PROG Holdings, Inc.PRG
PROG Holdings, Inc. Income Taxes Disclosure
INCOME TAXES
The following is a summary of the Company's income tax expense (benefit) from continuing operations:
| Year Ended December 31, | |||||||||||||||||
| (In Thousands) | 2025 | 2024 | 2023 | ||||||||||||||
Current Income Tax Expense (Benefit): | |||||||||||||||||
| Federal | $ | 349 | $ | 19,548 | $ | 76,334 | |||||||||||
| State | 7,442 | (46) | 12,157 | ||||||||||||||
| 7,791 | 19,502 | 88,491 | |||||||||||||||
Deferred Income Tax Expense (Benefit): | |||||||||||||||||
| Federal | 39,923 | (49,249) | (32,989) | ||||||||||||||
| State | 2,453 | (4,128) | (90) | ||||||||||||||
| 42,376 | (53,377) | (33,079) | |||||||||||||||
Income Tax Expense (Benefit) | $ | 50,167 | $ | (33,875) | $ | 55,412 | |||||||||||
Income tax expense attributable to discontinued operations was $8.7 million, $0.2 million, and $2.0 million for the years ended December 31, 2025, 2024 and 2023, related to the discontinuation of the operations of Vive, and is reflected in earnings (loss) from discontinued operations, net of income tax on the Company's consolidated statements of earnings.
Significant components of the Company's deferred income tax liabilities and assets are as follows:
| December 31, | |||||||||||
| (In Thousands) | 2025 | 2024 | |||||||||
| Deferred Income Tax Liabilities: | |||||||||||
| Property and Equipment | $ | 129,903 | $ | 71,803 | |||||||
| Goodwill and Other Intangibles | 56,950 | 51,913 | |||||||||
| Operating Lease Right-of-Use Assets | 680 | 960 | |||||||||
Total Deferred Income Tax Liabilities | 187,533 | 124,676 | |||||||||
| Deferred Income Tax Assets: | |||||||||||
Accrued Liabilities and Other Reserves | 34,036 | 35,062 | |||||||||
| Customer Deposits and Advance Payments | 8,179 | 9,034 | |||||||||
| Operating Lease Liabilities | 1,800 | 2,799 | |||||||||
| Tax Credit Carryforwards | 7,662 | 7,833 | |||||||||
| Net Operating Loss Carryforwards | 33,883 | 4,162 | |||||||||
| Stock-Based Compensation | 4,943 | 5,311 | |||||||||
| Other, Net | 2,180 | 1,352 | |||||||||
| Total Deferred Income Tax Assets | 92,683 | 65,553 | |||||||||
| Less: Valuation Allowance | (6,741) | (5,991) | |||||||||
| Net Deferred Income Tax Liabilities | $ | 101,591 | $ | 65,114 | |||||||
One Big Beautiful Bill Act
On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, including 100% bonus depreciation on qualified property acquired and placed into service after January 19, 2025.
Partnership Deemed Liquidation
During the year ended December 31, 2024, the Company made a tax election to convert a subsidiary of the Company from a corporation to a disregarded entity which resulted in the deemed liquidation of the Company's investment in a wholly-owned partnership for tax purposes. As a result of the election, the Company reversed a deferred tax liability related to the investment in partnership and recognized a non-cash deferred tax benefit of $27.8 million.
Effective Tax Rate Reconciliation
The Company's effective tax rate differs from the statutory United States Federal income tax rate as follows for continuing operations:
| Year Ended December 31, | ||||||||||||||||||||||||||
| (In Thousands) | 2025 | 2024 | 2023 | |||||||||||||||||||||||
Federal Tax at Statutory Rate | $ | 36,649 | 21.0 | % | $ | 34,322 | 21.0 | % | $ | 39,754 | 21.0 | % | ||||||||||||||
State Tax Expense, Net of Federal Benefit1 | 6,783 | 3.9 | 8,035 | 4.9 | 9,342 | 4.9 | ||||||||||||||||||||
| Foreign Tax Effects - Other Foreign Jurisdictions | 92 | — | 158 | 0.1 | (8) | — | ||||||||||||||||||||
| Tax Credits - Other | 17 | — | (67) | — | (131) | (0.1) | ||||||||||||||||||||
| Nontaxable or Nondeductible Items | ||||||||||||||||||||||||||
| Executive Compensation | 2,080 | 1.2 | 1,680 | 1.0 | 284 | 0.2 | ||||||||||||||||||||
| Other | 388 | 0.2 | (257) | (0.2) | 321 | 0.2 | ||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | 1,591 | 0.9 | (51,724) | (31.6) | 3,681 | 1.9 | ||||||||||||||||||||
| Other Adjustments | ||||||||||||||||||||||||||
| Partnership Dissolution | — | — | (27,767) | (17.0) | — | — | ||||||||||||||||||||
| Deferred Tax Adjustments | 1,941 | 1.1 | — | — | 2,181 | 1.2 | ||||||||||||||||||||
| Other | 626 | 0.4 | 1,745 | 1.1 | (12) | — | ||||||||||||||||||||
Effective Income Tax Expense (Benefit) and Rate | $ | 50,167 | 28.7 | % | $ | (33,875) | (20.7) | % | $ | 55,412 | 29.3 | % | ||||||||||||||
1 State taxes in CA, NY, PA, IL, TX, and NC for 2025 and TX, CA, DE, and PA for 2024 and CA, TX, NC, MI, PA, NY and IL for 2023 made up the majority (greater than 50%) of the tax effect in this category.
Reconciling items exceeding 5% of earnings before income taxes multiplied by the statutory rate are presented separately in the table above.
The effective tax rate reconciliation is based on net earnings from continuing operations. Income tax expense (benefit) attributable to discontinued operations is excluded from the reconciliation in accordance with ASC 740, "Accounting for Income Taxes." Certain tax impacts related to discontinued operations, including tax on the gain on sale of receivables and related valuation allowance adjustments are reflected in discontinued operations and are not included in the reconciliation above.
At December 31, 2025, the Company had $26.7 million of tax-effected federal net operating loss carryforwards that may be carried forward indefinitely. The Company also had $7.2 million of tax-effected state net operating loss carryforwards and $3.8 million of state tax credit carryforwards, which will begin to expire in 2026 and 2027, respectively.
The Company files a federal consolidated income tax return in the United States, and the separate legal entities file in various states. With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2022.
Income Taxes Paid
The following table presents income taxes paid (net of refunds) for the periods presented:
| Year Ended December 31, | |||||||||||||||||
| (In Thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 40,000 | $ | 44,281 | $ | 87,913 | |||||||||||
| Foreign | |||||||||||||||||
| Puerto Rico | — | — | 801 | ||||||||||||||
| State | |||||||||||||||||
| California | 1,617 | 1,437 | 1,552 | ||||||||||||||
| Illinois | * | 574 | 1,218 | ||||||||||||||
| Louisiana | * | 336 | * | ||||||||||||||
| Maryland | * | * | 1,081 | ||||||||||||||
New Mexico | 312 | * | * | ||||||||||||||
New York | * | 670 | 889 | ||||||||||||||
| Oregon | * | 302 | * | ||||||||||||||
| Pennsylvania | 850 | 451 | 769 | ||||||||||||||
| Tennessee | 331 | * | 737 | ||||||||||||||
| Texas | 1,186 | 1,357 | * | ||||||||||||||
New York City | 305 | * | * | ||||||||||||||
| Other | 1,192 | 432 | 5,473 | ||||||||||||||
| Total Income Taxes Paid (Net of Refunds Received) | $ | 45,793 | $ | 49,840 | $ | 100,433 | |||||||||||
*Jurisdiction below the threshold for the period presented
The Company disaggregates state income taxes paid by individual jurisdiction when state income taxes paid represent more than 5% of total income taxes paid for the period; remaining state payments are included in Other. Income taxes paid include amounts relating to both continuing and discontinued operations.
Uncertain Tax Positions
The following table summarizes the activity related to the Company's uncertain tax positions for the periods presented (does not include accrued interest):
| Year Ended December 31, | |||||||||||||||||
| (In Thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at January 1, | $ | 732 | $ | 46,200 | $ | 46,407 | |||||||||||
| Additions Based on Tax Positions Related to the Current Year | 1,315 | — | 81 | ||||||||||||||
| Prior Year Reductions | — | (3) | — | ||||||||||||||
Statute of Limitation Expirations | (29) | (45,103) | (288) | ||||||||||||||
| Settlements | — | (362) | — | ||||||||||||||
| Balance at December 31, | $ | 2,018 | $ | 732 | $ | 46,200 | |||||||||||
As of December 31, 2025 and 2024, uncertain tax positions (inclusive of accrued interest) were $2.7 million and $0.8 million, respectively, and are included within accounts payable and accrued expenses in the consolidated balance sheets.
In December 2019, Progressive Leasing reached an agreement in principle with the staff of the Federal Trade Commission ("FTC") with respect to a tentative settlement to resolve the FTC inquiry received by the Company in July 2018, under which Progressive Leasing agreed to pay $175.0 million. At the time of the agreement, the Company treated the tentative settlement as a non-deductible regulatory charge for tax purposes and recognized tax expense.
The $175.0 million settlement was finalized and paid to the FTC in 2020. Prior to filing the Company's 2020 income tax return, it was determined there was a reasonable basis for deducting the settlement amount on the return. However, the tax position did not meet the more-likely-than-not recognition standard and no tax benefit was recognized. As a result, the Company reclassified
$44.8 million from taxes payable, previously recognized in December 2019, to an uncertain tax position as of December 31, 2021.
The Company's policy is to recognize potential interest and penalties related to uncertain tax positions as a component of income tax expense (benefit), and recognized accrued interest related to this uncertain tax position accordingly.
During September 2024, the statute of limitations for the taxing authority to examine the uncertain tax position relating to the FTC settlement expired. The Company therefore recognized a net income tax benefit of $53.6 million relating to the uncertain tax position reversal, which included the reversal of the associated accrued interest. As a result, the Company had no accrued interest related to the FTC settlement as of December 31, 2024 or December 31, 2025.
As of December 31, 2025 and 2024, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $2.1 million and $0.6 million, respectively, including interest and penalties.
During the year ended December 31, 2025, the Company recognized a net expense of $0.6 million related to penalties and interest. During the years ended December 31, 2024 and 2023, the Company recognized a net benefit of $8.7 million and an expense of $4.1 million, respectively, related to penalties and interest. The Company had $0.7 million and $0.1 million of accrued interest and penalties at December 31, 2025 and 2024, respectively. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 26, 2021 | |
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.