PIPER SANDLER COMPANIESPIPR
PIPER SANDLER COMPANIES Income Taxes Disclosure
INCOME TAXES
Income tax expense is provided using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial statement purposes, using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The disclosure requirements of ASU 2023-09 have been disclosed on a prospective basis for fiscal year 2025. See Note 3 for additional details on the Company's adoption of this guidance.
The components of income before income tax expense by jurisdiction, in accordance with the updated disclosure requirements of ASU 2023-09, are as follows:
Year Ended | |||||
December 31, | |||||
| (Amounts in thousands) | 2025 | ||||
Domestic | $ | 347,539 | |||
Foreign | 27,008 | ||||
| Total income before income tax expense | $ | 374,547 | |||
The components of income tax expense are as follows:
| Year Ended December 31, | |||||||||||||||||
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
Current | |||||||||||||||||
| Federal | $ | 49,167 | $ | 30,429 | $ | 3,988 | |||||||||||
| State | 19,695 | 10,679 | 5,292 | ||||||||||||||
| Foreign | 6,261 | 2,747 | 684 | ||||||||||||||
Total current | 75,123 | 43,855 | 9,964 | ||||||||||||||
Deferred | |||||||||||||||||
| Federal | 5,028 | 10,329 | 11,856 | ||||||||||||||
| State | 576 | 5,913 | 1,546 | ||||||||||||||
| Foreign | (145) | 875 | 247 | ||||||||||||||
Total deferred | 5,459 | 17,117 | 13,649 | ||||||||||||||
| Total income tax expense | $ | 80,582 | $ | 60,972 | $ | 23,613 | |||||||||||
A reconciliation of federal income taxes at statutory rate to the Company's effective tax rate for the year ended December 31, 2025, in accordance with the updated disclosure requirements of ASU 2023-09, is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
(Amounts in thousands, except percentages) | Amount | Percent | |||||||||
Federal income tax expense at statutory rate | $ | 78,655 | 21.0 | % | |||||||
| Increase/(decrease) in taxes resulting from: | |||||||||||
| State and local income taxes, net of federal tax benefit (1) | 21,328 | 5.7 | |||||||||
Foreign tax effects | 444 | 0.1 | |||||||||
| Non-taxable or non-deductible items: | |||||||||||
| Non-deductible compensation | 11,809 | 3.2 | |||||||||
| Vestings of stock awards | (28,142) | (7.5) | |||||||||
Tax-exempt interest income | (1,603) | (0.4) | |||||||||
| (Income)/loss attributable to noncontrolling interests | (2,653) | (0.7) | |||||||||
| Other non-taxable or non-deductible items | 2,505 | 0.7 | |||||||||
| Total non-taxable or non-deductible items | (18,084) | (4.8) | |||||||||
| Other, net | (1,761) | (0.5) | |||||||||
Total income tax expense and effective tax rate | $ | 80,582 | 21.5 | % | |||||||
(1)For the year ended December 31, 2025, state and local income taxes in New York, California, and New York City made up the majority (greater than 50 percent) of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the reconciliation of federal income taxes at statutory rate to the Company's effective tax rate is as follows:
| Year Ended December 31, | |||||||||||
| (Amounts in thousands) | 2024 | 2023 | |||||||||
Federal income tax expense at statutory rate | $ | 45,867 | $ | 25,743 | |||||||
Increase/(decrease) in taxes resulting from: | |||||||||||
| State and local income taxes, net of federal tax benefit | 13,433 | 7,994 | |||||||||
Tax-exempt interest income | (1,332) | (1,613) | |||||||||
Foreign jurisdictions tax rate differential | 1,076 | 993 | |||||||||
| Non-deductible compensation | 8,362 | 3,645 | |||||||||
| Change in valuation allowance | — | (159) | |||||||||
| Vestings of stock awards | (13,146) | (13,714) | |||||||||
| (Income)/loss attributable to noncontrolling interests | 4,972 | (2,831) | |||||||||
| Other, net | 1,740 | 3,555 | |||||||||
| Total income tax expense | $ | 60,972 | $ | 23,613 | |||||||
In accordance with ASC 740, U.S. income taxes are not provided on undistributed earnings of international subsidiaries that are permanently reinvested. As of December 31, 2025, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of the Company's foreign earnings to the U.S.
Deferred income tax assets and liabilities reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for the same items for income tax reporting purposes. The net deferred income tax assets consisted of the following items:
| December 31, | December 31, | ||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
Deferred tax assets | |||||||||||
| Deferred compensation | $ | 127,015 | $ | 119,916 | |||||||
Accrued lease liabilities | 24,454 | 20,588 | |||||||||
| Goodwill tax basis in excess of book basis | 28,877 | 36,415 | |||||||||
| Net operating loss carryforwards | — | 536 | |||||||||
| Liabilities/accruals not currently deductible | 1,246 | 2,949 | |||||||||
| Other | 7,049 | 5,252 | |||||||||
| Total deferred tax assets | 188,641 | 185,656 | |||||||||
Deferred tax liabilities | |||||||||||
Right-of-use lease assets | 15,283 | 15,564 | |||||||||
| Unrealized gains on firm investments | 3,928 | 1,388 | |||||||||
| Fixed assets | 12,691 | 6,545 | |||||||||
| Other | 615 | 576 | |||||||||
| Total deferred tax liabilities | 32,517 | 24,073 | |||||||||
| Net deferred tax assets | $ | 156,124 | $ | 161,583 | |||||||
The realization of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized. The Company believes that its future tax profits will be sufficient to recognize its deferred tax assets.
The Company accounts for unrecognized tax benefits in accordance with the provisions of ASC 740, which requires tax reserves to be recorded for uncertain tax positions on the consolidated statements of financial condition. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (Amounts in thousands) | |||||
| Balance at December 31, 2022 | $ | 2,151 | |||
| Additions based on tax positions related to the current year | — | ||||
| Additions for tax positions of prior years | — | ||||
| Reductions for tax positions of prior years | (42) | ||||
| Settlements | (305) | ||||
| Balance at December 31, 2023 | $ | 1,804 | |||
| Additions based on tax positions related to the current year | — | ||||
| Additions for tax positions of prior years | 113 | ||||
| Reductions for tax positions of prior years | — | ||||
| Settlements | — | ||||
| Balance at December 31, 2024 | $ | 1,917 | |||
| Additions based on tax positions related to the current year | — | ||||
| Additions for tax positions of prior years | 283 | ||||
| Reductions for tax positions of prior years | — | ||||
| Settlements | — | ||||
| Balance at December 31, 2025 | $ | 2,200 | |||
As of December 31, 2025 and 2024, $2.2 million and $1.9 million, respectively, of the Company's unrecognized tax benefits included above would impact the annual effective rate, if recognized.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense. The Company had $0.6 million, $0.5 million and $0.4 million accrued related to the payment of interest and penalties at December 31, 2025, 2024 and 2023, respectively. The Company or one of its subsidiaries files income tax returns with the various states and foreign jurisdictions in which the Company operates. The Company is not subject to examination by U.S. federal tax authorities for years before 2022 and is not subject to examination by state and local or non-U.S. tax authorities for taxable years before 2018.
The components of income taxes paid, in accordance with the updated disclosure requirements of ASU 2023-09, are as follows:
Year Ended | |||||
December 31, | |||||
| (Amounts in thousands) | 2025 | ||||
Federal | $ | 32,800 | |||
| State | 5,848 | ||||
Foreign | |||||
United Kingdom | 2,388 | ||||
Other | 59 | ||||
Total foreign | 2,447 | ||||
Total income taxes paid | $ | 41,095 | |||
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, income taxes paid were $10.9 million and $19.4 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 26, 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.