BLUE OWL CAPITAL INC.OWL

BLUE OWL CAPITAL INC. Income Taxes Disclosure

10-KFiled Feb 19, 20265 min read
11. INCOME TAXES
The Company’s income tax provision and related income tax assets and liabilities are based on, among other things, an estimate of the impact of the exchanges of Common Units for Class A Shares, inclusive of an analysis of tax basis and state tax implications of the Blue Owl Operating Group and their underlying assets and liabilities. The Company’s estimate is based on the most recent information available and cannot be finally determined until the Company’s 2025 tax returns have been filed. The tax basis and state impact of the Blue Owl Operating Group and their underlying assets and liabilities are based on estimates subject to finalization of the Company’s tax returns.
The Blue Owl Operating Partnerships are partnerships for U.S. federal income tax purposes subject to New York City UBT. Generally all of the income the Registrant earns will be subject to corporate-level income taxes in the United States.
The following table presents the components of the Company’s income before income taxes and income tax expense (benefit):
Year Ended December 31,
(dollars in thousands)202520242023
Income Before Income Taxes
U.S.$336,676 $459,489 $239,783 
Foreign11,235 9,739 6,601 
347,911 469,228 246,384 
Current Income Tax Expense (Benefit)
U.S. federal13 (255)286 
State and local18,702 20,140 19,280 
Foreign2,505 2,141 1,838 
21,220 22,026 21,404 
Deferred Income Tax Expense (Benefit)
U.S. federal17,890 29,734 14,373 
State and local3,556 (2,811)(9,500)
Foreign(242)(167)(669)
21,204 26,756 4,204 
Total Income Tax Expense (Benefit)
U.S. federal17,903 29,479 14,659 
State and local22,258 17,329 9,780 
Foreign2,263 1,974 1,169 
$42,424 $48,782 $25,608 
The following table sets forth the reconciliation of the statutory U.S. federal corporate income tax rate to the Company’s effective income tax rate:
Year Ended December 31,
(dollars in thousands)202520242023
Statutory U.S. federal corporate income tax rate$73,062 21.00%$98,538 21.00%$51,73321.00%
State and local income taxes, net of federal effect(1)
16,6604.79%10,856 2.31%5,6552.30%
Changes in unrecognized tax benefits4,8591.40%5,045 1.08%4,3481.76%
Effect of cross-border tax laws(69)(0.02%)(43)(0.01%)(161)(0.07%)
Nontaxable or nondeductible items
Income passed through to noncontrolling interest holders(53,085)(15.26%)(67,277)(14.34%)(36,663)(14.88%)
Other1,0930.31%1,733 0.37%8390.34%
Foreign tax effects(96)(0.03%)(70)(0.01%)(143)(0.06%)
Total$42,42412.19%$48,782 10.40%$25,60810.39%
(1)Local taxes in New York City made up the majority (greater than 50 percent) of the tax effect in this category.
The following table presents the components of the Company’s income taxes paid (net of refunds):
Year Ended December 31,
(dollars in thousands)202520242023
U.S. federal$21 $500 $— 
State and Local
New York City13,925 17,938 11,728 
Other911 821 1,207 
Total State and Local14,836 18,759 12,935 
Foreign
Hong Kong(36)1,266 — 
United Kingdom1,426 1,118 1,192 
Other893 493 122 
Total Foreign2,283 2,877 1,314 
Total Cash Paid for Income Taxes$17,140 $22,136 $14,249 
As of December 31, 2025 and 2024, the income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:
(dollars in thousands)December 31, 2025December 31, 2024
Deferred Tax Assets
Basis difference in subsidiaries$939,294 $855,906 
Tax receivable agreement399,725 340,360 
Net operating losses65,144 41,267 
Other27,200 22,160 
Total Deferred Tax Assets$1,431,363 $1,259,693 
Deferred Tax Liabilities
Goodwill and intangible assets$42,749 $39,436 
Other14,749 12,001 
Total Deferred Tax Liabilities$57,498 $51,437 
As of December 31, 2025, the Company has U.S. federal and UBT net operating losses of $277.4 million and $5.2 million, respectively, that can be carried forward indefinitely until they are used. The Company evaluates the realizability of its deferred tax assets and may recognize or adjust any valuation allowance when it is more-likely-than-not that all or a portion of the deferred tax asset may not be realized. The Company believes it is more-likely-than-not that its deferred tax assets will be realized based on historic and projected earnings and the reversal of taxable temporary differences. As of December 31, 2025 and 2024, the Company has not recorded any valuation allowances.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the tax years that remain open under the statute of limitations will be subject to examinations by the appropriate tax authorities. The Company is generally no longer subject to state or local examinations by tax authorities for tax years prior to 2021.
As of December 31, 2025, the Company’s unrecognized tax benefits, excluding related interest expense and penalties, were $16.5 million. If recognized, $16.5 million would reduce the effective tax rate. For the year ended December 31, 2025, interest and penalties on these unrecognized tax benefits of $1.0 million has been accrued through income tax expense in the consolidated statements of operations.
The following table presents the Company’s unrecognized tax benefits relating to uncertain tax positions:
(dollars in thousands)Year Ended December 31,
202520242023
Beginning balance$12,677 $8,399 $4,784 
Increases related to tax positions related to the current period4,684 4,278 3,615 
Decreases related to the lapse of applicable statute of limitations(858)— — 
Ending Balance$16,503 $12,677 $8,399 
In connection with and subsequent to the applicable Acquisitions, the Company recognized various adjustments to deferred tax assets and liabilities within additional paid-in capital, as well as related impacts to the TRA liability, related to capital transactions. These adjustments primarily resulted from differences between the Company’s GAAP and tax basis in its investment in the Blue Owl Operating Partnerships, as well as portions related to the TRA liability that will eventually lead to additional tax basis in the Blue Owl Operating Partnerships upon future TRA payments. The deferred tax assets will be recovered as the basis is amortized. See the Company’s consolidated statements of changes in stockholders’ equity for these amounts.

Historical Timeline

Fiscal YearFiled
2025Feb 19, 2026Showing above
2024Feb 21, 2025
2023Feb 23, 2024
2022Feb 27, 2023
2021Feb 28, 2022

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.

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