PENSKE AUTOMOTIVE GROUP, INC.PAG
PENSKE AUTOMOTIVE GROUP, INC. Income Taxes Disclosure
Income Taxes
Income before income taxes by geographic region was as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. | $ | 998.8 | $ | 1,026.4 | $ | 1,175.5 | |||||||||||
| Non-U.S. | 264.9 | 263.5 | 299.6 | ||||||||||||||
| Income before income taxes | $ | 1,263.7 | $ | 1,289.9 | $ | 1,475.1 | |||||||||||
Income taxes consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 143.9 | $ | 215.4 | $ | 131.0 | |||||||||||
| State and local | 42.7 | 43.1 | 53.4 | ||||||||||||||
| Non-U.S. | 73.0 | 71.0 | 74.7 | ||||||||||||||
| Total current | $ | 259.6 | $ | 329.5 | $ | 259.1 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | 44.6 | (19.7) | 85.5 | ||||||||||||||
| State and local | 17.0 | 4.1 | 10.0 | ||||||||||||||
| Non-U.S. | 4.6 | 2.6 | 6.3 | ||||||||||||||
| Total deferred | $ | 66.2 | $ | (13.0) | $ | 101.8 | |||||||||||
| Income taxes | $ | 325.8 | $ | 316.5 | $ | 360.9 | |||||||||||
Income taxes varied from the U.S. federal statutory income tax rate due to the following:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Income taxes at federal statutory rate | $ | 265.4 | 21.0 | % | $ | 270.8 | 21.0 | % | $ | 309.8 | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal taxes (1) | $ | 48.4 | 3.8 | % | $ | 40.5 | 3.1 | % | $ | 47.7 | 3.2 | % | |||||||||||||||||||||||
| Foreign Tax Effects | |||||||||||||||||||||||||||||||||||
| Non-U.S. income taxed at other rates | $ | 22.0 | 1.7 | % | $ | 18.3 | 1.4 | % | $ | 18.2 | 1.2 | % | |||||||||||||||||||||||
| Other adjustments | $ | (10.0) | (0.8) | % | $ | (13.1) | (1.0) | % | $ | (14.8) | (1.0) | % | |||||||||||||||||||||||
| Effective tax rate | $ | 325.8 | 25.8 | % | $ | 316.5 | 24.5 | % | $ | 360.9 | 24.5 | % | |||||||||||||||||||||||
| _____________________ | |||||||||||||||||||||||||||||||||||
(1)State taxes in California, New Jersey, Georgia, Arizona, and Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category. | |||||||||||||||||||||||||||||||||||
The components of deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets | |||||||||||
| Accrued liabilities | $ | 84.0 | $ | 79.9 | |||||||
| Net operating loss and credit carryforwards | 46.2 | 47.0 | |||||||||
| Leasing liabilities | 665.7 | 641.7 | |||||||||
| Other | 46.4 | 44.5 | |||||||||
| Total deferred tax assets | 842.3 | 813.1 | |||||||||
| Valuation allowance | (61.9) | (59.2) | |||||||||
| Net deferred tax assets | $ | 780.4 | $ | 753.9 | |||||||
| Deferred Tax Liabilities | |||||||||||
| Depreciation and amortization | (329.7) | (402.2) | |||||||||
| Partnership investments | (979.1) | (930.0) | |||||||||
| Leasing assets | (662.4) | (641.7) | |||||||||
| Other | (9.6) | (11.0) | |||||||||
| Total deferred tax liabilities | (1,980.8) | (1,984.9) | |||||||||
| Net deferred tax liabilities | $ | (1,200.4) | $ | (1,231.0) | |||||||
Cash paid for income taxes (net of refunds) consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 153.2 | $ | 206.0 | $ | 158.0 | |||||||||||
| State and local | 43.3 | 39.8 | 55.5 | ||||||||||||||
| Non-U.S. | |||||||||||||||||
| United Kingdom | 27.4 | 28.9 | 36.2 | ||||||||||||||
| Australia | 17.8 | 17.9 | 10.7 | ||||||||||||||
| Other | 29.8 | 24.8 | 27.7 | ||||||||||||||
| Total cash paid for income taxes | $ | 271.5 | $ | 317.4 | $ | 288.1 | |||||||||||
We are not permanently reinvested in a portion of our previously-taxed unremitted foreign earnings, which may be distributed in the future. At December 31, 2025, we have accrued the appropriate amount of U.S. state income taxes and foreign withholding taxes for the unremitted foreign earnings that are not permanently reinvested. We have not provided any U.S. taxes on any temporary difference related to the excess of financial reporting basis over tax basis in our non-U.S. subsidiaries, as it is our position that we are permanently reinvested for that basis difference. Determination of the deferred tax liability, if any, associated with this permanently reinvested basis difference is not practicable.
At December 31, 2025, we have $90.3 million of state net operating loss carryforwards in the U.S. that expire at various dates beginning in 2026 through 2047, a U.S. foreign tax credit carryforward of $32.0 million that will expire beginning in 2027, U.K. capital loss carryforwards of $5.9 million that will not expire, Germany net operating loss carryforwards of $19.2 million that will not expire, Italy net operating loss carryforwards of $0.1 million that will not expire, New Zealand net operating loss carryforwards of $2.8 million that will not expire, and Japan net operating loss carryforwards of $1.3 million that will expire in 2035. The Company used $6.4 million of state net operating loss carryforwards in the U.S. in 2025.
A valuation allowance of $0.6 million has been recorded against the state net operating loss carryforwards in the U.S. and a valuation allowance of $32.0 million has been recorded against the U.S. foreign tax credit carryforward as of December 31, 2025. A valuation allowance of $0.3 million has been recorded against German net operating losses and other deferred tax assets. A valuation allowance of $29.0 million has been recorded against U.K. deferred tax assets related to buildings as of December 31, 2025.
Generally accepted accounting principles relating to uncertain income tax positions prescribe a minimum recognition threshold that a tax position is required to meet before being recognized and provides guidance on the derecognition, measurement, classification, and disclosure relating to income taxes.
We have elected to include interest and penalties in our income tax expense. There were no amounts of interest or penalties to be included within uncertain tax positions at December 31, 2025. We do not expect a significant change to the amount of uncertain tax positions within the next twelve months. Our U.S. federal returns remain open to examination for 2022, 2023, and 2024 and various U.S. state jurisdictions are open for periods ranging from 2020 through 2024. The portion of the total amount of uncertain tax positions that would, if recognized, impact the effective tax rate was $0.0 million, $0.5 million, and $0.5 million as of December 31, 2025, 2024, and 2023, respectively.
On November 19, 2025, we acquired PMG from a commonly controlled affiliate, which was accounted for as a transaction between entities under common control. Historically, PMG was treated as a pass-through partnership for income tax purposes and therefore did not record income tax expense in its stand-alone financial statements. Because we have retrospectively recast prior periods to include PMG as if it had always been part of our consolidated reporting, those historical periods do not reflect federal and state income taxes that would have been incurred had PMG been included in our taxable consolidated group. Beginning on the acquisition date, the results of PMG are included in our consolidated federal and state income tax filings and therefore subject to income tax.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 25, 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.