Option Care Health, Inc.OPCH
Option Care Health, Inc. Income Taxes Disclosure
INCOME TAXES
The income tax expense (benefit) consists of the following for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal income tax expense (benefit): | |||||||||||||||||
| Current | $ | 51,994 | $ | 47,239 | $ | 56,474 | |||||||||||
| Deferred | 9,291 | 16,396 | 18,739 | ||||||||||||||
| 61,285 | 63,635 | 75,213 | |||||||||||||||
| State income tax expense (benefit): | |||||||||||||||||
| Current | 12,606 | 10,597 | 20,253 | ||||||||||||||
| Deferred | 1,424 | (2,456) | (3,814) | ||||||||||||||
| 14,030 | 8,141 | 16,439 | |||||||||||||||
| Total income tax expense | $ | 75,315 | $ | 71,776 | $ | 91,652 | |||||||||||
Beginning with the year ended December 31, 2025, the Company has prospectively adopted the guidance in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures (“ASU 2023-09”). The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09 (in thousands, except for percentages):
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory income tax rate | $ | 59,409 | 21.0 | % | |||||||
| State and local income taxes, net of federal income tax effect (1) | 11,382 | 4.0 | % | ||||||||
| Tax credits: | |||||||||||
| Research and development tax credits | (555) | (0.2) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Share-based compensation impacts | 4,779 | 1.7 | % | ||||||||
| Other | 300 | 0.1 | % | ||||||||
| Effective income tax rate | $ | 75,315 | 26.6 | % | |||||||
(1) State tax in California, Florida, New York and Pennsylvania made up more than 50% of the tax effect in this category.
Also in accordance with ASU 2023-09, the following table reflects income taxes paid disaggregated by Federal and State for the year ended December 31, 2025 (in thousands):
| Amount | |||||
| Federal | $ | 57,500 | |||
| State | 9,787 | ||||
| Total income taxes paid | $ | 67,287 | |||
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | |||||||
| State and local income taxes, net of federal income tax effect | 3.5 | % | 4.8 | % | |||||||
| Valuation allowance | (0.8) | % | (1.5) | % | |||||||
| Share-based compensation impacts | 1.2 | % | 0.7 | % | |||||||
| Other, net | 0.4 | % | 0.5 | % | |||||||
| Effective income tax rate | 25.3 | % | 25.5 | % | |||||||
The Company recorded income tax expense of $75.3 million, $71.8 million, and $91.7 million, which represents an effective tax rate of 26.6%, 25.3%, and 25.5% for the years ended December 31, 2025, 2024, and 2023, respectively. The Company released $0.4 million, $2.2 million, and $5.8 million of state valuation allowances for the years ended December 31, 2025, 2024, and 2023, respectively. The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses.
The variance in the Company’s effective tax rate of 26.6%, 25.3%, and 25.5% for the years ended December 31, 2025, 2024, and 2023, respectively, compared to the federal statutory rate of 21%, as well as year-over-year changes, was primarily attributable to the inclusion of state taxes in multiple jurisdictions, various non-deductible expenses, and changes in state valuation allowance.
The components of deferred income tax assets and liabilities were as follows as of December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Price concessions | $ | 5,697 | $ | 8,053 | |||||||
| Compensation and benefits | 7,364 | 6,166 | |||||||||
| Interest limitation carryforward | 3,533 | 5,768 | |||||||||
| Operating lease liability | 25,323 | 23,880 | |||||||||
| Net operating losses | 46,459 | 50,860 | |||||||||
| Other | 13,012 | 12,676 | |||||||||
| Deferred tax assets before valuation allowance | 101,388 | 107,403 | |||||||||
| Valuation allowance | (2,839) | (3,337) | |||||||||
| Deferred tax assets, net of valuation allowance | 98,549 | 104,066 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Accelerated depreciation | (16,914) | (12,630) | |||||||||
| Operating lease right-of-use asset | (20,078) | (18,883) | |||||||||
| Intangible assets | (43,445) | (48,412) | |||||||||
| Goodwill | (67,766) | (59,303) | |||||||||
| Other | (6,365) | (12,414) | |||||||||
| Deferred tax liabilities | (154,568) | (151,642) | |||||||||
| Net deferred tax liabilities | $ | (56,019) | $ | (47,576) | |||||||
Deferred tax assets are generally required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. For the year ended December 31, 2025, the Company maintains a valuation allowance of $2.8 million against certain state net operating losses (“NOL”). In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income and tax-planning strategies, in making this assessment. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.
At December 31, 2025, the Company had $33.7 million of tax-effected federal NOL carryforwards all of which are currently available to offset future taxable income in the United States and reflected as a deferred tax asset of the company. Tax-effected federal NOL carryforwards of $22.7 million expire beginning in 2028 through 2036, and $11.0 million of tax-effected federal NOLs have an indefinite carryforward period. At December 31, 2025, the Company had $3.5 million tax-effected amounts of interest limitation carryforwards which have an indefinite carryforward period. At December 31, 2025, the Company also had $12.8 million tax-effected amounts of cumulative state NOL carryforwards available to offset future taxable income in various states. These state NOL carryforwards will expire beginning in 2026 through 2044, with some having an indefinite carryforward period.
At December 31, 2025, 2024, and 2023, there were no unrecognized tax benefits for uncertain tax positions. Tax related interest and penalties are classified as a component of income tax expense.
The following table presents the valuation allowance for deferred tax assets for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| Additions | ||||||||||||||||||||||||||
| Description | Balance at Beginning of Period | Charged (Benefit) to Costs and Expenses | Charged (Benefit) to Other Accounts | Balance at End of Period | ||||||||||||||||||||||
| 2023: Valuation allowance for deferred tax assets | $ | 13,056 | $ | (6,685) | $ | — | $ | 6,371 | ||||||||||||||||||
| 2024: Valuation allowance for deferred tax assets | $ | 6,371 | $ | (3,034) | $ | — | $ | 3,337 | ||||||||||||||||||
| 2025: Valuation allowance for deferred tax assets | $ | 3,337 | $ | (498) | $ | — | $ | 2,839 | ||||||||||||||||||
The company files income tax returns in the U.S. and various state and local jurisdictions. There are no ongoing Federal or state income tax audits as of December 31, 2025. The statute remains open for examination by the Internal Revenue Service beginning with year 2022 and in state jurisdictions for periods beginning in 2021.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has reflected the applicable provisions of the OBBBA into its consolidated financial statements for the year ended December 31, 2025, and there is no material impact on the Company’s effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Mar 11, 2021 | |
| 2019 | Mar 5, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 26, 2018 | |
| 2016 | Mar 7, 2017 | |
| 2015 | Mar 3, 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.