ROLLINS INCROL
ROLLINS INC Income Taxes Disclosure
INCOME TAXES
For the years ended December 31, income from continuing operations before income taxes consisted of the following:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Income before income taxes | |||||||||||||||||
| Domestic | $ | 664,780 | $ | 592,704 | $ | 548,428 | |||||||||||
| Foreign | 36,146 | 37,526 | 37,829 | ||||||||||||||
| Total income from continuing operations before income taxes | $ | 700,926 | $ | 630,230 | $ | 586,257 | |||||||||||
For the years ended December 31, the Company’s income tax provision consisted of the following:
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 105,940 | $ | 126,246 | $ | 112,647 | |||||||||||
| State | 35,326 | 36,328 | 33,516 | ||||||||||||||
| Foreign | 13,803 | 11,613 | 12,781 | ||||||||||||||
| Total current tax expense | 155,069 | 174,187 | 158,944 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 17,541 | (6,848) | (2,349) | ||||||||||||||
| State | 5,253 | (2,336) | (2,925) | ||||||||||||||
| Foreign | (3,642) | (1,152) | (2,370) | ||||||||||||||
| Total deferred tax expense (benefit) | 19,152 | (10,336) | (7,644) | ||||||||||||||
| Total income tax provision | $ | 174,221 | $ | 163,851 | $ | 151,300 | |||||||||||
The following table presents the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended December 31:
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| (in thousands) | $ | % | $ | % | $ | % | ||||||||||||||||||||
| Income tax at statutory rate | $ | 147,210 | 21.0 | % | $ | 132,361 | 21.0 | % | $ | 123,114 | 21.0 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 32,485 | 4.6 | % | 26,647 | 4.2 | % | 23,653 | 4.0 | % | |||||||||||||||||
| Foreign tax effects | 3,330 | 0.5 | % | 3,303 | 0.5 | % | 841 | 0.1 | % | |||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | — | — | % | — | — | % | |||||||||||||||||
| Effect of cross-border tax laws | (883) | (0.1) | % | 384 | 0.1 | % | 505 | 0.1 | % | |||||||||||||||||
| Tax credits: | ||||||||||||||||||||||||||
| Investment tax credits | (7,687) | (1.1) | % | — | — | % | — | — | % | |||||||||||||||||
| Other tax credits | (1,506) | (0.2) | % | (1,308) | (0.2) | % | (1,300) | (0.2) | % | |||||||||||||||||
| Changes in valuation allowances | — | — | % | — | — | % | — | — | % | |||||||||||||||||
| Nontaxable or nondeductible items | 2,893 | 0.5 | % | 2,163 | 0.3 | % | 1,940 | 0.3 | % | |||||||||||||||||
| Changes in unrecognized tax benefits | (1,411) | (0.2) | % | 44 | — | % | 958 | 0.2 | % | |||||||||||||||||
| Other adjustments | (210) | (0.1) | % | 257 | 0.1 | % | 1,589 | 0.3 | % | |||||||||||||||||
| Total income tax provision | $ | 174,221 | 24.9 | % | — | $ | 163,851 | 26.0 | % | $ | 151,300 | 25.8 | % | |||||||||||||
(1) State taxes in California, Florida, Georgia, Illinois, and New Jersey make up the majority (greater than 50 percent) of the tax effect in this category.
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. The Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Employee compensation and benefits | $ | 16,644 | $ | 15,146 | |||||||
| Unearned revenues | 16,056 | 15,243 | |||||||||
| Insurance reserves | 31,285 | 29,773 | |||||||||
| Lease liabilities | 103,960 | 118,382 | |||||||||
| Non-amortizable intangible assets | 8,680 | 7,792 | |||||||||
| Other deferred tax assets | 14,129 | 16,415 | |||||||||
| Total deferred tax assets | 190,754 | 202,751 | |||||||||
| Valuation allowance | (8,680) | (7,792) | |||||||||
| Net deferred tax assets | $ | 182,074 | $ | 194,959 | |||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets and depreciation | $ | 11,546 | $ | 9,599 | |||||||
| Intangible assets | 106,162 | 93,872 | |||||||||
| Right of use assets | 99,649 | 102,299 | |||||||||
| Total deferred tax liabilities | $ | 217,357 | $ | 205,770 | |||||||
| Net deferred taxes | |||||||||||
| Deferred tax assets | 1,715 | 4,841 | |||||||||
| Deferred tax liabilities | (36,998) | (15,652) | |||||||||
| Net deferred taxes | $ | (35,283) | $ | (10,811) | |||||||
Deferred tax assets are included in "Other assets" and deferred tax liabilities are included in "Other long-term accrued liabilities" on the consolidated statements of financial position
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. As of December 31, 2025, the Company increased its valuation allowance by approximately $0.9 million related to deferred tax assets on intangible assets held in Australia. The Company does not expect to recognize such deferred tax assets as it expects to continue its operations in Australia for the foreseeable future and the related intangible assets are not amortizable for tax purposes in Australia.
The changes in the Company’s valuation allowance for deferred tax assets are as follows:
| (in thousands) | |||||
| December 31, 2023 | $ | 6,883 | |||
| Charged to income tax expense | 909 | ||||
| Charged to other accounts | — | ||||
| December 31, 2024 | 7,792 | ||||
| Charged to income tax expense | 888 | ||||
| Charged to other accounts | — | ||||
| December 31, 2025 | $ | 8,680 | |||
As of December 31, 2025, the Company has no net operating loss carryforwards in any federal, state, or foreign jurisdictions. The Company has state tax credit carryforwards of $0.4 million which will begin to expire in 2035 if not fully utilized.
As of December 31, 2025, we assert that foreign cash earnings in excess of working capital and cash needed for strategic investments and acquisitions are not intended to be indefinitely reinvested offshore and we have included the tax effects of such current and/or future repatriations, including applicable state taxes and foreign withholding tax of such cash earnings in these financial statements. Any non-cash unremitted earnings in our foreign subsidiaries are considered permanently reinvested and deferred taxes have not been provided on these earnings.
The total amount of unrecognized tax benefits as of December 31, 2025 that, if recognized, would affect the effective tax rate is $0.1 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Unrecognized tax benefits at beginning of year | $ | 1,584 | $ | 1,784 | $ | 1,394 | |||||||||||
| Additions for tax positions of prior years | — | — | 653 | ||||||||||||||
| Reductions for tax positions of prior years | (844) | (39) | (263) | ||||||||||||||
| Settlements with taxing authorities | (614) | (161) | — | ||||||||||||||
| Unrecognized tax benefits at end of year | $ | 126 | $ | 1,584 | $ | 1,784 | |||||||||||
The Company’s policy is to record interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were $0.6 million and $0.6 million as of December 31, 2024 and 2023, respectively. The Company had no interest and penalties related to income tax matters during the year ended December 31, 2025.
The Company files U.S. federal income tax returns, as well as separate and combined income tax returns in numerous state and foreign jurisdictions. The Company is under examination in certain state jurisdictions for years ranging from 2019 through 2023. The Company regularly assesses the outcomes of both ongoing and future examinations for the current or prior years to determine whether the Company’s provision for income taxes is sufficient. The Company recognizes liabilities based on estimates of whether additional taxes will be due and believes its reserves are adequate in relation to any potential assessments. The outcome of any one examination, some of which may conclude during the next 12 months, is not expected to have a material impact on the Company’s financial position or results of operations.
For the years ended December 31, income taxes paid consisted of the following:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
Federal (1) | $ | 111,662 | $ | 93,748 | $ | 109,568 | |||||||||||
| State | 35,718 | 36,635 | 39,426 | ||||||||||||||
| Foreign | 15,520 | 15,255 | 10,160 | ||||||||||||||
| Total income taxes paid (net of refunds) | $ | 162,900 | $ | 145,638 | $ | 159,154 | |||||||||||
(1) 2025 amount includes $56.2 million paid to third parties to purchase federal investment tax credits.
For the years ended December 31, income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| State | |||||||||||||||||
| California | $ | 8,489 | $ | 8,642 | $ | 11,862 | |||||||||||
| Foreign | |||||||||||||||||
| Canada | $ | 11,149 | $ | 11,397 | * | ||||||||||||
*Jurisdiction below the threshold for the period presented
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 24, 2016 | |
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.