MOLINA HEALTHCARE, INC.MOH

MOLINA HEALTHCARE, INC. Income Taxes Disclosure

10-KFiled Feb 10, 20265 min read
Income Taxes
Income from continuing operations, before income tax expense (benefit) consisted of the following:
Year Ended December 31,
202520242023
(In millions)
Federal$589 $1,582 $1,464 
Foreign— 7 — 
Total$589 $1,589 $1,464 
Income tax expense (benefit) from continuing operations consisted of the following:
Year Ended December 31,
202520242023
(In millions)
Current:
Federal$58 $298 $349 
State16 59 55 
Total current74 357 404 
Deferred:
Federal39 47 (28)
State4 6 (3)
Total deferred43 53 (31)
Total income tax expense (benefit)
Federal97 345 321 
State20 65 52 
Total income tax expense (benefit)$117 $410 $373 
A reconciliation of the U.S. federal statutory income tax rate to the combined effective income tax rate for continuing operations is as follows:
Year Ended December 31,
202520242023
(In millions)
Income from continuing operations, before income tax expense$589 $1,589 $1,464 
Tax provision at the U.S. federal statutory rate124 21.0%334 21.0%308 21.0%
Federal
Tax Credits
Transferable energy-related tax credits(19)(3.2)— —— —
Nontaxable or nondeductible items
Nondeductible compensation1 0.217 1.120 1.4
Other nontaxable or nondeductible items4 0.74 0.35 0.3
Other (9)(1.6)3 0.2(1)—
Foreign tax effects
Puerto Rico
Tax provision at Puerto Rico statutory rate(1)
— —3 0.2— —
Changes in valuation allowances— —(3)(0.2)— —
State income taxes, net of federal benefit(2)
16 2.752 3.241 2.8
Income tax expense$117 19.8%$410 25.8%$373 25.5%
_______________________________ 
(1)    The Company’s Puerto Rico subsidiary is dually incorporated in the United States and the Commonwealth of Puerto Rico.
(2)    During the tax year ended December 31, 2025, state taxes in California comprised greater than 50% of the tax effect in this category. During the tax year ended December 31, 2024, state taxes in California and New York City comprised greater than 50% of the tax effect in this category. During the year ended December 31, 2023, state taxes in California, Illinois and New York City comprised greater than 50% of the tax effect in this category.

Income taxes paid are as follows:
Year Ended December 31,
202520242023
(In millions)
U.S. Federal (1)
$237 $312 $357 
California15 28 *
Other (2)
23 39 48 
Total U.S. State and Local38 67 48 
Total income taxes paid, net$275 $379 $405 
_______________________________ 
(1)    Includes $237 million paid to purchase transferable tax credits during the year ended December 31, 2025.
(2)    Includes $6 million, $10 million and $3 million paid to purchase transferable tax credits during the years ended December 31, 2025, 2024 and 2023, respectively.
*    The amount of income taxes paid during the year ended December 31, 2023 does not meet the 5% disaggregation threshold.
Deferred tax assets and liabilities are classified as non-current. Significant components of our deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:
December 31,
20252024
(In millions)
Accrued expenses and reserve liabilities$92 $99 
Deferred compensation16 9 
Other accrued medical costs27 25 
Net operating losses9 5 
Lease liabilities66 79 
Unrealized losses— 18 
Fixed assets and intangibles28 32 
Tax credit carryover5 5 
Other— 6 
Valuation allowance(19)(19)
Total deferred income tax assets, net of valuation allowance 224 259 
Right-of-use assets(16)(26)
Prepaid expenses (30)(26)
Total deferred income tax liabilities (46)(52)
Net deferred income tax asset$178 $207 
At December 31, 2025, we had state net operating loss carryforwards of $122 million, which begin expiring in 2037 with some having an indefinite carryforward period, and foreign net operating loss carryforwards of $7 million, which begin expiring in 2031. Additionally, as of December 31, 2025, we had foreign tax credit carryovers of $5 million, which expire in 2030.
We evaluate the need for a valuation allowance taking into consideration the ability to carry back and carry forward tax credits and losses, available tax planning strategies and future income, including reversal of temporary differences. We have determined that as of December 31, 2025 and December 31, 2024, $19 million of deferred tax assets did not satisfy the recognition criteria.
We recognize tax benefits only if the tax position is more likely than not to be sustained. We are subject to income taxes in the United States, Puerto Rico, and numerous state jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
The roll forward of our unrecognized tax benefits is as follows:
Year Ended December 31,
202520242023
(In millions)
Gross unrecognized tax benefits at beginning of period$(5)$(5)$(5)
Settlements 5 — — 
Gross unrecognized tax benefits at end of period$— $(5)$(5)
Settlements reflect the resolution of a state refund claim that had no net impact on our financial statements.
Our continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. Amounts accrued for the payment of interest and penalties as of December 31, 2025, 2024 and 2023 were insignificant.
With a few exceptions, which are immaterial in the aggregate, we are no longer subject to federal, state, local, and Puerto Rico tax examinations for years before 2021.

Historical Timeline

Fiscal YearFiled
2025Feb 10, 2026Showing above
2024Feb 11, 2025
2023Feb 13, 2024
2022Feb 13, 2023
2021Feb 14, 2022
2020Feb 16, 2021
2019Feb 14, 2020
2018Feb 19, 2019
2017Mar 1, 2018
2016Mar 1, 2017
2015Feb 26, 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.

Other Available Disclosures

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