NMI Holdings, Inc.NMIH
NMI Holdings, Inc. Income Taxes Disclosure
Income Taxes
We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate income tax rate of 21%. NMIH files a consolidated U.S. federal and various state income tax returns on behalf of itself and its subsidiaries.
Total income tax expense consists of the following components:
| For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In Thousands) | |||||||||||||||||
| Current | $ | 39,106 | $ | 22,607 | $ | — | |||||||||||
| Deferred | 71,772 | 80,698 | 90,593 | ||||||||||||||
| Total income tax expense | $ | 110,878 | $ | 103,305 | $ | 90,593 | |||||||||||
The following table presents a reconciliation between the federal statutory income tax expense and tax rate and our effective income tax expense and tax rate:
| For the years ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| ($ Values In Thousands) | ||||||||||||||||||||||||||
US federal statutory tax rate | $ | 104,959 | 21.0 | % | $ | 97,316 | 21.0 | % | $ | 86,668 | 21.0 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 3,036 | 0.6 | 2,839 | 0.6 | 2,401 | 0.6 | ||||||||||||||||||||
Nontaxable or nondeductible items | 2,883 | 0.6 | 3,150 | 0.7 | 1,524 | 0.4 | ||||||||||||||||||||
Effective income tax rate | $ | 110,878 | 22.2 | % | $ | 103,305 | 22.3 | % | $ | 90,593 | 22.0 | % | ||||||||||||||
(1) Florida and Illinois accounted for the majority of our state and local income taxes during the years ended December 31, 2025 and 2024, and Illinois accounted for the majority for the year ended December 31, 2023.
The components of our net deferred tax liability are summarized as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax asset: | (In Thousands) | ||||||||||
| Unrealized loss on investments | $ | 11,162 | $ | 32,088 | |||||||
Net operating loss carryforward | 8,669 | 8,869 | |||||||||
| Share-based compensation | 6,038 | 5,980 | |||||||||
| Unearned premium reserve | 2,014 | 2,800 | |||||||||
| Accrued expenses | 1,381 | 1,581 | |||||||||
Capitalized software | 1,587 | — | |||||||||
| Other | 1,881 | 1,265 | |||||||||
| Total gross deferred tax asset | 32,732 | 52,583 | |||||||||
| Less: valuation allowance | (9,519) | (9,486) | |||||||||
| Total deferred tax asset | 23,213 | 43,097 | |||||||||
| Deferred tax liability: | |||||||||||
| Contingency reserve | (484,627) | (411,421) | |||||||||
Deferred policy acquisition costs | (13,894) | (13,885) | |||||||||
| Capitalized software | — | (306) | |||||||||
| Other | (3,582) | (3,677) | |||||||||
| Total deferred tax liability | (502,103) | (429,289) | |||||||||
| Net deferred income tax (liability) | $ | (478,890) | $ | (386,192) | |||||||
As a mortgage guaranty insurance company, we are eligible to claim a tax deduction for our statutory contingency reserve balance, subject to certain limitations outlined under IRC Section 832(e), to the extent we acquire tax and loss bonds in an amount equal to the tax benefit derived from the claimed deduction, which is our intent.
During the years ended December 31, 2025, 2024 and 2023, we purchased $78.1 million, $86.9 million and $80.9 million, of tax and loss bonds, respectively. As of December 31, 2025 and 2024, we held $400.3 million and $322.2 million of tax and loss bonds, respectively, in “Prepaid Federal Income Taxes” on our consolidated balance sheets.
At December 31, 2025, we had a federal net operating loss carryforward of $0.7 million which expires in varying amounts in 2030 and 2031, and state net operating loss carryforwards of $133.1 million, which begin to expire in varying amounts in 2032. Section 382 of the IRC imposes annual limitations on a corporation's ability to utilize its net operating loss carryforward if it experiences an “ownership change.” As a result of the acquisition of our insurance subsidiaries in 2012, $7.3 million of federal net operating losses were subject to annual limitations of $0.8 million through 2016, $0.5 million in 2017 and $0.3 million, thereafter, through 2028. Our federal net operating loss carryforward arises from this limitation and the constraint on our ability to utilize the net operating loss carryforward in full during the current period.
We are required to establish a valuation allowance against our deferred tax assets when it is more likely than not that all or a portion of the asset will not be realized. We assess our need for a valuation allowance on a quarterly basis. In the course of our review, we assess all available evidence, both positive and negative, including our expectations for future sources of income and contractual cash flows, the availability and application of tax planning strategies, and the potential reversal of temporary tax differences. At both December 31, 2025 and 2024, we recorded a valuation allowance of $9.5 million against state net deferred tax assets. The valuation allowance for both years primarily relates to state net operating losses generated by NMIH, as NMIH has historically operated at a loss and currently only generates revenue from its investment portfolio.
The following table presents the changes in our valuation allowance:
For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
(In Thousands) | |||||||||||||||||
Valuation allowance - beginning of period | $ | 9,486 | $ | 9,169 | $ | 8,888 | |||||||||||
Additions charged to income tax benefit | 33 | 317 | 281 | ||||||||||||||
Valuation allowance - end of period | $ | 9,519 | $ | 9,486 | $ | 9,169 | |||||||||||
As of December 31, 2025 and 2024, we had zero reserves for unrecognized tax benefits as we have taken no material uncertain tax positions that would have required a reserve to be measured and recognized.
We file income tax returns with the U.S. federal government and various state jurisdictions that are subject to potential examination by tax authorities. We are not currently under examination by federal or state jurisdictions. Our U.S. federal income tax returns for 2022 and subsequent years, and state income tax returns for 2021 and subsequent years, remain open by statute.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted and included provisions that amended U.S. federal corporate income tax law to, among other things, allow for the immediate expensing of domestic U.S. research and development expenses, allow for the immediate expensing of certain capital expenditures, and change the U.S. taxation of profits derived from foreign operations. The OBBBA did not have a material impact on our effective income tax rate or consolidated financial statements.
The following table presents total income taxes paid (net of refunds received):
For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
(In Thousands) | |||||||||||||||||
Federal: | $ | 40,600 | $ | 19,300 | $ | — | |||||||||||
State: | 1,762 | 727 | 20 | ||||||||||||||
Total: | $ | 42,362 | $ | 20,027 | $ | 20 | |||||||||||
During the years ended December 31, 2025 and 2024, no individual state jurisdiction accounted for 5% or more of total income taxes paid. During the year ended December 31, 2023, Florida accounted for 100% of income taxes paid.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 19, 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.