Public Policy Holding Company, Inc.PPHC
Public Policy Holding Company, Inc. Income Taxes Disclosure
INCOME TAXES
Net loss before provision for income taxes for the years ended December 31, 2025 and 2024 was:
| 2025 | 2024 | ||||||||||
| United States | $ | (27,259) | $ | (19,942) | |||||||
| Foreign | (7,343) | 2,530 | |||||||||
| Net loss before income taxes | $ | (34,602) | $ | (17,412) | |||||||
The components of income tax expense attributable to income before income taxes was a follows for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
Current tax expense (benefit): | |||||||||||
Federal | $ | 5,438 | $ | 5,588 | |||||||
State | 2,343 | 2,251 | |||||||||
Foreign | (757) | — | |||||||||
| Total current tax expense (benefit) | 7,024 | 7,839 | |||||||||
Deferred tax expense (benefit): | |||||||||||
Federal | (2,389) | (1,252) | |||||||||
State | (790) | (216) | |||||||||
Foreign | 554 | 174 | |||||||||
Total deferred tax (benefit) | (2,625) | (1,294) | |||||||||
Total provision for income taxes | $ | 4,399 | $ | 6,545 | |||||||
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The acquisitions of KP, Engage, Multistate, Doherty, Lucas Public Affairs, TrailRunner and Pine Cove were taxable asset acquisitions. As such, the purchase consideration for these acquisitions generated tax-deductible goodwill in the combined amount of approximately $94.2 million. A deferred tax asset has been recorded in relation to the excess of the tax deductible goodwill as compared to the GAAP carrying value of goodwill. Of the $94.2 million of tax deductible goodwill, approximately $50.6 million is
eligible for amortization during 2025. None of the goodwill recorded in connection with the Pagefield business combination is deductible for tax purposes.
As of December 31, 2025, there are no known items that would result in a material liability related to uncertain tax positions, as such, there are no unrecognized tax benefits. The Company's policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2025, the Company had no accrued interest or penalties related to uncertain tax positions. There were no changes in uncertain tax positions during the 2025 reporting year.
The Company’s 2022 to 2024 domestic income tax return years are open under the statute of limitations for examination by the taxing authorities. Additionally, the Company’s income tax returns for Pagefield, TrailRunner UK, TrailRunner International Public Relations DMCC, and TrailRunner International Public Relations FZ for the years 2021 to 2024 are open under the statute of limitations for examination by the applicable taxing authorities. The Company had $0.2 million of foreign net operating losses that carry forward indefinitely. There were no federal or state net operating loss carryforwards as of December 31, 2025.
The Company recorded a valuation allowance of less than $0.1 million against the deferred tax asset related to foreign net operating losses as of December 31, 2025 because realization is not more likely than not based on available positive and negative evidence. The change in valuation allowance was less than $0.1 million as of December 31, 2025.
The Tax Cuts and Jobs Act of 2017 subjects a US shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to account for GILTI in the year the tax is incurred. The Company recorded a GILTI inclusion of approximately $1.4 million and $0.6 million during the years ended December 31, 2025 and 2024, respectively.
On July 4, 2025, the US government enacted the One Big Beautiful Bill Act ("OBBBA"), which includes several changes to US federal income tax law including temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. Significant provisions for corporate taxpayers include permanent 100% bonus depreciation for qualified property, immediate expensing of domestic research & development expenditures, and changes to the limitation on business interest expense deductions under Section 163(j). None of these provisions had a material impact on the Company’s 2025 income tax provision.
Significant components of the Company's deferred tax assets and liabilities are as follows as of December 31:
| 2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
Other assets | $ | 689 | $ | 318 | |||||||
Foreign net operating losses | 35 | 1,087 | |||||||||
Long term incentive plan RSUs | 1,281 | 717 | |||||||||
Foreign equity compensation and accrual | — | 392 | |||||||||
Goodwill | 23,492 | 10,998 | |||||||||
| ASC 842 Lease liability | 5,834 | 5,810 | |||||||||
| Valuation Allowance | (11) | — | |||||||||
Total deferred income tax assets | 31,320 | 19,322 | |||||||||
Deferred tax liabilities: | |||||||||||
Other | (151) | (183) | |||||||||
Intangible assets | (1,469) | (3,152) | |||||||||
Right of use asset | (5,100) | (4,949) | |||||||||
Total deferred income tax liabilities | (6,720) | (8,284) | |||||||||
Total net deferred tax asset | $ | 24,600 | $ | 11,038 | |||||||
A reconciliation for the difference between actual income tax expense (benefit) compared to the amount computed by applying the statutory federal income tax rate to net loss before income tax for the year ended December 31, 2025 after the adoption of ASU 2023-09 is as follows:
| December 31, 2025 | |||||||||||
Amount | % of Pretax Earnings | ||||||||||
| Tax at US Federal Statutory Tax Rate | $ | (7,264) | 21.0 | % | |||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect | 1,061 | (3.1) | % | ||||||||
| Foreign Tax Effects | |||||||||||
| United Kingdom | |||||||||||
| Statutory tax rate difference between UK and US | (293) | 0.8 | % | ||||||||
| Nondeductible Goodwill Impairment | 1,514 | (4.4) | % | ||||||||
| Other | 111 | (0.3) | % | ||||||||
| United Arab Emirates | |||||||||||
| Statutory tax rate difference between UAE and US | (8) | — | |||||||||
| Other | 11 | — | |||||||||
| Effect of Cross-Border Tax Laws | 290 | (0.8) | % | ||||||||
| Nontaxable or Nondeductible Items – US Federal Impact | |||||||||||
| Prepaid post combination compensation expense | 3,670 | (10.60) | % | ||||||||
| Nondeductible share-based accounting charge | 6,221 | (18.00) | % | ||||||||
| Excess Tax Benefit – Equity Compensation | (539) | 1.60 | % | ||||||||
| Bargain Purchase Gain | (571) | 1.70 | % | ||||||||
| Other | 185 | (0.50) | % | ||||||||
| Other Adjustments | 11 | (0.10) | % | ||||||||
| Effective Tax Rate | $ | 4,399 | (12.7) | % | |||||||
The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Washington D.C., and Virginia.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory US federal income tax rate to income before income taxes for the year prior to the adoption of ASU 2023-09 is as follows:
| December 31, 2024 | |||||||||||
Amount | % of Pretax Earnings | ||||||||||
Federal income tax benefit at statutory rate | $ | (3,657) | (21.0) | % | |||||||
State income taxes, net of federal income tax benefit | (1,168) | (6.7) | % | ||||||||
Nondeductible share-based accounting charge | 8,541 | 49.1 | % | ||||||||
Prepaid post-combination compensation expense | 3,107 | 17.8 | % | ||||||||
Foreign rate differential | 101 | 0.6 | % | ||||||||
Other | (379) | (2.2) | % | ||||||||
Total provision for income taxes | $ | 6,545 | 37.6 | % | |||||||
The amounts of cash income taxes paid (received) by the Company for the year ended December 31, 2025 were as follows:
| Federal | $ | 3,750 | |||
| State and Local | 2,508 | ||||
| Foreign (UK) | (319) | ||||
| Income Taxes, net of amounts refunded | $ | 5,939 | |||
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.