STERLING INFRASTRUCTURE, INC.STRL

STERLING INFRASTRUCTURE, INC. Income Taxes Disclosure

10-KFiled Feb 26, 20263 min read
12.INCOME TAXES
Provision for Income Taxes
The Company and its subsidiaries are based in the U.S. and file federal and various state income tax returns. The components of the provision for income taxes were as follows:
Years Ended December 31,
202520242023
Current federal tax expense$63,114 $42,045 $25,012 
Current state tax expense21,852 12,796 8,012 
Deferred federal tax expense13,637 28,701 12,702 
Deferred state tax expense149 3,818 2,044 
Income tax expense$98,752 $87,360 $47,770 
Effective Tax Rate
The items comprising the difference between income taxes computed at the U.S. federal statutory rates in effect for 2025, 2024 and 2023 and our effective tax rates were as follows:
Years Ended December 31,
202520242023
Amount%Amount%Amount%
Tax expense at the U.S. federal statutory rate$85,780 21.0 %$75,238 21.0 %$40,029 21.0 %
State income taxes, net of federal benefits (1)
17,412 4.3 %13,927 3.9 %8,374 4.4 %
Non-taxable or Non-deductible items:
Taxes on subsidiaries’ and joint ventures’ earnings allocated to noncontrolling interests owners(4,110)(1.0)%(2,826)(0.8)%(880)(0.5)%
Executive compensation including stock incentives4,526 1.1 %3,579 1.0 %1,652 0.9 %
Excess tax benefits from equity awards(3,877)(0.9)%(5,678)(1.6)%(1,644)(0.9)%
Gain on deconsolidation of subsidiary— — %1,905 0.5 %— — %
Other permanent differences540 0.1 %1,215 0.3 %239 0.1 %
Changes in unrecognized tax benefits(1,519)(0.4)%— — %— — %
Income tax expense$98,752 24.2 %$87,360 24.4 %$47,770 25.1 %
(1) Georgia and Alabama made up the majority (greater than 50%) of the tax effect in this category.

The 2025, 2024 and 2023 effective income tax rate varied from the statutory rate primarily as a result of state income taxes, nondeductible compensation, gain on the deconsolidation of subsidiary and other permanent differences.
During 2025, the Company paid federal income taxes totaling $61,000. Additionally, the Company paid state income taxes of $6,085 to Georgia and $13,989 to all other states.
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities were as follows:
Long Term
As of December 31,
Assets related to:20252024
Accrued compensation and other$6,461 $4,155 
Right of use liabilities13,894 13,091 
Net operating loss carryforwards946 957 
   Net deferred tax assets$21,301 $18,203 
Liabilities related to:
Depreciation of property and equipment$(60,602)$(47,583)
Right of use assets(13,731)(13,027)
Amortization of tax basis goodwill(23,985)(20,351)
Investment in unconsolidated subsidiary
(23,376)(25,903)
Amortization of intangibles(22,021)(20,518)
Other(731)(181)
Total deferred tax liabilities$(144,446)$(127,563)
Net total deferred tax liability
$(123,145)$(109,360)
Net Operating Loss—At December 31, 2025 the Company had federal and state net operating loss (“NOL”) carryforwards of $255 and $13,050, respectively. Federal NOLs have expiration dates between 2034 and 2036. The Company has $28 of federal NOLs that do not expire. State NOLs have expiration dates between 2028 and 2039.
Uncertain Tax Positions
The Company's U.S. federal and state income tax returns for 2022 and later are open and subject to examination. Additionally, state NOLs may be adjusted by the taxing authorities for the 2013 and later tax years.
The Company has an Uncertain Tax Position (“UTP”) liability of $5,214 and an additional liability related to the UTP for penalties of $1,043 and interest of $1,225 at December 31, 2025. The Company had a UTP liability of $6,733 and an additional liability related to the UTP for penalties of $1,346 and interest of $1,109 at December 31, 2024. We recognize interest and penalties related to the UTP as administrative expense. The UTP, including penalties and interest, are fully offset by an indemnification receivable at December 31, 2025.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 26, 2025
2023Feb 27, 2024
2022Feb 28, 2023
2021Mar 1, 2022
2020Mar 3, 2021
2019Mar 3, 2020
2018Mar 5, 2019
2017Mar 6, 2018

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.

Other Available Disclosures

RevenueEarnings Per SharePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsStock CompensationNew StandardsPay vs Performance