Repay Holdings Corp Income Taxes Disclosure
14. Taxation
Repay Holdings Corporation is taxed as a corporation and is subject to paying corporate federal, state and local taxes on the income allocated to it from Hawk Parent, based upon Repay Holding Corporation’s economic interest held in Hawk Parent, as well as any stand-alone income or loss it generates. Hawk Parent is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hawk Parent is not subject to U.S. federal and certain state and local income taxes. Hawk Parent’s members, including Repay Holdings Corporation, are liable for federal, state and local income taxes based on their allocable share of Hawk Parent’s pass-through taxable income.
The components of income (loss) before income taxes are as follows:
|
|
Year Ended December 31, |
|
|||||||||
($ in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
U.S. |
|
$ |
(278,538 |
) |
|
$ |
(13,146 |
) |
|
$ |
(121,593 |
) |
Foreign |
|
|
1,581 |
|
|
|
2,226 |
|
|
|
2,058 |
|
Loss before income tax benefit |
|
$ |
(276,957 |
) |
|
$ |
(10,920 |
) |
|
$ |
(119,535 |
) |
|
|
|
|
|
|
|
|
|
|
|||
The Company recorded a provision (benefit) for income tax as follows:
|
|
Year Ended December 31, |
|
|||||||||
($ in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current expense (benefit) |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
$ |
276 |
|
|
$ |
872 |
|
|
$ |
591 |
|
U.S. state and local |
|
|
(71 |
) |
|
|
570 |
|
|
|
332 |
|
Foreign |
|
|
299 |
|
|
|
473 |
|
|
|
556 |
|
Total current expense |
|
$ |
504 |
|
|
$ |
1,915 |
|
|
$ |
1,479 |
|
Deferred expense (benefit) |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
$ |
(4,480 |
) |
|
$ |
(2,774 |
) |
|
$ |
(1,858 |
) |
U.S. state and local |
|
|
(1,893 |
) |
|
|
284 |
|
|
|
(1,736 |
) |
Foreign |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total deferred benefit |
|
$ |
(6,373 |
) |
|
$ |
(2,490 |
) |
|
$ |
(3,594 |
) |
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
$ |
(4,204 |
) |
|
$ |
(1,902 |
) |
|
$ |
(1,267 |
) |
U.S. state and local |
|
|
(1,964 |
) |
|
|
854 |
|
|
|
(1,404 |
) |
Foreign |
|
|
299 |
|
|
|
473 |
|
|
|
556 |
|
Income tax benefit |
|
$ |
(5,869 |
) |
|
$ |
(575 |
) |
|
$ |
(2,115 |
) |
|
|
|
|
|
|
|
|
|
|
|||
A reconciliation of the income taxes paid, net of refunds received by the Company is as follows for the years indicated:
|
|
Year Ended December 31, |
|
|
|||||||||
($ in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
|||
U.S. Federal |
|
$ |
1,270 |
|
|
$ |
1,300 |
|
|
$ |
709 |
|
|
U.S. state and local |
|
|
|
|
|
|
|
|
|
|
|||
Pennsylvania |
|
$ |
— |
|
(1) |
$ |
181 |
|
|
$ |
— |
|
(1) |
Other |
|
|
52 |
|
|
|
523 |
|
|
|
217 |
|
|
|
|
$ |
52 |
|
|
$ |
704 |
|
|
$ |
217 |
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|||
Canada - Federal |
|
$ |
341 |
|
|
$ |
624 |
|
|
$ |
224 |
|
|
Canada - British Columbia |
|
|
98 |
|
|
|
183 |
|
|
|
180 |
|
|
|
|
$ |
439 |
|
|
$ |
807 |
|
|
$ |
404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
1,761 |
|
|
$ |
2,811 |
|
|
$ |
1,330 |
|
|
A reconciliation of the United States statutory income tax rate to the Company’s effective income tax rate is as follows for the years indicated:
|
|
Year Ended December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
($ in thousands) |
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||||
U.S. Federal Statutory Tax Rate |
|
$ |
(58,161 |
) |
|
|
21.0 |
% |
|
$ |
(2,293 |
) |
|
|
21.0 |
% |
|
$ |
(25,104 |
) |
|
|
21.0 |
% |
Domestic Federal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tax Credits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development tax credits |
|
|
— |
|
|
|
0.0 |
% |
|
|
(871 |
) |
|
|
8.0 |
% |
|
|
(1,315 |
) |
|
|
1.1 |
% |
Foreign tax credit |
|
|
(458 |
) |
|
|
0.2 |
% |
|
|
(375 |
) |
|
|
3.5 |
% |
|
|
(235 |
) |
|
|
0.2 |
% |
Nontaxable or Nondeductible Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Goodwill impairment |
|
|
49,026 |
|
|
|
(17.7 |
%) |
|
|
— |
|
|
|
0.0 |
% |
|
|
14,693 |
|
|
|
(12.3 |
%) |
Other |
|
|
219 |
|
|
|
(0.1 |
%) |
|
|
204 |
|
|
|
(1.9 |
%) |
|
|
123 |
|
|
|
(0.1 |
%) |
Effect of Changes in Tax Laws or Rates Enacted in the Current Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Excess tax shortfall related to share-based compensation |
|
|
2,062 |
|
|
|
(0.7 |
%) |
|
|
1,420 |
|
|
|
(13.0 |
%) |
|
|
2,318 |
|
|
|
(1.9 |
%) |
Gain on sale of Blue Cow |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
7,407 |
|
|
|
(6.2 |
%) |
Other |
|
|
3,010 |
|
|
|
(1.1 |
%) |
|
|
(55 |
) |
|
|
0.5 |
% |
|
|
948 |
|
|
|
(0.8 |
%) |
Domestic State and Local Income Taxes, Net of Federal Income Tax Effect (1) |
|
|
(1,994 |
) |
|
|
0.7 |
% |
|
|
794 |
|
|
|
(7.3 |
%) |
|
|
(1,505 |
) |
|
|
1.3 |
% |
Foreign Tax Effects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Statutory tax rate difference between Canada and United States |
|
|
427 |
|
|
|
(0.2 |
%) |
|
|
601 |
|
|
|
(5.5 |
%) |
|
|
555 |
|
|
|
(0.5 |
%) |
Effective tax rate |
|
$ |
(5,869 |
) |
|
|
2.1 |
% |
|
$ |
(575 |
) |
|
|
5.3 |
% |
|
$ |
(2,115 |
) |
|
|
1.8 |
% |
The Company’s effective tax rate was 2.1%, 5.3% and 1.8% for the years ended December 31, 2025, 2024 and 2023, respectively. The comparison of the Company’s effective tax rate to the U.S. statutory tax rate of 21% was primarily influenced by the fact that the Company is not liable for the income taxes on the portion of Hawk Parent’s earnings that are attributable to
noncontrolling interests, the calculation of the Federal and state research and development credit and its impact on income taxes, the excess tax shortfall related to share-based compensation and the impact of the goodwill impairment. Further, the comparison is reflective of the effect of remeasuring net deferred tax assets for state tax rate changes.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Details of the Company’s deferred tax assets and liabilities are as follows:
($ in thousands) |
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Tax credits |
|
$ |
5,492 |
|
|
$ |
5,653 |
|
Acquisition costs |
|
|
230 |
|
|
|
257 |
|
Federal net operating losses |
|
|
42,647 |
|
|
|
26,761 |
|
State net operating losses |
|
|
11,013 |
|
|
|
6,624 |
|
Tax integrated capped call |
|
|
7,177 |
|
|
|
8,954 |
|
Other assets |
|
|
(38 |
) |
|
|
(41 |
) |
Partnership basis tax differences |
|
|
116,030 |
|
|
|
131,598 |
|
Total deferred tax asset |
|
|
182,551 |
|
|
|
179,806 |
|
Valuation allowance |
|
|
(5,739 |
) |
|
|
(8,734 |
) |
Total deferred tax asset, net of valuation allowance |
|
|
176,812 |
|
|
|
171,072 |
|
Deferred tax liabilities |
|
|
|
|
|
|
||
Other intangibles - Payix |
|
|
(2,387 |
) |
|
|
(3,023 |
) |
Other liabilities |
|
|
(1,397 |
) |
|
|
(4,766 |
) |
Total deferred tax liabilities |
|
|
(3,784 |
) |
|
|
(7,789 |
) |
Net deferred tax assets |
|
$ |
173,028 |
|
|
$ |
163,283 |
|
As a result of the finalization of 2024 income tax returns, Post-Merger Repay Unit exchanges during the year ended December 31, 2025, and estimates of current year activity, the Company recognized a reduction of the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) in the amount of $3.0 million, compared to a reduction of $3.2 million during the year ended December 31, 2024, to account for the portion of the Company’s outside basis in the partnership interest that it will not recover through tax deductions, a ceiling rule limitation arising under Internal Revenue Code (the “Code”) sec. 704(c). As the ceiling rule causes taxable income allocations to be in excess of 704(b) book allocations the DTL will unwind, leaving only the DTA, which may only be recovered through the sale of the partnership interest in Hawk Parent. The Company has concluded, based on the weight of all positive and negative evidence, that all of the DTA associated with the ceiling rule limitation is not likely to be realized as of December 31, 2025. As such, a 100% valuation allowance was recognized.
As of December 31, 2025, the Company had net tax effected federal and state (net of federal benefit) net operating losses (“NOLs”) of $53.6 million, of which approximately $47.1 million have an indefinite life. NOLs of approximately $0.3 million and $6.2 million will begin to expire in 2031 and 2034, respectively. As of December 31, 2025, the Company had federal and state research tax credit carryforwards of $3.5 million and $1.0 million, respectively, which will begin to expire in 2039 and 2032, respectively. As of December 31, 2025, the Company had a federal foreign tax credit carryforward of $0.9 million. The Company believes as of December 31, 2025, based on the weight of all positive and negative evidence, it is more likely than not that the results of future operations will generate sufficient taxable income to realize the NOLs and tax credits and, as such, no valuation allowance was recorded.
On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act (“OBBBA”). Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the United States taxation of profits derived from foreign operations. The Company accounted for the effects of OBBBA in accordance with ASC740, Income Taxes, in the year ended December 31, 2025. The OBBBA did not have a material effect on the financial statements for the year ended December 31, 2025, and the Company is continuing to evaluate the potential effect on future periods.
The Company is no longer subject to U.S. Federal, state, or local examinations by tax authorities for years prior to 2021. No uncertain tax positions existed as of December 31, 2025.
Tax Receivable Agreement Liability
Pursuant to our election under Section 754 of the Code, we expect to obtain an increase in our share of the tax basis in the net assets of Hawk Parent when Post-Merger Repay Units are redeemed or exchanged for Class A common stock of Repay Holdings Corporation. The Company intends to treat any redemptions and exchanges of Post-Merger Repay Units as direct purchases for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On July 11, 2019, the Company entered into a TRA that provides for the payment by the Company of 100% of the amount of any tax benefits realized, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of Hawk Parent resulting from any redemptions or exchanges of Post-Merger Repay Units and from our acquisition of the equity of the selling Hawk Parent members, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”). The TRA Payments are not conditioned upon any continued ownership interest in Hawk Parent or Repay. The rights of each party under the TRA other than the Company are assignable. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.
As of December 31, 2025, the Company had a liability of $200.9 million related to the fair value of its projected obligations under the TRA, which is captioned as the tax receivable agreement liability in the Company’s Consolidated Balance Sheets. The decrease of $2.7 million in the TRA liability for the year ended December 31, 2025, was primarily a result of the decrease in the Early Termination Rate, subsequent exchanges of Post-Merger Repay Units occurring during the period, and accretion, partially offset by a decrease in the tax rate and a payment of the current portion of the TRA liability, as reported at December 31, 2024, over the same period.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 9, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
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.