of the realizability of deferred tax assets must consider both positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. The Company has determined that a valuation allowance is necessary for net operating losses which the Company does not believe will be utilized as well as for deferred compensation in excess of statutory limits. Based upon these considerations, the Company determined the necessary valuation allowance as of December 31, 2025.
The Company has filed tax returns in many states. Federal, Utah, California, New York, Florida, and Texas tax filings of the Company for the tax years 2022 through the present are the more significant filings that are open for examination.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 16, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Mar 13, 2019 | |
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.