Porch Group, Inc.PRCH

Porch Group, Inc. Income Taxes Disclosure

10-KFiled Feb 20, 20266 min read
Note 12. Income Taxes
On January 1, 2025, we adopted ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about our effective tax rate reconciliation as well as information on income taxes paid. Because we adopted ASU 2023-09 in 2025 using a prospective method, disclosures for historical periods were not revised to conform to this ASU.
The following table summarizes the components of income before taxes.
Year Ended December 31,
202520242023
Domestic$26,347 $(30,791)$(133,311)
Foreign388 79 — 
Income (loss) before income taxes$26,735 $(30,712)$(133,311)
The following table summarizes the components of the income tax provision.
Year Ended December 31,
202520242023
Current:
Federal$(10,234)$— $—
State(446)(778)(399)
Foreign(111)— — 
Total current(10,791)(778)(399)
Deferred:
Federal(870)(569)(66)
State247(770)(157)
Foreign(3)——
Total deferred(626)(1,339)(223)
Income tax expense$(11,417)$(2,117)$(622)
The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.
December 31,
20252024
Deferred tax assets
Accrued expenses and other$3,034 $3,158 
Unrealized gain/loss on investments— 1,421 
Stock-based compensation6,652 4,768 
Deferred revenue21,027 25,844 
Goodwill8,740 4,562 
Operating lease liabilities447 478 
Loss and loss adjustment reserves484 6,289 
Net operating losses108,662 105,823 
Disallowed interest26,235 18,243 
Research and development capitalized costs— 289 
Total deferred tax assets175,281 170,874 
Less: Valuation allowance(149,617)(148,147)
Deferred tax assets less valuation allowance$25,664 $22,727 
Deferred tax liabilities
Property and equipment$(72)$(61)
Intangibles(4,897)— 
Operating lease right-of-use assets(423)(556)
Deferred policy acquisition costs(18,264)(10,151)
Reinsurance balance due(2,553)(13,956)
Research and development capitalized costs(1,929)— 
Unrealized gain/loss on investments(149)— 
Total deferred tax liabilities$(28,287)$(24,724)
Net deferred tax liabilities(1)$(2,623)$(1,997)
______________________________________
(1)As of December 31, 2025, there were $1.8 million of net deferred tax liabilities included in other liabilities in the Consolidated Balance Sheets, and $0.8 million included in other liabilities of the Liabilities of Reciprocal: section of the Consolidated Balance Sheets.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax purposes and the tax effect of the tax loss carryforwards. We have recorded a valuation allowance due to the uncertainty surrounding the ultimate realizability or recoverability of such assets. Management evaluates, on an annual basis, both the positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable and the amount of the valuation allowance. In our evaluation, we considered our cumulative losses as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, we determined that the negative evidence outweighed the positive evidence. At such time as it is determined that it is more likely than not the deferred tax assets are realizable, the valuation allowance will be reduced. The valuation allowance increased by $1.5 million for the year ended December 31, 2025, from $148.1 million at December 31, 2024, to $149.6 million at December 31, 2025.
As of December 31, 2025, we had net operating loss carryforwards for federal tax purposes of approximately $438.8 million and $310.6 million for state income tax purposes, which may be used to offset future taxable income. The net operating loss carryforwards for federal tax purposes generated prior to January 1, 2018, will begin to expire in 2032, and the net operating loss carryforwards for state tax purposes will begin to expire in 2026. Net operating loss
carryforwards with an unlimited carryforward period are $346.8 million for federal tax purposes and $78.4 million for state tax purposes. Utilization of net operating loss and tax credit carryforwards are subject to certain limitations under Sections 382–384 of the Internal Revenue Code of 1986, as amended, in the event of a change in our ownership, as defined in current income tax regulations. We have determined that we have experienced a limited number of ownership changes in our history. The sale of HOA to the Reciprocal in January 2025 was an ownership change with respect to HOA and resulted in its separate net operating losses being deemed not utilizable. Additional ownership changes may occur in the future.
The following tables provide reconciliations of the income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes.
Year Ended December 31,
2025
Amount
%
Tax computed at federal statutory rate$(5,614)21.0 %
State and local income tax, net of federal income tax effect(1)(158)0.6 %
Foreign tax effects
India(33)0.1 %
Effect of cross-border tax laws
Global intangible low-taxed income(22)0.1 %
Changes in valuation allowances(2,286)8.6 %
Nontaxable or nondeductible items
Equity compensation4,164 (15.6)%
Officer compensation(2,345)8.8 %
Debt transactions3,281 (12.3)%
Change in contingent consideration(914)3.4 %
Other nontaxable or nondeductible items(270)1.0 %
Other
Write-off of tax attributes(7,569)28.3 %
Deferred adjustments540 (2.0)%
Other(191)0.7 %
Income tax benefit (expense)$(11,417)42.7 %
_____________________________________
(1)This amount is primarily comprised of state taxes from Texas.
Year Ended December 31,
20242023
Tax computed at federal statutory rate$6,512$27,995
State tax, net of federal tax benefit2311,934
Loss on impairment—(4,775)
Equity compensation(1,523)(3,311)
Officer compensation(827)(15)
Debt transactions1,378 (1,591)
Enacted tax rate changes1,685(2,061)
Return to provision(2,748)4,816
Valuation allowance(7,612)(23,453)
Change in contingent consideration914 — 
Other(127)(161)
Income tax benefit (expense)$(2,117)$(622)
The U.S. federal statutory tax rate is 21%, while our effective tax rate for 2025, 2024, and 2023 was 42.7%, (6.9)%, and (0.5)%, respectively. The difference for all years is due primarily to the tax benefit of pre-tax book losses being offset by the valuation allowance.
The 2017 Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in the future years or provide for tax expense related to GILTI in the year the tax is incurred. We elected to recognize tax expense related to GILTI in the year the tax is incurred. GILTI tax in each of the years ended December 31, 2025, 2024, and 2023, was less than $0.1 million.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted which introduced a series of federal income tax changes effective in 2025. Among other provisions, OBBBA changes how the interest expense limitation is calculated and provides taxpayers with options regarding the treatment of research and experimental (“R&E”) expenditures for federal income tax purposes. Due to the interplay of these items, along with net operating losses and valuation allowances, we do not expect OBBBA to have a material impact on our financial statements. We will continue to evaluate the available options under OBBBA and finalize our elections in connection with the filing of our 2025 federal income tax return.
We file U.S. federal income tax returns as well as income tax returns in various state, local, and foreign jurisdictions. The statute of limitations in those jurisdictions generally ranges from 3 to 4 years. We are not currently under income tax examination in any jurisdiction, but we are generally open to examination by tax authorities for tax years beginning in 2012 due to the availability of net operating loss carryforwards. As of December 31, 2025, there are no penalties or accrued interest recorded in the financial statements for any potential examinations.
We had no uncertain tax position reserves as of December 31, 2025 and 2024.
The following table shows tax payments, net of refunds received, during the year ended December 31, 2025.
2025
U.S. Federal$— 
U.S. State and Local
Texas141 
Pennsylvania129 
Florida114 
Other65 
Total U.S. State and Local449 
Foreign
India113 
Total income taxes paid, net of refunds received$562 

Historical Timeline

Fiscal YearFiled
2025Feb 20, 2026Showing above
2024Feb 25, 2025
2023Mar 15, 2024
2022Mar 16, 2023
2021Mar 16, 2022
2020Mar 31, 2021
2019Mar 20, 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

RevenueEarnings Per ShareFair ValuePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsStock CompensationNew StandardsPay vs PerformanceNEO Compensation Adjustments