PACS Group, Inc.PACS

PACS Group, Inc. Income Taxes Disclosure

10-KFiled Feb 27, 20263 min read
INCOME TAXES
The provision for income taxes for the years ended December 31, 2025, 2024, and 2023 is summarized as follows:
Year Ended December 31,
202520242023
Current
Federal$79,031 $66,292 $38,242 
State31,691 30,729 16,116 
Total current provision
$110,722 $97,021 $54,358 
Deferred
Federal$(12,461)$(34,582)$(6,641)
State(5,272)(16,229)(3,282)
Total deferred provision
$(17,733)$(50,811)$(9,923)
Total income tax provision
$92,989 $46,210 $44,435 
A reconciliation of the income tax expense at the federal statutory rate to income tax expense for the years ended December 31, 2025, 2024 and 2023, respectively, is as follows:
Year Ended December 31,
202520242023
Total%Total%Total%
Income tax expense at federal statutory rate$59,735 21.0 %$21,326 21.0 %$33,037 21.0 %
State income taxes – net of federal benefit(1)
20,045 7.0 7,106 7.0 10,283 6.5 
Tax credits(5,000)(1.8)(947)(0.9)(336)(0.2)
Change in valuation allowance272 0.1 (622)(0.6)2,107 1.3 
Nontaxable or nondeductible items
Nondeductible compensation9,413 3.3 16,780 16.5 71 0.0 
Other nontaxable or nondeductible items2,262 0.8 2,053 2.0 1,368 0.9 
Other
Stock-based compensation5,498 1.9 — — — — 
Change to deferred taxes733 0.3 1,031 1.0 (2,486)(1.6)
Other adjustments31 — (517)(0.5)391 0.2 
Income tax expense$92,989 32.6 %$46,210 45.5 %$44,435 28.1 %
__________________
(1) State taxes in California comprise the majority (greater than 50 percent) of the tax effect of this category for the years ended December 31, 2025, 2024, and 2023, respectively.
Income taxes paid are as follows:
Year Ended December 31,
202520242023
Federal(1)
$50,415 $75,741 $42,447 
California26,104 25,396 17,387 
Other7,528 6,694 175 
Total state and local$33,632 $32,090 $17,562 
Total income taxes paid$84,047 $107,831 $60,009 
__________________
(1) Excludes amounts paid to purchase transferable tax credits of $28,372 during the year ended December 31, 2025.
The Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are summarized as follows:
December 31,
20252024
Deferred tax assets (liabilities)
Accrued expenses$30,474 $28,275 
Allowance for doubtful accounts27,298 21,737 
Insurance42,098 36,577 
Intangible assets6,892 4,931 
Deferred compensation3,006 2,097 
Lease liability823,131 826,397 
Stock-based compensation6,404 5,166 
Total deferred tax assets
$939,303 $925,180 
Valuation allowance(1,263)(991)
Total net deferred tax assets
$938,040 $924,189 
Fixed assets(65,661)(53,106)
Prepaid expenses(11,005)(10,307)
Investment in partnership(7,124)(8,030)
Right of use asset(789,932)(805,552)
Other(354)(963)
Total deferred tax liabilities
$(874,076)$(877,958)
Net deferred tax assets$63,964 $46,231 
As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $1,263 and $991, respectively, against its captive insurance dual consolidated loss deferred tax asset. This valuation allowance was established because it was more likely than not that the deferred tax asset will not be realized.
The Company is subject to U.S. federal income tax, as well as income tax in certain states in which it operates. The Company’s federal returns for tax years 2022 and forward are subject to examination, and state returns for tax years 2021 and forward are subject to examination. The Company is not, to its knowledge, under examination by any federal or state income tax authority. The Company’s balance of net deferred tax assets is included within other assets on the combined/consolidated balance sheets as of December 31, 2025 and 2024.
As of December 31, 2025 and 2024, the Company did not have any unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company does not anticipate the uncertain tax position to change materially within the next 12 months.

Historical Timeline

Fiscal YearFiled
2025Feb 27, 2026Showing above
2024Nov 19, 2025

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

RevenueEarnings Per ShareFair ValuePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsStock CompensationNew StandardsPay vs PerformanceAward Timing Disclosure