SKYWEST INC Income Taxes Disclosure
(4) Income Taxes
The provision for income taxes includes the following components (in thousands):
Year ended December 31, |
| |||||||||
2025 | 2024 | 2023 |
| |||||||
Current tax provision (benefit): | | | | | | | ||||
Federal | $ | 4,838 | $ | 5,917 | $ | 4,962 | ||||
State |
| 9,350 |
| 2,776 |
| 1,794 | ||||
| 14,188 |
| 8,693 |
| 6,756 | |||||
Deferred tax provision (benefit): | ||||||||||
Federal |
| 105,693 |
| 86,301 |
| (678) | ||||
State |
| 17,376 |
| 14,187 |
| (111) | ||||
| 123,069 |
| 100,488 |
| (789) | |||||
Provision for income taxes | $ | 137,257 | $ | 109,181 | $ | 5,967 | ||||
The following is a reconciliation between the federal income tax rate of 21.0% and the effective tax rate which is derived by dividing the provision for income taxes by the income before income taxes (in thousands). As a result of adopting ASU 2023-09, the disaggregated components for the years ended December 31, 2024 and 2023 were recast to conform with the presentation for the 2025 year.
Year ended December 31, |
| |||||||||||||||
2025 | 2024 | 2023 |
| |||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||
U.S. federal statutory tax rate | | $ | 118,774 | 21.0 | % | | $ | 90,750 | 21.0 | % | | $ | 8,465 | 21.0 | % | |
Domestic federal reconciling items: | ||||||||||||||||
Tax credits |
| (541) | (0.1) | % |
| (107) | 0.0 | % |
| (356) | (0.9) | % | ||||
Nontaxable and nondeductible items, net: | ||||||||||||||||
Section 162(m) limit on compensation | 8,911 | 1.6 | % | 4,007 | 0.9 | % | 1,734 | 4.3 | % | |||||||
Other employee non-deductible expenses | 2,645 | 0.5 | % | 2,138 | 0.5 | % | 1,862 | 4.6 | % | |||||||
Other | 5 | 0.0 | % | (4) | 0.0 | % | (15) | 0.0 | % | |||||||
Other reconciling items: | ||||||||||||||||
Excess tax benefits from stock based compensation | (11,784) | (2.1) | % | (913) | (0.2) | % | 939 | 2.3 | % | |||||||
Other | (894) | (0.2) | % | (524) | (0.1) | % | (523) | (1.3) | % | |||||||
Domestic state and local income taxes, net of federal benefit |
| 20,141 | 3.6 | % |
| 14,488 | 3.4 | % |
| 1,417 | 3.5 | % | ||||
Change in prior year unrecognized tax benefits |
| — | — | % |
| (654) | (0.2) | % |
| (7,556) | (18.7) | % | ||||
Provision for income taxes | $ | 137,257 | 24.3 | % | $ | 109,181 | 25.3 | % | $ | 5,967 | 14.8 | % | ||||
For the year ended December 31, 2025, the Company's taxes from California, Colorado, Illinois, and Oregon comprised the majority of the state and local income taxes, net of federal benefit category. For the years ended December 31, 2024 and 2023, the Company's state and local income taxes from California, Colorado, and Illinois comprised the majority of the state and local income taxes, net of federal benefit category.
The following are the income taxes paid, net of refunds by the Company for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Year ended December 31, | ||||||||||
2025 | 2024 | 2023 | ||||||||
US Federal | $ | 5,000 | $ | 12,500 | $ | 12,000 | ||||
Domestic state and local: | ||||||||||
California | 5,050 | 1,850 | — | |||||||
Illinois | 1,300 | 760 | 450 | |||||||
Other | 5,513 | 3,478 | 1,160 | |||||||
Total income taxes paid, net of refunds | $ | 16,863 | $ | 18,588 | $ | 13,610 | ||||
The significant components of the Company’s net deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows (in thousands):
As of December 31, |
| ||||||
2025 | 2024 |
| |||||
Deferred tax assets: | | | | | |||
Accrued benefits | $ | 34,033 | $ | 34,096 | |||
Net operating loss carryforward |
| 64,774 |
| 89,030 | |||
Aircraft maintenance contracts |
| 93,737 |
| 86,965 | |||
Deferred revenue | 70,525 | 83,724 | |||||
Operating lease liabilities | 20,037 | 21,452 | |||||
Interest deduction limitation | — | 2,333 | |||||
Accrued reserves and other |
| 59,459 |
| 47,486 | |||
Total deferred tax assets |
| 342,565 |
| 365,086 | |||
Valuation allowance |
| — |
| — | |||
Deferred tax liabilities: | |||||||
Accelerated depreciation |
| (1,214,016) |
| (1,131,670) | |||
Operating lease right-of-use assets | (20,037) | (21,384) | |||||
Other | (19,243) | — | |||||
Total deferred tax liabilities |
| (1,253,296) |
| (1,153,054) | |||
Net deferred tax liability | $ | (910,731) | $ | (787,968) | |||
The Company’s deferred tax liabilities were primarily generated through accelerated depreciation, combined with shorter depreciable tax lives, allowed under the IRS tax code for purchased aircraft and support equipment compared to the Company’s depreciation policy under GAAP for such assets (see Note 1, “Nature of Operations and Summary of Significant Accounting Policies”).
At December 31, 2025 and 2024, the Company had federal net operating losses of approximately $269.1 million and $377.9 million and state net operating losses of approximately $239.4 million and $280.3 million, respectively. The estimated effective tax rate applicable to the federal and state net operating losses at December 31, 2025, was 21.0% and 3.45%, respectively. The Company anticipates that the federal and state net operating losses will start to expire in 2035 and 2026, respectively. The Company has no ongoing federal examination and has one ongoing state examination. Federal tax years 2022, 2023 and 2024 are open to examination.
Under ASC Topic 740, the accounting guidance related to uncertainty in tax positions requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the year ended December 31, 2025, 2024 and 2023 is as follows (in thousands):
Year ended December 31, | |||||||||
2025 | 2024 | 2023 | |||||||
Unrecognized tax benefits at the beginning of year | | $ | — | | $ | 654 | | $ | 8,210 |
Gross increases - current year tax positions | — | — | — | ||||||
Gross increases - prior year tax positions |
| — |
| — |
| 191 | |||
Gross decreases - prior year tax positions | — | (654) | (7,747) | ||||||
Unrecognized tax benefits at end of year | $ | — | $ | — | $ | 654 | |||
Interest and penalties in year-end balance | $ | — | $ | — | $ | — | |||
For the year ended December 31, 2023, the Company recorded $191,000 of interest expense related to uncertain tax positions not offset by the Company's tax attributes. The Company did not record a similar expense for the years ended December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 26, 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.