Sun Country Airlines Holdings, LLCSNCY
Sun Country Airlines Holdings, LLC Income Taxes Disclosure
14. INCOME TAXES
The following table summarizes the significant components of the provision for income taxes from continuing operations:
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 93 | $ | 1,697 | $ | — | |||||||||||
| State and Local | 145 | 547 | 92 | ||||||||||||||
| Total Current Tax Expense | 238 | 2,244 | 92 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 14,756 | 13,389 | 19,609 | ||||||||||||||
| State and Local | 2,408 | 1,038 | 2,277 | ||||||||||||||
| Total Deferred Tax Expense | 17,164 | 14,427 | 21,886 | ||||||||||||||
| Total: | |||||||||||||||||
| Federal | 14,849 | 15,086 | 19,609 | ||||||||||||||
| State and Local | 2,553 | 1,585 | 2,369 | ||||||||||||||
| Total Income Tax Expense | $ | 17,402 | $ | 16,671 | $ | 21,978 | |||||||||||
The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:
Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| $ | 14,745 | 21.0 | % | $ | 14,610 | 21.0 | % | $ | 19,773 | 21.0 | % | |||||||||||||||
State Tax, net of Federal Impact (1) | 2,017 | 2.9 | % | 1,252 | 1.8 | % | 1,871 | 2.0 | % | |||||||||||||||||
| Nontaxable or Nondeductible Items: | ||||||||||||||||||||||||||
| Stock Compensation Benefit | (1,783) | (2.5) | % | (45) | (0.1) | % | (1,048) | (1.1) | % | |||||||||||||||||
| Executive Compensation Limitation | 1,530 | 2.2 | % | 215 | 0.3 | % | 902 | 1.0 | % | |||||||||||||||||
| Other Permanent Adjustments | 893 | 1.2 | % | 639 | 1.0 | % | 480 | 0.4 | % | |||||||||||||||||
| Effective Tax Rate | $ | 17,402 | 24.8 | % | $ | 16,671 | 24.0 | % | $ | 21,978 | 23.3 | % | ||||||||||||||
| (1) | The state tax rate in Minnesota and Florida made up the majority (greater than 50 percent) of the tax effect in this category. | ||||
On July 4, 2025, the OBBBA was signed into law. The Company's effective tax rate for 2025 did not materially change as a result of the legislation.
The following table summarizes the significant components of the Company’s deferred taxes:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Net Operating Loss | $ | 71,474 | $ | 66,834 | |||||||
| Finance Lease Obligations | 40,272 | 42,840 | |||||||||
| Operating Lease Obligations | 3,511 | 4,123 | |||||||||
| Loyalty Program Liabilities | 3,668 | 3,258 | |||||||||
| Interest Expense Limitation | 929 | 8,374 | |||||||||
| Other | 12,763 | 11,279 | |||||||||
| Total Deferred Tax Assets | 132,617 | 136,708 | |||||||||
| Deferred Tax Liabilities: | |||||||||||
| Accelerated Depreciation | (126,296) | (113,679) | |||||||||
| Finance Lease Assets | (32,994) | (36,535) | |||||||||
| Operating Lease Right-of-use Assets | (3,279) | (3,886) | |||||||||
| Prepaid Maintenance | (4,999) | (4,135) | |||||||||
| Other | (5,810) | (2,039) | |||||||||
| Total Deferred Tax Liabilities | (173,378) | (160,274) | |||||||||
| Total Net Deferred Tax (Liabilities) Assets | $ | (40,761) | $ | (23,566) | |||||||
As of December 31, 2025, the Company has $68,709 of federal NOLs and $2,765 of state NOLs, net of tax effect, available that may be applied against future tax liabilities. As a result of ownership changes that occurred in 2021, the existing federal and state NOLs may be subject to certain limitations under Section 382 of the Internal Revenue Code. However, the Company does not believe these limitations will adversely impact its ability to use these losses to offset taxable income in future periods. There is no expiration of federal net operating losses. The state NOLs begin to expire in 2033.
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. The ultimate realization of the Deferred Tax Assets is dependent upon the generation of future taxable income during periods in which the temporary differences become deductible. Management considers the scheduled reversal of the liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. As of December 31, 2025, management believes that it is more likely than not that the future results of the operations will generate sufficient taxable income to realize the tax benefits related to its Deferred Tax Assets.
The Company recognizes the consolidated financial statement effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. If applicable, the Company reports both accrued interest and penalties related to unrecognized tax benefits as a component of Income Tax Expense in the Consolidated Statements of Operations. As of December 31, 2025 and 2024, the Company had no liability for unrecognized tax benefits recorded in its Consolidated Balance Sheets.
The Company files income tax returns in the United States and various states. In the normal course of business, the Company is subject to potential income tax examination by the federal and state tax authorities in these jurisdictions for tax years that are open under local statute. For U.S. federal income tax purposes, the Company's 2024, 2023, and 2022 tax returns remain open to examination. For U.S. state income tax purposes, the Company's 2024, 2023, 2022, and 2021 tax returns remain open to examination.
Tax Receivable Agreement
In connection with the Company’s IPO, the legal entity Sun Country Airlines Holdings, Inc. entered into a TRA with the TRA holders. Upon the closing of the IPO, the Company recognized a non-current liability of $115,200, which represented undiscounted aggregate payments that were expected to be paid to the TRA holders, with an offset to Stockholders’ Equity. The total TRA balance as of December 31, 2025 and 2024 was $87,169 and $97,694, of which no amount and $10,325 was current, respectively. During the years ended December 31, 2025, 2024 and 2023 the Company made payments of $10,525, $3,350 and $2,425 respectively, to the TRA holders, which includes certain members of the Company's management and certain members of the Company's Board of Directors.
The TRA liability is an estimate and actual amounts payable under the TRA could differ from this estimate. For example, changes to full year taxable income, as well as changes in tax laws may impact the timing of TRA liability payments. The decrease in the current portion of the TRA balance is primarily due to the OBBBA enacted on July 4, 2025. Payments will be made in future periods as the Pre-IPO Tax Attributes are utilized. If the Company does not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax benefits, then it would not be required to make the related TRA payments. In the case of a merger that constitutes a change of control, such as the Merger Agreement with Allegiant, the TRA will terminate. Upon completion of the potential Merger with Allegiant, the TRA will be settled with the TRA holders. The amount paid to the TRA holders will be the outstanding balance of the TRA at time of closing. For more information on the TRA see Note 2 within these Consolidated Financial Statements.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 18, 2022 | |
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.