Pennant Group, Inc.PNTG

Pennant Group, Inc. Income Taxes Disclosure

10-KFiled Feb 26, 20263 min read
INCOME TAXES
The provision for income tax expense for the years ended December 31, 2025, 2024, and 2023 is summarized as follows:

Year Ended December 31,
202520242023
Current:
Federal$10,429 $6,449 $1,178 
State3,627 1,766 492 
Total current14,056 8,215 1,670 
Deferred:
Federal(1,652)(998)3,217 
State(538)(189)787 
Total deferred(2,190)(1,187)4,004 
Total provision for income taxes
$11,866 $7,028 $5,674 

A reconciliation of the federal statutory tax rate to the effective tax rate for income from continuing operations for the years ended December 31, 2025, 2024, and 2023, respectively, is comprised as follows:

Year Ended December 31,
202520242023
Income tax expense at statutory rate$9,582 21.0 %$6,587 21.0 %$4,113 21.0 %
State income taxes - net of federal benefit (a)
2,5785.6 1,314 4.2 1,031 5.3 
Tax credits(98)(0.2)(93)(0.3)(47)(0.2)
Nontaxable or nondeductible items
Stock based compensation(730)(1.6)(1,429)(4.6)(6)— 
Section 162(m) limitation1,2952.8 972 3.1 593 3.0 
Noncontrolling interest(1,040)(2.3)(443)(1.4)(133)(0.7)
Other non-deductible expenses2350.5 156 0.5 204 1.0 
Other adjustments440.2 (36)(0.1)(81)(0.4)
Total income tax expense at effective rate
$11,866 26.0 %$7,028 22.4 %$5,674 29.0 %
(a)In 2025, state taxes in Arizona, California, and Oregon made up the majority (greater than 50%) of the tax effect in this category. In 2024 and 2023, state taxes in Arizona, California, and Wisconsin made up the majority (greater than 50%) of the tax effect in this category.
The Company’s deferred tax assets and liabilities for the years ended December 31, 2025 and 2024 are summarized below.

Year Ended December 31,
 20252024
Deferred tax assets (liabilities):
Accrued compensation$15,105 $11,196 
Allowance for doubtful accounts3,628 1,690 
State taxes
193 128 
Lease liabilities73,458 70,706 
Insurance2,768 1,839 
Other 870 1,276 
Total deferred tax assets96,022 86,835 
Less: valuation allowance(197)— 
Net deferred tax assets95,825 86,835 
Depreciation and amortization(19,924)(16,010)
Prepaid expenses(1,000)(902)
Right-of-use assets(72,493)(69,813)
State taxes(153)— 
Other(1,927)(1,971)
Total deferred tax liabilities(95,497)(88,696)
Net deferred tax assets (liabilities)$328 $(1,861)

The Company evaluates positive and negative evidence to determine if existing deferred tax assets will be realized or a valuation allowance is required. As of December 31, 2025, and December 31, 2024, the Company had a valuation allowance of $197 and $0, respectively, against net deferred tax assets primarily related to carryforwards in U.S. states. 2025 changes in the valuation allowance were due to adjustments based on management’s assessment of the realizability of net operating losses. As of December 31, 2025, net operating loss carryforward amounts and expiration periods, as reported to tax authorities (not tax effected) were $3,869 in various U.S. states expiring between December 2033 and December 2042.

As of December 31, 2025, 2024, and 2023, the Company did not have any unrecognized tax benefits, net of its state benefits that would affect the Company’s effective tax rate. The Company classifies interest and/or penalties on income tax liabilities or refunds as additional income tax expense or income. Such amounts are not material.

As of December 31, 2025, the Company is no longer subject to federal tax examinations for the fiscal years prior to 2022, and in most states, is no longer subject to state income tax examinations for fiscal years before 2021. The lapsing of the statutes of limitation for the years ended December 31, 2021 and December 31, 2020 had no impact on the Company’s unrecognized tax benefits.

The following table presents income taxes paid (net of refunds received) for the years ended December 31, 2025, 2024, and 2023, respectively:
Year Ended December 31,
202520242023
Federal$10,555 $5,794 $550 
State
California860 519 110 
Oregon816 176 90 
Other1,818 862 91 
$14,049 $7,351 $841 

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 27, 2025
2023Feb 28, 2024
2022Feb 23, 2023
2021Feb 28, 2022
2020Feb 24, 2021
2019Mar 4, 2020

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

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