Mister Car Wash, Inc. Income Taxes Disclosure

8. Income Taxes

The income tax expense recorded in 2025 is different from the expected statutory federal and state tax expense primarily due to a $2,963 income tax expense related to equity award exercises and/or vesting in 2025, which is net of the impact of the internal revenue code rules and regulations related to the deductibility of executive compensation by publicly held companies.

We had federal and state net operating loss (“NOL”) carryforwards available of $108,915 and $85,218 at December 31, 2025, respectively. The federal NOL carryforwards can be carried forward indefinitely while $38,889 of the state NOL carryforwards have indefinite lives and the remaining amounts will expire between 2036 and 2043. We had federal interest expense carryforwards of $108,357 at December 31, 2025

, which can be carried forward indefinitely. We also had state interest expense carryforwards in 12 states where the amounts vary by jurisdiction, which also have indefinite lives. We had federal and state R&D and other business tax credit carryforwards of $3,283 and $1,119 at December 31, 2025, respectively. The federal business tax credit carryforwards can be carried forward for 20 years and will expire between 2039 and 2045. The state R&D and other business tax credit carryforwards can be carried forward for 5 to 20 years and will expire between 2029 and 2038.

As noted above, we had deferred tax assets related to both federal and state NOL and interest expense carryforwards. When determining the need for a valuation allowance, we consider all available positive and negative evidence, including taxable income in prior carryback years (if carryback is permitted under the relevant tax law), the timing of the reversal of existing taxable temporary differences, tax planning strategies and projected future taxable income. We adjust the valuation allowance in the period management determines it is more likely than not that we will not realize some or all of the deferred tax assets.

For financial reporting purposes, we established valuation allowances of $290 and $262 at December 31, 2025 and 2024, respectively, to offset deferred tax assets. The current and prior year valuation allowance relates to state attributes and carryovers.

On July 4, 2025, the “One Big Beautiful Bill Act” (the “OBBBA”) was signed into law. The OBBBA includes tax reform provisions including 100% bonus depreciation, full expensing of domestic research expenditures, and modifications to interest expense limitations. After initial evaluation, the Company does not currently expect these laws to have a material effect on tax expense or the anticipated annual effective tax rate. We expect certain provisions effective for the 2025 tax year will decrease current and future cash taxes paid on the consolidated financial statements.

Past ownership changes and other equity transactions may have triggered Sections 382 and 383 of the Internal Revenue Code, resulting in certain annual limitations on the utilization of existing federal and state net operating losses and credits. Such provisions may limit the potential future tax benefit to be realized by us from its accumulated net operating losses and tax credit carryforwards.

We file income tax returns in the U.S. federal and various state tax jurisdictions and are subject to varying statutes of limitation in each jurisdiction. As of December 31, 2025, we are not under audit for federal or state income tax purposes. In general, our federal tax return may be subject to examination for the 2022 through 2024 tax years, while for state purposes, the 2021 through 2024 years are generally open to examination, with some states having either a three- or four-year statute of limitations. Our usage of NOL carryovers also permits taxing authorities to adjust aspects of tax returns that may be outside of these statutes of limitation.

We had gross unrecognized tax benefits of $637 and $542 as of December 31, 2025 and 2024, respectively, related to federal and state R&D tax credits. All of the unrecognized tax benefits, if recognized, would affect the effective tax rate.

We accrued interest and penalties of $12 and $42 as of December 31, 2025 and 2024, respectively, in income tax expense.