Strategic Education, Inc.STRA
Strategic Education, Inc. Income Taxes Disclosure
Income Taxes
The income tax provision for the years ended December 31, 2023, 2024 and 2025 is summarized below (in thousands):
| 2023 | 2024 | 2025 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 20,071 | $ | 25,896 | $ | 22,835 | |||||||||||
| State | 6,228 | 8,844 | 8,391 | ||||||||||||||
| Foreign | 10,962 | 14,295 | 11,787 | ||||||||||||||
| Total current | 37,261 | 49,035 | 43,013 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (2,437) | (843) | 7,525 | ||||||||||||||
| State | (100) | 838 | 350 | ||||||||||||||
| Foreign | (3,789) | (282) | (109) | ||||||||||||||
| Total deferred | (6,326) | (287) | 7,766 | ||||||||||||||
| Total provision for income taxes | $ | 30,935 | $ | 48,748 | $ | 50,779 | |||||||||||
The U.S. and foreign components of income before income taxes for the years ended December 31, 2023, 2024 and 2025 are summarized below (in thousands):
| 2023 | 2024 | 2025 | |||||||||||||||
| United States | $ | 76,893 | $ | 118,785 | $ | 139,429 | |||||||||||
| Foreign | 23,833 | 42,647 | 37,964 | ||||||||||||||
| Total income before income taxes | $ | 100,726 | $ | 161,432 | $ | 177,393 | |||||||||||
The Company intends to indefinitely reinvest its foreign earnings and cash unless such repatriation results in no or minimal tax costs. State income taxes associated with the foreign earnings that the Company intends to repatriate in the future are not material. As such, no deferred tax liabilities have been recorded in the United States with respect to foreign subsidiary earnings.
The tax effects of the principal temporary differences that give rise to the Company’s net deferred tax liability are as follows as of December 31, 2024 and 2025 (in thousands):
| 2024 | 2025 | ||||||||||
| Lease liabilities | $ | 15,182 | $ | 13,264 | |||||||
| Allowance for credit losses | 12,465 | 12,176 | |||||||||
| Stock-based compensation | 9,758 | 10,085 | |||||||||
| Contract liabilities | 8,972 | 9,201 | |||||||||
| Loss carryforward | 3,088 | 3,977 | |||||||||
| Other | 5,297 | 7,899 | |||||||||
| Other facility-related costs | 1,033 | 938 | |||||||||
| Intangible assets | (69,712) | (71,720) | |||||||||
| Right-of-use lease assets | (9,397) | (8,256) | |||||||||
| Prepaid expenses | (1,108) | (6,775) | |||||||||
| Valuation allowance | (2,991) | (3,889) | |||||||||
| Property and equipment | (173) | (2,735) | |||||||||
| Net deferred tax liability | $ | (27,586) | $ | (35,835) | |||||||
As of December 31, 2025, Loss carryforward consists of net operating losses related to the states where the Company does not file a consolidated return. The company has state net operating loss carryforwards of $48.4 million which will expire from 2032 through 2042 and $42.8 million which have an indefinite carryover period. The change in the valuation allowance for deferred tax assets as of December 31, 2024 and 2025 was $0.3 million and $0.9 million, respectively, and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return. The Company concluded that it was more likely than not that the deferred tax asset for the net operating loss carryforwards would not be realized due to negative evidence outweighing the positive evidence regarding the realization of the deferred tax assets. The Company will continue to evaluate its ability to realize its net deferred tax assets on a quarterly basis.
As of December 31, 2024 and 2025, the Company had no unrecognized tax benefits recorded on its consolidated balance sheets. Interest and penalties, including those related to uncertain tax positions, are included in the provision for income taxes in the consolidated statements of income. The Company had no interest and penalties included in the consolidated balance sheets as of December 31, 2024 and 2025.
The following table summarizes changes in unrecognized tax benefits, excluding interest and penalties, for the respective periods (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2025 | ||||||||||
| Beginning unrecognized tax benefits | $ | 948 | $ | — | |||||||
| Additions for tax positions taken in the prior year | — | — | |||||||||
| Reductions for tax positions taken in prior years | (948) | — | |||||||||
| Ending unrecognized tax benefits | $ | — | $ | — | |||||||
During the years ended December 31, 2024 and 2025, the Company did not record any unrecognized tax benefits.
As stated in Note 2, the Company adopted ASU 2023-09 for its annual reporting period ended on December 31, 2025. The Company applied the standard prospectively. Accordingly, the comparative disclosures below for the years ended December 31, 2023 and 2024 continue to be presented under previous ASC 740 disclosure requirements, whereas the disclosures for the year ended December 31, 2025 reflect the enhanced disaggregation requirements under ASU 2023-09.
A reconciliation between the Company’s statutory tax rate and the effective tax rate for the years ended December 31, 2023 and 2024, prior to the adoption of ASU 2023-09, is as follows:
| 2023 | 2024 | ||||||||||
| Statutory federal rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal benefits | 3.7 | 3.8 | |||||||||
| Impact of foreign operations | 2.1 | 2.4 | |||||||||
| Nondeductible compensation | 1.9 | 1.4 | |||||||||
| Excess tax benefit on share-based compensation | 1.1 | 0.6 | |||||||||
| Change in valuation allowance | 0.8 | 0.2 | |||||||||
| Other | 0.1 | 0.8 | |||||||||
| Effective tax rate | 30.7 | % | 30.2 | % | |||||||
A reconciliation between the Company’s statutory tax rate and the effective tax rate for the year ended December 31, 2025, after the adoption of ASU 2023-09, is as follows (amounts in thousands):
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Statutory federal rate | 37,252 | 21.0 | % | ||||||||
State income taxes, net of federal benefits(1) | 6,030 | 3.4 | % | ||||||||
| Change in valuation allowance (state) | 761 | 0.4 | % | ||||||||
| Impact of foreign operations | |||||||||||
| Statutory tax rate difference between Australia and US | 3,302 | 1.9 | % | ||||||||
| Change in valuation allowance | 136 | 0.1 | % | ||||||||
| Other foreign jurisdictions | 81 | — | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nondeductible compensation | 3,084 | 1.7 | % | ||||||||
| Excess tax benefit on share-based compensation | (306) | (0.2) | % | ||||||||
| Other | 439 | 0.3 | % | ||||||||
| Effective tax rate | 50,779 | 28.6 | % | ||||||||
___________________________________________________________
(1)State taxes in Virginia, California, Pennsylvania, Georgia, New York, Florida, South Carolina, and Maryland made up the majority (greater than 50 percent) of the tax effect in this category
Cash payments for income taxes were $42.9 million and $49.2 million for the years ended December 31, 2023 and 2024, respectively.
Cash payments (net of refunds) for income taxes by jurisdiction for the year ended December 31, 2025 are summarized below (in thousands):
| 2025 | |||||
| Federal | $ | 24,459 | |||
| State | 7,827 | ||||
| Foreign | 16,561 | ||||
| Total cash payments (net of refunds) for income taxes | $ | 48,847 | |||
The jurisdictions in which income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) for the year ended December 31, 2025 are as follows (in thousands):
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”), which includes significant tax-related provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The Company accounted for the impacts of OBBBA in 2025, which had no material impact on its annual effective tax rate in 2025.| 2025 | |||||
| Foreign | |||||
| Australia | $ | 15,817 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
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.