SelectQuote, Inc.SLQT
SelectQuote, Inc. Income Taxes Disclosure
INCOME TAXES
Income tax expense (benefit) consists of the following for the periods presented:
| Year Ended June 30, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current income taxes: | |||||||||||||||||
| Federal | $ | (1,527) | $ | 2,523 | $ | 102 | |||||||||||
| State | 952 | 1,286 | 544 | ||||||||||||||
| Total | (575) | 3,809 | 646 | ||||||||||||||
| Deferred income taxes: | |||||||||||||||||
| Federal | 1,192 | (2,805) | (12,365) | ||||||||||||||
| State | 314 | 4,055 | 1,119 | ||||||||||||||
| Total | 1,506 | 1,250 | (11,246) | ||||||||||||||
Income tax expense (benefit) | $ | 931 | $ | 5,059 | $ | (10,600) | |||||||||||
The Company’s statutory federal tax rate was 21% for each of the years ended June 30, 2025, 2024, and 2023, respectively. The Company’s blended state tax rate (net of federal benefit) was 4.27%, 5.29%, and 4.66% for the years ended June 30, 2025, 2024, and 2023, respectively.
The differences from the Company’s federal statutory tax rate to the effective tax rate shown below for the year ended June 30, 2025, were primarily related to state income taxes and the recording of a valuation allowance for federal and state tax attributes that the Company does not expect to utilize prior to expiration, non-deductible change in fair value of warrants adjustment, excess officer and stock compensation, and general business credits. For the year ended June 30, 2024, the differences were primarily related to state income taxes, revaluation of deferred tax attributes, and the recording of a valuation allowance for federal and state tax attributes for which the Company does not believe will more likely than not be utilized. For the year ended June 30, 2023, the differences were primarily related to state income taxes, RSU vestings, executive officer compensation, and the recording of a valuation allowance for state tax attributes that the Company does not expect to utilize prior to expiration.
On July 4, 2025, legislation commonly referred to as the One Big Beautiful Bill Act was signed into law. The Company is evaluating the legislation and its effect on our consolidated financial statements, which will be reflected in the three month period ended September 30, 2025. The Company does not expect a material impact to our financial statements as a result of the legislation.
The following reconciles the statutory federal income tax rate to the effective income tax rate for the periods presented:
| Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal statutory rate | 21.0% | 21.0% | 21.0% | ||||||||||||||
Differences in income tax expense resulting from: | |||||||||||||||||
| State income taxes | 1.7 | 5.9 | 3.1 | ||||||||||||||
| Executive officer compensation | 3.7 | (0.4) | (1.1) | ||||||||||||||
| Equity compensation | (3.7) | (0.7) | (1.1) | ||||||||||||||
| Change in valuation allowance | 27.4 | (37.0) | (5.4) | ||||||||||||||
| Change in state tax rate | (16.8) | 12.1 | — | ||||||||||||||
| Deferred adjustments | — | (0.8) | (1.1) | ||||||||||||||
Deferred revaluation | — | (17.6) | — | ||||||||||||||
Transaction costs | 1.8 | — | — | ||||||||||||||
Warrant mark-to-market | (25.8) | — | — | ||||||||||||||
General business credit | (5.7) | — | — | ||||||||||||||
Return to provision adjustments | (2.2) | — | — | ||||||||||||||
| Other | 0.5 | 0.1 | (0.1) | ||||||||||||||
| Effective income tax rate | 1.9% | (17.4)% | 15.3% | ||||||||||||||
Significant components of the deferred tax assets and liabilities were as follows as of June 30:
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Accruals and other | $ | 11,165 | $ | 23,498 | |||||||
| Lease liability | 8,187 | 7,994 | |||||||||
| Interest expense limitation | 75,708 | 56,309 | |||||||||
| Net operating losses | 150,643 | 149,780 | |||||||||
| Credit carryforward | 5,068 | 4,393 | |||||||||
| Basis difference in fixed and amortizable assets | 13,289 | 11,310 | |||||||||
| Total deferred tax assets | 264,060 | 253,284 | |||||||||
Less: Valuation allowance | (28,083) | (14,476) | |||||||||
Deferred tax assets, net of valuation allowance | $ | 235,977 | $ | 238,808 | |||||||
| Deferred tax liabilities: | |||||||||||
| Commissions receivable | $ | (266,600) | $ | (268,656) | |||||||
| Lease right-of-use asset | (6,617) | (6,175) | |||||||||
Other | (632) | — | |||||||||
| Interest rate swap | — | (1,455) | |||||||||
Total deferred tax liabilities | (273,849) | (276,286) | |||||||||
| Net long-term deferred tax liabilities | $ | (37,872) | $ | (37,478) | |||||||
The Company has established a valuation allowance on certain deferred tax assets associated with federal and state specific net operating losses (“NOL”) and credits that are not more likely than not to be realized. For the year-ended June 30, 2025, the Company increased the valuation allowance by $13.6 million. As the Company is currently in a three-year cumulative loss position, it cannot consider the projections of future income as part of the valuation allowance analysis and have considered the other sources of future taxable income described under ASC 740 when evaluating the need for a valuation allowance. Aside from the certain deferred tax asset related to federal and state credits noted above where a valuation allowance has been established, the Company continues to recognize its deferred tax assets as of June 30, 2025 as it believes it is more likely than not that the net deferred tax assets will be realized. The Company will continue to evaluate the realizability of its deferred tax assets.
As of June 30, 2025, the Company has NOL carryforwards for federal and state income tax purposes of $541.1 million and $724.5 million, respectively. All remaining federal NOLs may be carried forward indefinitely. The state carryforwards will expire during tax years 2026 through 2045. As of June 30, 2025, the Company has federal tax credit carryforwards of $1.0 million and state income tax credit carryforwards of $5.6 million. These state tax credits will expire during tax years 2024 through 2037.
The Company is subject to income taxes in the US federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to interpretation of the related tax laws and regulations and require the application of significant judgment. The federal tax returns from tax years 2021 through 2023 and state tax returns from tax years 2020 through 2023 remain open to examination by significant domestic taxing jurisdictions to which the Company is subject. The statute of limitations for federal and state tax returns may be extended upon utilization of NOL carryforwards.
Uncertain Tax Positions
The benefits of uncertain tax positions are recorded in the Company's consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities.
As of June 30, 2025, the Company had gross unrecognized tax benefits of $0.4 million, consisting of $0.4 million related to prior year tax positions and less than $0.1 million related to current year tax positions. There were no gross unrecognized tax benefits as of June 30, 2024. If recognized, these benefits would reduce the Company’s effective tax rate in future periods.
| Year Ended June 30, | ||||||||
(in thousands) | 2025 | 2024 | ||||||
Balance as of June 30, 2024 | $ | — | $ | — | ||||
Additions for UTP’s of prior years | 350 | — | ||||||
Decreases for UTP’s of prior years | — | — | ||||||
Additions for UTP’s of current year | 49 | — | ||||||
Decreases related to audit settlements | — | — | ||||||
Balance as of June 30, 2025 | $ | 399 | $ | — | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 21, 2025 | Showing above |
| 2024 | Sep 13, 2024 | |
| 2023 | Sep 13, 2023 | |
| 2022 | Aug 29, 2022 | |
| 2021 | Aug 26, 2021 | |
| 2020 | Sep 10, 2020 | |
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.