SouthState Bank Corp Income Taxes Disclosure

Note 11—Income Taxes

The provision for income taxes consists of the following:

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The provision for income taxes differs from that computed by applying the federal statutory income tax rate of 21% in 2025, 2024 and 2023 to income before provision for income taxes, as indicated in the following analysis:

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The Company adopted the disclosure requirements in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a retrospective basis as of January 1, 2025. The adoption primarily impacted the presentation and disaggregation of the Company’s income tax disclosures and did not affect the Company’s consolidated financial position, results of operations, or cash flows. Comparative income tax disclosures have been updated to conform to the new standard.

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For the year-ended December 31, 2025, state income taxes in Florida comprise the majority of the state income tax expense (benefit), net of federal category. Income taxes paid for the years ended December 31, 2025, 2024, and 2023 were as follows:

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The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

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The components of the net deferred tax asset are as follows:

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The Company had federal net operating loss (“NOL”) & realized built-in loss (“RBIL”) carryforwards of $45.2 million and $48.9 million for the years ended December 31, 2025 and 2024, respectively, which expire in varying amounts between 2026 to 2036. All of the Company's loss carryforwards are subject to Section 382 of the Internal Revenue Code, which places an annual limitation on the amount of federal net operating loss carryforwards which the Company may utilize after a change in control, and also limits the Company's ability to utilize certain tax deductions (realized built-in losses or RBIL) due to the existence of a Net Unrealized Built-in Loss (“NUBIL”) at the time of the change in control. The Company is allowed to carry forward any such limited RBIL under terms similar to those related to NOLs. The Company also has an immaterial amount of credit carryforwards, which it expects to fully utilize within the carryforward period.

The Company acquired federal net operating loss carryforwards of $41.6 million in the January 1, 2025 acquisition of Independent. These acquired NOLs are subject to a combined annual limitation of $34.2 million. In total, the combined allowable deduction for all loss carryforwards on an annual basis is $45.3 million. Of the $45.3 million of combined allowable deduction for all loss carryforwards, $31.4 million relates to Independent's 2024 and short period 2025 loss, which is expected to be utilized in full in 2025. The remaining deductions subject to various Section 382 limitations is approximately $13.9 million.

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An immaterial amount of the Section 382 NOLs acquired from Independent will expire unused and the carrying value of those loss carryforwards were reduced in purchase accounting. The company expects all remaining Section 382 limited carryforwards and state credit carryforwards to be realized within the applicable carryforward period.

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The Company has acquired state net operating losses in various states. These are also subject to annual limitations under Section 382, similar to the federal NOLs. An immaterial amount of the Section 382 state NOLs acquired from Independent will expire unused and the carrying value of those loss carryforwards were reduced in purchase accounting. The Company has immaterial state credit carryforwards. The Company expects all remaining state Section 382 limited carryforwards and state credit carryforwards to be realized within the applicable carryforward period.

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The Company had state net operating loss carryforwards of $114.7 million and $110.9 million for the years ended December 31, 2025 and 2024, respectively, most of which expire in varying amounts through 2040. There is a valuation allowance of $3.8 million on $96.2 million of state operating loss carryforwards at the parent company for which realizability is uncertain.

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In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in carryback years, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deferred tax assets, net of the valuation allowance at December 31, 2025.

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A reconciliation of the beginning balance and ending amount of unrecognized tax benefits is as follows:

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Accrued interest and penalties on unrecognized tax benefits totaled $0 and $309,000 as of December 31, 2025 and 2024, respectively. Interest and penalties related to unrecognized tax benefits are recorded in interest expense and penalties. Unrecognized tax benefits as of December 31, 2025 and 2024, that, if recognized, would impact the effective tax rate totaled $0 and $1.3 million for each period, respectively.

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The Company's unrecognized tax benefit as of December 31, 2024 related to income tax exposure on an ongoing state tax examination which was concluded during the period ended December 31, 2025. Upon conclusion of the examination the Company expects the above amounts to reverse in their entirety.

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Generally, the Company's federal and state income tax returns are no longer subject to examination by taxing authorities for years prior to 2022.