TIPTREE INC.TIPT
TIPTREE INC. Income Taxes Disclosure
Income Taxes
The following table presents the Company’s provision (benefit) for income taxes reflected as a component of income (loss):
| For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current provision (benefit) for income taxes: | |||||||||||||||||
| Federal | $ | 26,192 | $ | 2,118 | $ | 250 | |||||||||||
| State | 1,288 | 940 | 1,612 | ||||||||||||||
| Foreign | 3,031 | 2,974 | 1,041 | ||||||||||||||
| Total current provision (benefit) for income taxes | 30,511 | 6,032 | 2,903 | ||||||||||||||
| Deferred provision (benefit) for income taxes: | |||||||||||||||||
| Federal | 29,020 | 38,126 | 39,983 | ||||||||||||||
| State | 2,438 | (1,446) | 7,155 | ||||||||||||||
| Foreign | (317) | 344 | 409 | ||||||||||||||
| Total deferred provision (benefit) for income taxes | 31,141 | 37,024 | 47,547 | ||||||||||||||
| Total provision (benefit) for income taxes | $ | 61,652 | $ | 43,056 | $ | 50,450 | |||||||||||
On June 21, 2022, the WP Transaction was completed, in which Warburg invested $200,000 in Tiptree’s insurance subsidiary, Fortegra. The WP Transaction, along with Fortegra management’s ownership, reduced Tiptree’s ownership in Fortegra below 80% such that, while still consolidated for GAAP financial reporting purposes, Fortegra will no longer be included in the consolidated tax return group with Tiptree. Tiptree recorded deferred tax liabilities related to the basis difference in Tiptree’s investment in Fortegra as of December 31, 2022. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell any of its Fortegra stock at its carrying value on the Company’s balance sheet. The deferred tax liability as of December 31, 2022 relating to the WP Transaction was $39,970, of which $14,064 was recorded directly in stockholders’ equity, a benefit of $2,424 in other comprehensive income and $28,330 as a provision for income taxes in the consolidated statements of operations for the year ended December 31, 2022. Additional one time impacts from the transaction caused $4,803 of expense, leading to $33,133 of expense in the statement of operations.
For the year ended December 31, 2024, the deferred tax liability relating to Fortegra was $84,702, an increase of $23,028, of which $478 of benefit was recorded in OCI, and $23,506 expense was recorded as a provision for income taxes.
Excluding the impact of these deferred taxes, the effective tax rates for the years ended December 31, 2024 and 2023, were 25.5% and 28.8%, respectively.
The U.S. federal rate is before the consideration of rate reconciling items. A reconciliation of the expected federal provision (benefit) for income taxes on income using the federal statutory income tax rate to the actual provision (benefit) for income taxes and resulting effective income tax rate is as follows for the periods indicated below:
| For the Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Income (loss) before income taxes | $ | 149,319 | $ | 83,053 | $ | 54,011 | |||||||||||
| Federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Expected federal provision (benefit) for income taxes at the federal statutory income tax rate | 31,357 | 17,441 | 11,342 | ||||||||||||||
| Effect of state provision (benefit) for income taxes, net of federal benefit | (913) | (1,971) | 2,034 | ||||||||||||||
Effect of non-deductible compensation | 3,470 | 3,376 | 3,292 | ||||||||||||||
| Effect of tax deconsolidation of subsidiaries | 23,506 | 19,101 | 33,133 | ||||||||||||||
| Effect of change in valuation allowance | 2,406 | 518 | 3,285 | ||||||||||||||
| Effect of foreign operations | (271) | 2,743 | (18) | ||||||||||||||
Effect of stock-based compensation | (196) | (233) | (556) | ||||||||||||||
| Effect of return-to-accrual | 500 | 1,580 | (509) | ||||||||||||||
| Effect of other items | 1,793 | 501 | (1,553) | ||||||||||||||
| Tax (benefit) on income | $ | 61,652 | $ | 43,056 | $ | 50,450 | |||||||||||
| Effective tax rate | 41.3 | % | 51.8 | % | 93.4 | % | |||||||||||
For the year ended December 31, 2024, the Company’s effective tax rate on income was equal to 41.3%. The effective tax rate for the year ended December 31, 2024 is higher than the U.S. statutory income tax rate of 21.0% primarily from the impact of the tax deconsolidation of Fortegra and non-deductible compensation.
For the year ended December 31, 2023, the Company’s effective tax rate on income was equal to 51.8%. The effective tax rate for the year ended December 31, 2023 is higher than the U.S. statutory income tax rate of 21.0% primarily from the impact of the tax deconsolidation of Fortegra and non-deductible compensation.
For the year ended December 31, 2022, the Company’s effective tax rate on losses was equal to 93.4%. The effective tax rate for the year ended December 31, 2022 is higher than the U.S. statutory income tax rate of 21.0% primarily from the impact of the tax deconsolidation of Fortegra and non-deductible compensation.
The table below presents the components of the Company’s net deferred tax assets and liabilities as of the respective balance sheet dates:
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Loss carryforwards | $ | 50,164 | $ | 30,834 | |||||||
| Unrealized losses | 10,426 | 28,926 | |||||||||
| Accrued expenses | 2,605 | 2,041 | |||||||||
| Unearned premiums | 57,294 | 61,112 | |||||||||
| Deferred revenue | 16,900 | 15,655 | |||||||||
Claims reserve | 9,886 | 6,351 | |||||||||
Lease liability | 9,313 | 8,357 | |||||||||
| Other deferred tax assets | 3,713 | 3,311 | |||||||||
| Total deferred tax assets | 160,301 | 156,587 | |||||||||
| Less: Valuation allowance | (14,772) | (12,366) | |||||||||
| Total net deferred tax assets | 145,529 | 144,221 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property | 2,831 | 3,266 | |||||||||
| Unrealized gains | 10,477 | 9,648 | |||||||||
| Other deferred tax liabilities | 114 | 246 | |||||||||
| Deferred acquisition cost | 133,794 | 135,628 | |||||||||
| Advanced commissions | 59,522 | 48,975 | |||||||||
| Right of use asset | 7,100 | 6,236 | |||||||||
| Intangibles | 17,397 | 18,394 | |||||||||
| Investment in Fortegra | 84,702 | 61,673 | |||||||||
| Total deferred tax liabilities | 315,937 | 284,066 | |||||||||
Net deferred tax liability | $ | 170,408 | $ | 139,845 | |||||||
As of January 2016, Tiptree established a U.S. federal consolidated income tax group and filed on a consolidated basis, with limited exceptions. As of June 2022, Fortegra and its subsidiaries are no longer part of Tiptree’s consolidated income tax group and formed their own tax consolidation group. Tiptree’s consolidated group, and certain subsidiaries on a separate basis, filed returns in various state jurisdictions, and as such may have state tax obligations. Additionally, as needed the Company will take all necessary steps to comply with any income tax withholding requirements.
As of December 31, 2024, the Company had total U.S. federal net operating loss (NOL) and capital loss carryforwards of $134,517. The following table presents the U.S. federal NOLs and capital loss carryforwards by tax year of expiration:
As of December 31, 2024 | |||||
| Tax Year of Expiration | |||||
| 2025 | $ | — | |||
| 2026 | — | ||||
| 2027 | 2,290 | ||||
| 2028 | 10,553 | ||||
| 2029 | 84,292 | ||||
| Indefinite | 37,382 | ||||
Total (1) | $ | 134,517 | |||
(1) $21,258 of the loss carryforwards reside at Fortegra, outside of the Tiptree consolidated tax group.
In addition to the U.S. federal NOL, Tiptree and its subsidiaries have NOLs and capital loss carryforwards in various state jurisdictions totaling $21,565 as of December 31, 2024. Valuation allowances of $14,772 have been established for primarily state deferred tax assets, which are primarily state NOLs, since management has concluded it is more likely than not they will expire unutilized based on existing positive and negative evidence. Management believes it is more likely than not the remaining NOLs and deferred tax assets will be utilized prior to their expiration dates.
As of December 31, 2024, the consolidated valuation allowance for the Company was $14,772. In 2024, the Company recorded a net increase in its valuation allowances equal to $2,406, compared to a net increase in its valuation allowance of $518 in 2023.
As of December 31, 2024 and 2023, the Company had no material unrecognized tax benefits or accrued interest and penalties. Federal tax years 2015 and onward are open for examination as of December 31, 2024.
On April 15, 2024, the Company sold its 16.98 million shares of Invesque for $625 of proceeds resulting in a capital loss for tax purposes of approximately $106,768.
The Organization for Economic Cooperation and Development (“OECD”) has introduced a framework to implement a global minimum corporate tax rate of 15%, commonly referred to as Pillar Two. Many aspects of Pillar Two are effective beginning calendar year 2024 and other aspects will be effective beginning in calendar year 2025. While it is uncertain whether the U.S. will adopt Pillar Two, certain countries in which the Company operates have adopted legislation and other countries are in the process of introducing legislation to implement Pillar Two. We continue to expect Pillar Two not to have a material impact on the Company, and we regularly monitor the additional guidance the OECD releases and the legislation that countries are implementing.
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.