Income Taxes
We are the sole managing member of RMR LLC. We are a corporation subject to U.S. federal and state income tax with respect to our allocable share of any taxable income of RMR LLC and its tax consolidated subsidiaries. RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by RMR LLC is passed through to and included in the taxable income or loss of its members, including RMR Inc. and ABP Trust, based on each member’s respective ownership percentage. During the fiscal years ended September 30, 2025, 2024 and 2023, all of our income before taxes was derived solely from domestic operations.
We had a provision (benefit) for income taxes which consists of the following:
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| | Fiscal Year Ended September 30, |
| | 2025 | | 2024 | | 2023 |
| Current: | | | | | | |
| Federal | | $ | 4,188 | | | $ | 4,912 | | | $ | 16,922 | |
| State | | 1,501 | | | 3,350 | | | 5,954 | |
| Deferred: | | | | | | |
| Federal | | 1,335 | | | 2,248 | | | (940) | |
| State | | 647 | | | 809 | | | (168) | |
| Total | | $ | 7,671 | | | $ | 11,319 | | | $ | 21,768 | |
A reconciliation of the statutory income tax rate to the effective tax rate is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | Fiscal Year Ended September 30, |
| | | 2025 | | 2024 | | 2023 |
| Income taxes computed at the federal statutory rate | | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State taxes, net of federal benefit | | 3.6 | % | | 3.4 | % | | 3.0 | % |
| Permanent items | | 1.2 | % | | 1.1 | % | | 0.5 | % |
| Uncertain tax position reserve, net of federal benefit | | 0.3 | % | | 1.9 | % | | — | % |
| Net income attributable to noncontrolling interest | | (9.5) | % | | (9.8) | % | | (9.9) | % |
| Total | | 16.6 | % | | 17.6 | % | | 14.6 | % |
The components of the deferred tax assets as of September 30, 2025 and 2024 are entirely comprised of the outside basis difference in our partnership interest in RMR LLC.
ASC 740, Income Taxes, provides a model for how a company should recognize, measure and present in its financial statements uncertain tax positions that have been taken or are expected to be taken with respect to all open years and in all significant jurisdictions. Pursuant to this topic, we recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50.0% likely to be realized upon settlement.
We continue to be subject to federal, state, and local income tax audit examinations for open periods, which can lead to adjustments to our provision for income taxes, the resolution of which may be highly uncertain. We have accrued an uncertain tax position reserve related to an ongoing examination with a state jurisdiction for the fiscal years ending September 30, 2019 and thereafter, the impact of which is not significant to the overall financial statements. Our policy is to include interest expense related to unrecognized tax benefits within the provision for income taxes in our consolidated statements of comprehensive income.
As of September 30, 2025 and 2024, our gross unrecognized tax benefit from uncertain tax positions, exclusive of interest expense, was $1,527 and $1,449, respectively, of which $78 and $107, respectively, is based on positions related to the fiscal years ended September 30, 2025 and 2024, respectively. As of September 30, 2025 and 2024, we recognized $146 and $252, respectively, for interest expense related to unrecognized tax benefits and had $1,925 and $1,701, respectively, of gross unrecognized tax benefits. As of September 30, 2023, we had no uncertain tax positions. We do not reasonably expect any significant changes relating to our unrecognized tax benefits within the next twelve months.