SERVICE CORP INTERNATIONALSCI
SERVICE CORP INTERNATIONAL Income Taxes Disclosure
Income Taxes
The provision or benefit for income taxes includes U.S. federal income taxes (determined on a consolidated return basis), foreign income taxes, and state income taxes.
We participate in tax equity investments in renewable energy projects that qualify for federal investment tax credits. These investments are accounted for under the proportional amortization method. Tax credits and other related tax benefits are recognized as a reduction of income tax expense as they are realized, with corresponding amortization of the investment in proportion to the tax benefits received. During 2025, we recognized $5.3 million of investment tax credits and other tax benefits and recorded $5.2 million of amortization related to these investments. The tax credits and related amortization are presented net within the Provision for income taxes in the Consolidated Statement of Operations. As of December 31, 2025, the unamortized balance of renewable energy tax credit investments was $51.1 million, and unfunded commitments related to these investments totaled $40.8 million. These amounts are included in Deferred charges and other assets and Accounts payable and accrued liabilities, respectively, on the Consolidated Balance Sheet.
Income before income taxes was composed of the following components:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| United States | $ | 689,745 | $ | 631,159 | $ | 664,745 | |||||||||||
| Foreign | 40,038 | 44,259 | 43,861 | ||||||||||||||
Total income before income taxes | $ | 729,783 | $ | 675,418 | $ | 708,606 | |||||||||||
Income tax provision consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| United States | 104,582 | 113,379 | (30,832) | ||||||||||||||
| Foreign | 13,268 | 13,069 | 14,989 | ||||||||||||||
| State | 28,071 | 22,676 | (4,728) | ||||||||||||||
| Total current income taxes | 145,921 | 149,124 | (20,571) | ||||||||||||||
| Deferred: | |||||||||||||||||
| United States | $ | 36,764 | $ | 5,971 | $ | 155,677 | |||||||||||
| Foreign | (1,561) | (32) | (1,999) | ||||||||||||||
| State | 5,814 | 1,602 | 37,838 | ||||||||||||||
| Total deferred income taxes | 41,017 | 7,541 | 191,516 | ||||||||||||||
| Total income taxes | $ | 186,938 | $ | 156,665 | $ | 170,945 | |||||||||||
In December 2023, the FASB amended income tax disclosure guidance to require enhanced transparency in the effective tax rate reconciliation and additional disclosures related to income taxes paid. We adopted this guidance for the year ended December 31, 2025 and applied the disclosure requirements retrospectively to all prior periods presented.
The table below reflects those disclosures for the years ended December 31, 2025, 2024 and 2023.
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||||
| Federal Statutory Tax Rate | 153,255 | 21.0 | % | 141,838 | 21.0 | % | 148,807 | 21.0 | % | |||||||||||||||||
State and Local Income Taxes, net of federal tax effect(1) | 27,298 | 3.7 | % | 20,224 | 3.0 | % | 26,047 | 3.7 | % | |||||||||||||||||
| Foreign Tax Effects | 3,501 | 0.5 | % | 3,651 | 0.5 | % | 4,156 | 0.5 | % | |||||||||||||||||
| Tax Credits | (737) | (0.1) | % | 178 | — | % | (1,001) | (0.1) | % | |||||||||||||||||
| Nontaxable or Nondeductible Items | 4,019 | 0.6 | % | (8,126) | (1.2) | % | (6,991) | (1.0) | % | |||||||||||||||||
| Excess tax benefits from stock-based compensation | (1,060) | (0.1) | % | (10,561) | (1.6) | % | (7,412) | (1.0) | % | |||||||||||||||||
| Other | 5,079 | 0.7 | % | 2,435 | 0.4 | % | 421 | — | % | |||||||||||||||||
| Changes in Unrecognized Tax Benefits | (551) | (0.1) | % | $ | (1,084) | (0.1) | % | 110 | — | % | ||||||||||||||||
| Other Adjustments | 153 | — | % | (16) | — | % | (183) | — | % | |||||||||||||||||
| Effective Tax Rate | $ | 186,938 | 25.6 | % | $ | 156,665 | 23.2 | % | $ | 170,945 | 24.1 | % | ||||||||||||||
(1) In 2025, state tax in California, Maryland, and Illinois comprise the majority of the tax effect in this category. In 2024, state tax in California, Texas, and Illinois comprise the majority of the tax effect in this category. In 2023, state tax in California and Texas comprise the majority of the tax effect in this category.
The higher effective tax rate in 2025 was primarily due to a decrease in excess tax benefits recognized on the settlement of employee share-based awards. The effective tax rate for the year ended December 31, 2025 was higher than the federal statutory tax rate of 21% primarily due to state and foreign income taxes.
The table below presents the income taxes paid, net of refunds received, by jurisdiction for the years ended December 31, 2025, 2024 and 2023.
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| US Federal | $ | 95,956 | $ | — | $ | 57,000 | |||||||||||
| US State and Local: | |||||||||||||||||
California(1) | 13,385 | — | — | ||||||||||||||
| All Others | 15,875 | 8,417 | 9,606 | ||||||||||||||
| Total US Domestic | $ | 29,260 | $ | 8,417 | $ | 9,606 | |||||||||||
| Foreign: | |||||||||||||||||
| Canada | 13,528 | 10,975 | 14,399 | ||||||||||||||
| All Others | 1,321 | 1,428 | 2,724 | ||||||||||||||
| Total Foreign | $ | 14,849 | $ | 12,403 | $ | 17,123 | |||||||||||
| Total Income Tax Paid | $ | 140,065 | $ | 20,820 | $ | 83,729 | |||||||||||
(1) The blank cells indicate that the amount of income tax paid during the year is either immaterial or does not meet the 5% disaggregation threshold.
Deferred taxes are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Inventories and cemetery property | $ | (191,122) | $ | (195,851) | |||||||
| Deferred incremental direct selling costs | (114,032) | (110,305) | |||||||||
| Property and equipment | (186,055) | (146,121) | |||||||||
| Intangibles | (217,144) | (213,641) | |||||||||
| Deferred revenue on preneed funeral and cemetery contracts | (71,128) | (100,095) | |||||||||
| Other | (7,167) | (6,085) | |||||||||
| Deferred tax liabilities | (786,648) | (772,098) | |||||||||
| Loss and tax credit carryforwards | 106,657 | 113,603 | |||||||||
| Accrued liabilities | 92,319 | 115,515 | |||||||||
| Deferred tax assets | 198,976 | 229,118 | |||||||||
| Less: valuation allowance | (95,464) | (99,325) | |||||||||
| Net deferred income tax liability | $ | (683,136) | $ | (642,305) | |||||||
Deferred tax assets and deferred income tax liabilities are recognized in our Consolidated Balance Sheet as follows:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
Non-current deferred tax assets - included in Deferred charges and other assets, net | $ | 7,897 | $ | 6,890 | |||||||
Non-current deferred tax liabilities - included in Deferred tax liability | (691,033) | (649,195) | |||||||||
| Net deferred income tax liability | $ | (683,136) | $ | (642,305) | |||||||
As of December 31, 2025, foreign withholding taxes have not been provided on the estimated $306.5 million of undistributed earnings and profits (E&P) of our foreign subsidiaries as we intend to permanently reinvest these foreign E&P in the respective businesses outside the U.S. However, if we were to repatriate such foreign E&P, the foreign withholding tax liability is estimated to be $15.8 million. Additionally, if we were to repatriate E&P in excess of our previously taxed income under the Tax Cuts and Jobs Act of 2017, such excess repatriation may cause us to incur an additional U.S. federal income tax of approximately $7.7 million related to our hybrid debt structure between Canada and the United States that was eliminated in 2022.
The following table summarizes the activity related to our gross unrecognized tax benefits from January 1, 2023 to December 31, 2025 (in thousands):
| Federal, State, and Foreign Tax | |||||
| (In thousands) | |||||
| Balance at December 31, 2022 | $ | 1,348 | |||
| Reduction to tax positions related to prior years | — | ||||
| Balance at December 31, 2023 | $ | 1,348 | |||
| Reductions to tax positions due to lapse of statutes of limitations | (1,348) | ||||
| Additions to tax positions related to prior years | 834 | ||||
| Balance at December 31, 2024 | $ | 834 | |||
| Reductions to tax positions due to lapse of statutes of limitations | (400) | ||||
| Balance at December 31, 2025 | $ | 434 | |||
Our total unrecognized tax benefits that, if recognized, would affect our effective tax rates were $0.4 million, $0.8 million and $1.3 million as of December 31, 2025, 2024 and 2023, respectively.
We include potential accrued interest and penalties related to unrecognized tax benefits within our income tax provision account. We have accrued $0.3 million, $0.4 million and $1.0 million for the payment of interest, net of tax benefits, and penalties as of December 31, 2025, 2024 and 2023, respectively. We recorded a decrease of interest and penalties of $0.1 million, $0.6 million and an increase of $0.1 million for years ended December 31, 2025, 2024 and 2023, respectively. To the extent interest and penalties are not assessed with respect to uncertain tax positions or the uncertainty of deductions in the future, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.
We file income tax returns, including tax returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. We consider the United States to be our most significant jurisdiction; however, all tax returns are subject to routine compliance review by the taxing authorities in the jurisdictions in which we file tax returns in the ordinary course of business.
The federal statutes of limitations have expired for all tax years prior to 2022. Our 2022 federal income tax return is currently under audit by the IRS. Various state and foreign jurisdictions are auditing years 2020 through 2023. The outcome of each of these audits cannot be predicted at this time.
Following the enactment of the new U.S. tax legislation, Public Law No. 119-21, on July 4, 2025, we adopted the relevant provisions during the third quarter of 2025, including those pertaining to bonus depreciation and interest expense. Consistent with our expectations, the adoption of these provisions did not have a material effect on our consolidated financial statements.
Various subsidiaries have federal, state, and foreign loss carryforwards totaling $2.2 billion with expiration dates ranging through 2043. Such loss carryforwards will expire as follows:
| Federal | State | Foreign | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| 2026 | $ | — | $ | 340,129 | $ | 942 | $ | 341,071 | |||||||||||||||
| 2027 | — | 189,417 | 966 | 190,383 | |||||||||||||||||||
| 2028 | — | 234,006 | 1,705 | 235,711 | |||||||||||||||||||
| 2029 | — | 190,895 | 661 | 191,556 | |||||||||||||||||||
| Thereafter | — | 1,253,180 | 615 | 1,253,795 | |||||||||||||||||||
| Total loss carryforwards | $ | — | $ | 2,207,627 | $ | 4,889 | $ | 2,212,516 | |||||||||||||||
In addition to the above loss carryforwards, we have $1.0 million of federal net operating loss carryforwards and $2.1 million of foreign alternative minimum tax credits, both of which can be carried forward indefinitely.
In assessing the usefulness of deferred tax assets, we consider whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The future realization of net deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. During 2025, we recorded a net $3.9 million decrease in our valuation allowance primarily driven by utilization and expiration of state net operating losses, along with legislative changes in certain states. The valuation allowances can be affected in future periods by changes to tax laws, changes to statutory tax rates, and changes in estimates of future taxable income.
At December 31, 2025, our loss and tax credit carryforward deferred tax assets and valuation allowances by jurisdiction are as follows (presented net of federal benefit).
| Federal | State | Foreign | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Loss and tax credit carryforwards | $ | 214 | $ | 102,515 | $ | 3,928 | $ | 106,657 | |||||||||||||||
| Valuation allowance | $ | — | $ | 80,711 | $ | 14,753 | $ | 95,464 | |||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 13, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 15, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 14, 2018 | |
| 2016 | Feb 15, 2017 | |
| 2015 | Feb 18, 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.