Priority Technology Holdings, Inc.PRTH
Priority Technology Holdings, Inc. Income Taxes Disclosure
Income Taxes
The following is a summary of income taxes paid by jurisdiction (net of refunds) pursuant to disclosure requirements of ASU 2023-09 for year ended December 31, 2025:
Components of income before income taxes were as follows:
| (in thousands) | For the Years Ended December 31, | ||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| US | $ | 45,327 | $ | 35,834 | $ | 5,255 | |||||||||||
| Foreign | 952 | 1,447 | 1,897 | ||||||||||||||
| Total income before income taxes | $ | 46,279 | $ | 37,281 | $ | 7,152 | |||||||||||
Components of consolidated income tax expense were as follows:
| (in thousands) | For the Years Ended December 31, | ||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. current income tax expense | |||||||||||||||||
| Federal | $ | 305 | $ | 12,094 | $ | 10,624 | |||||||||||
| State and local | 2,020 | 3,085 | 3,187 | ||||||||||||||
| Foreign | 426 | 281 | 738 | ||||||||||||||
| Total current income tax expense | $ | 2,751 | $ | 15,460 | $ | 14,549 | |||||||||||
| U.S. deferred income tax (benefit) expense | |||||||||||||||||
| Federal | $ | (11,051) | $ | (2,213) | $ | (5,149) | |||||||||||
| State and local | (793) | (101) | (712) | ||||||||||||||
| Foreign | (309) | 120 | (225) | ||||||||||||||
| Total deferred income tax (benefit) expense | $ | (12,153) | $ | (2,194) | $ | (6,086) | |||||||||||
| Total income tax (benefit) expense | $ | (9,402) | $ | 13,266 | $ | 8,463 | |||||||||||
The Company's consolidated effective income tax rate was (20.3)% for the year ended December 31, 2025, compared to a consolidated effective income tax rate of 35.6% for the year ended 2024. For the year ended December 31, 2023, the Company's consolidated effective income tax benefit rate was 118.3%. The effective rate for December 31, 2025 differed from the statutory rate of 21% primarily due to a decrease in the valuation allowance against certain business interest carryover deferred tax assets. The effective rate for December 31, 2024 differed from the statutory federal rate of 21% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets. The effective rate for December 31, 2023, differed from the statutory federal rate of 21% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.
The following is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate:
| (in thousands) | December 31, 2025 | ||||||||||
| Rate Recognition | Amount | Percent | |||||||||
| US federal statutory expense (benefit) | 9,719 | 21.0 | % | ||||||||
State and local income taxes, net of federal benefit(1) | 1,036 | 2.2 | % | ||||||||
| Foreign tax effects | (83) | (0.2) | % | ||||||||
| Tax credits | (425) | (0.9) | % | ||||||||
| Changes in valuation allowance | (18,347) | (39.6) | % | ||||||||
| Nontaxable items | |||||||||||
| Stock-based compensation | (826) | (1.8) | % | ||||||||
| Non-taxable compensation | 886 | 1.9 | % | ||||||||
| Bargain purchase gain | (838) | (1.8) | % | ||||||||
| Other non-taxable items | 238 | 0.5 | % | ||||||||
| Uncertain tax positions | (67) | (0.1) | % | ||||||||
| Other adjustments | |||||||||||
| Noncontrolling interest | (596) | (1.3) | % | ||||||||
| Other miscellaneous | (99) | (0.2) | % | ||||||||
| Income tax expense (benefit) | $ | (9,402) | (20.3) | % | |||||||
(1) The states that contributed to the majority (greater than 50%) of the tax effect in this category were California, Maryland, and Pennsylvania.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate:
| (in thousands) | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory expense | $ | 7,829 | $ | 1,502 | |||||||
| State and local income taxes, net | 2,308 | 1,588 | |||||||||
| Foreign rate differential | 98 | 114 | |||||||||
| Excess tax expense pursuant to ASU 2016-09 | 128 | 235 | |||||||||
| Valuation allowance changes | 2,204 | 3,958 | |||||||||
| Nondeductible items | 1,045 | 768 | |||||||||
| Tax credits | (275) | — | |||||||||
| Other, net | (71) | 298 | |||||||||
| Income tax expense | $ | 13,266 | $ | 8,463 | |||||||
The following is a summary of income taxes paid by jurisdiction (net of refunds) pursuant to disclosure requirements of ASU 2023-09 for year ended December 31, 2025:
| (in thousands) | Income Taxes Paid | |||||||
| US federal | $ | 7,000 | ||||||
| US state and local: | ||||||||
| California | 597 | |||||||
| Other | 2,426 | |||||||
| Foreign: | ||||||||
| India | 565 | |||||||
| Total cash taxes paid, net of refunds received | $ | 10,588 | ||||||
Deferred income taxes reflect the expected future tax consequences of temporary differences between the financial statement carrying amount of the Company's assets and liabilities, tax credits and their respective tax bases, and loss carry forwards. The significant components of consolidated deferred income taxes were as follows:
| As of December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred Tax Assets: | |||||||||||
| Accruals and reserves | $ | 2,592 | $ | 1,566 | |||||||
| Investments in partnership | 2,382 | 2,561 | |||||||||
| Intangible assets | 21,690 | 29,166 | |||||||||
| Net operating loss carryforwards | 14,031 | 1,012 | |||||||||
| Interest limitation carryforwards | 15,821 | 19,821 | |||||||||
| Other | 6,939 | 3,832 | |||||||||
| Gross deferred tax assets | 63,455 | 57,958 | |||||||||
| Valuation allowance | (5,092) | (21,625) | |||||||||
| Total deferred tax assets | 58,363 | 36,333 | |||||||||
| Deferred Tax Liabilities: | |||||||||||
| Prepaid assets | $ | (1,256) | $ | (1,457) | |||||||
| Property and equipment | (10,757) | (10,179) | |||||||||
| Total deferred tax liabilities | (12,013) | (11,636) | |||||||||
| Net deferred tax assets | $ | 46,350 | $ | 24,697 | |||||||
In accordance with the provisions of ASC 740, Income Taxes, the Company provides a valuation allowance against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The assessment considers all available positive and negative evidence and is measured quarterly. On July 4, 2025, the U.S. government enacted legislation known as the One Big Beautiful Bill Act ("OBBBA") into law. The OBBBA, among other provisions, extends or reinstates certain provisions of the 2017 Tax Cuts and Jobs Act ("TCJA"), including but not limited to, 100% bonus depreciation on eligible property, immediate expensing of domestic research and development costs, and the restoration of an EBITDA based interest expense limitation calculation. As a result of the OBBBA interest expense limitation provision changes, the Company has released its valuation allowance against its interest limitation deferred tax assets. As of December 31, 2025, the Company had a consolidated valuation allowance of approximately $5.1 million against certain transaction costs and net deferred tax assets acquired as part of the Payslate acquisition that the Company believes are not more than likely to be realized. As of December 31, 2024, the Company had a consolidated valuation allowance of approximately $21.6M against certain transaction costs and interest deduction limitation carryforwards that the Company believes are not more than likely to be
realized. As of December 31, 2025 and December 31, 2024, the Company had interest deduction limitation carryforwards of $76.8 million and $87.6 million, respectively.
The Company recognizes the tax effects of uncertain tax positions only if such positions are more likely than not to be sustained based solely upon its technical merits at the reporting date. The Company refers to the difference between the tax benefit recognized in its financial statements and the tax benefit claimed in the income tax return as an "unrecognized tax benefit." A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (in thousands) | |||||
| Balance as of January 1, 2025 | $ | 80 | |||
| Additions based on positions of prior years | 65 | ||||
| Reductions related to lapse of the applicable statutes of limitations | (61) | ||||
Balance as of December 31, 2025 | $ | 84 | |||
As of December 31, 2025 and 2024, the balance of unrecognized tax benefits that, if recognized, affect our effective tax rate was immaterial. The Company continually evaluates the uncertain tax benefit associated with its uncertain tax positions.
The Company is subject to U.S. federal income tax and income tax in multiple state jurisdictions. Tax periods for December 31, 2022 and all years thereafter remain open to examination by the federal and state taxing jurisdictions and tax periods for December 31, 2021 and all years thereafter remain open for certain state taxing jurisdictions to which the Company is subject.
As of December 31, 2025 and December 31, 2024, the Company had federal NOL carryforwards of approximately $34.4 million and $0.0 million, respectively, with no expiration date. In addition, as of December 31, 2025 and December 31, 2024 the Company had state NOL carryforwards of approximately $53.2 million and $19.9 million, respectively, with expiration dates ranging from 2031 to 2045. Also, as of December 31, 2025 and December 31, 2024, the Company had Canadian NOL carryforwards of approximately $15.6 million and $0.0 million, respectively, with expiration dates ranging from 2037 to 2045.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 23, 2023 | |
| 2021 | Mar 17, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Mar 29, 2019 | |
| 2017 | Mar 27, 2018 | |
| 2016 | Mar 13, 2017 | |
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.