TPG Inc.TPG
TPG Inc. Income Taxes Disclosure
12. Income Taxes
As a result of the Reorganization, the Company is treated as a corporation for U.S. federal and state income tax purposes. The Company is subject to U.S. federal and state income taxes, in addition to local and foreign income taxes, with respect to its allocable share of taxable income generated by the TPG Operating Group. Prior to the Reorganization, the Company was treated as a partnership for U.S. federal income tax purposes and therefore was not subject to U.S. federal and state income taxes except for certain consolidated subsidiaries that were subject to taxation in the United States (federal, state and local) and in foreign jurisdictions.
The income (loss) before income taxes includes the following components (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Income (loss) before income taxes | |||||||||||||||||
| United States | $ | 130,081 | $ | (144,214) | $ | 18,303 | |||||||||||
| Foreign | 536,497 | 119,390 | 65,350 | ||||||||||||||
| $ | 666,578 | $ | (24,824) | $ | 83,653 | ||||||||||||
The Company has provided U.S. federal, foreign and state and local corporate income tax for certain consolidated subsidiaries. The provision for income taxes consists of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income taxes (benefit) | |||||||||||||||||
| Federal | $ | 10,266 | $ | 26,460 | $ | 24,314 | |||||||||||
| State and local | 11,583 | 8,368 | 6,680 | ||||||||||||||
| Foreign | 15,327 | 11,906 | 9,198 | ||||||||||||||
| 37,176 | 46,734 | 40,192 | |||||||||||||||
| Deferred income taxes (benefit) | |||||||||||||||||
| Federal | 56,528 | 15,412 | 18,258 | ||||||||||||||
| State and local | (14,758) | 88 | 1,570 | ||||||||||||||
| Foreign | (11,953) | (10,143) | 248 | ||||||||||||||
| 29,817 | 5,357 | 20,076 | |||||||||||||||
| Income tax expense (benefit) | $ | 66,993 | $ | 52,091 | $ | 60,268 | |||||||||||
During 2025, we adopted ASU 2023-09 on a prospective basis. See Note 2—Summary of Significant Accounting Policies—Recently Adopted Accounting Guidance for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in thousands, except percentages):
| Year Ended December 31, 2025 | |||||||||||
| Provision for income taxes at U.S. federal statutory rate | $ | 139,981 | 21.0 | % | |||||||
State and local income taxes, net of federal benefit(a) | (3,579) | (0.5) | |||||||||
| Foreign tax effects: | |||||||||||
| Cayman Islands | |||||||||||
| Income not subject to tax | (90,307) | (13.6) | |||||||||
| Luxembourg | |||||||||||
| Income not subject to tax | (15,962) | (2.4) | |||||||||
| Other reconciling items | (63) | — | |||||||||
| Other foreign jurisdictions | (1,995) | (0.3) | |||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | |||||||||
| Effect of cross-border tax laws: | |||||||||||
| Foreign branch | 108,824 | 16.3 | |||||||||
| Tax credits: | |||||||||||
| Foreign tax credits | (4,160) | (0.6) | |||||||||
| Changes in valuation allowances | 6,960 | 1.0 | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Non-deductible compensation | 34,524 | 5.2 | |||||||||
| Equity-based compensation windfall | (14,209) | (2.1) | |||||||||
| Other | (776) | (0.1) | |||||||||
| Changes in unrecognized tax benefits | 1,492 | 0.2 | |||||||||
| Other adjustments: | |||||||||||
| Income passed through to partners | (89,445) | (13.4) | |||||||||
| Other | (4,292) | (0.6) | |||||||||
| Total tax provision and effective tax rate | $ | 66,993 | 10.1 | % | |||||||
(a)State and local taxes in New York, California, Minnesota, and New York City made up the majority (greater than 50%) of the tax effect in this category.
The following table reconciles the U.S. federal statutory tax rate to the effective income tax rate of the Company’s income tax expense for the years ended December 31, 2024 and December 31, 2023:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal taxes at statutory rate | 21.0 | % | 21.0 | % | |||||||
| Income passed through to partners | (73.5) | 9.6 | |||||||||
| State and local income taxes | (35.5) | 12.0 | |||||||||
| Foreign taxes, net of U.S. foreign tax credits | (36.8) | 7.7 | |||||||||
| Equity-based compensation | (104.0) | (1.3) | |||||||||
| Change in TPG Operating Group tax basis estimate | — | — | |||||||||
| Return to Provision | 13.9 | (0.9) | |||||||||
| Change in valuation allowance | 33.6 | 20.8 | |||||||||
| Change in tax status of statutory subsidiaries | — | 2.9 | |||||||||
| Other reconciling items | (28.5) | 0.2 | |||||||||
| Effective income tax rate | (209.8 | %) | 72.0 | % | |||||||
Income taxes are provided at the applicable statutory rates. The tax effects of temporary differences resulted in the following deferred tax assets and liabilities (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Investment in TPG Operating Group | $ | 944,708 | $ | 406,730 | |||||||
| Accruals | 13,621 | 10,782 | |||||||||
| Fixed assets | 1,177 | 1,220 | |||||||||
| Net operating loss carryforwards | 1,913 | 248 | |||||||||
| Equity-based compensation | 37,034 | 21,752 | |||||||||
| Operating lease liabilities | 5,283 | 2,116 | |||||||||
| Foreign tax credits | 2,815 | 1,111 | |||||||||
| Other | 712 | 236 | |||||||||
| 1,007,263 | 444,195 | ||||||||||
| Less: valuation allowance | (141,265) | (89,321) | |||||||||
| Deferred tax assets, net | $ | 865,998 | $ | 354,874 | |||||||
| Deferred tax liabilities | |||||||||||
| Right-of-use assets | $ | 4,812 | $ | 1,869 | |||||||
| Intangible assets, net | 8,010 | 6,298 | |||||||||
| Other | 514 | 53 | |||||||||
| Deferred tax liabilities, net | $ | 13,336 | $ | 8,220 | |||||||
As of December 31, 2025 and December 31, 2024, the Company has recognized net deferred tax assets before the considerations of valuation allowances in the amount of $993.9 million and $436.0 million, respectively, which primarily relates to excess income tax basis versus book basis differences in connection with the Company’s investment in the TPG Operating Group. The excess of income tax basis in the TPG Operating Group is primarily due to the Reorganization and subsequent exchanges of Common Units for Class A common stock, including the exchanges of Common Units for Class A common stock. As a result of the Reorganization and subsequent exchanges, the Company recorded deferred tax assets generated by the step-up in the tax basis of assets, that will be recovered as those underlying assets are sold or the tax basis is amortized.
At December 31, 2025 the Company has foreign tax credits available in the United States in the amount of $2.8 million, which will begin to expire in 2033 if not utilized. The Company has U.S. federal and state and local net operating loss carryforwards of $0.7 million that may be carried forward indefinitely and approximately $1.2 million of net operating loss carryforwards related to foreign jurisdictions expected to expire beginning in 2026.
The Company evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts the valuation allowance when it is more likely than not that all or a portion of the deferred tax asset may not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In projecting its taxable income, the Company begins with historic results and incorporates assumptions of the amount of future pre-tax operating income. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that the Company uses to manage its business. The Company’s projections of future taxable income that include the effects of originating and reversing temporary differences, including those for the tax basis intangibles, indicate that it is more likely than not that the benefits from our deferred tax assets will be realized.
As of December 31, 2025 and December 31, 2024, the Company has recognized a valuation allowance of $141.3 million and $89.3 million, respectively, which primarily relates to the Company’s investment in the TPG Operating Group. In evaluating the realizability of the deferred tax asset related to the Company’s investment in the TPG Operating Group, the Company determined that a portion of excess income tax basis in the TPG Operating Group will only reverse upon a sale of the Company’s interest in the TPG Operating Group which is not expected to occur in the foreseeable future. The Company has recognized valuation allowances against certain foreign tax credits available for use in the United States in the amount of $0.4 million, which are expected to expire unutilized, The Company also recognized a valuation allowance of $0.2 million primarily related to foreign net operating loss carryforwards, as it is more likely than not that this portion of our foreign deferred tax assets is not realizable.
The current year net increase in our valuation allowance, as compared to the prior year, was $51.9 million of which a $10.2 million increase was charged to income tax expense and a $41.7 million increase was recognized through equity.
As of December 31, 2025 and December 31, 2024, the Company’s liability pursuant to the Tax Receivable Agreement related to the Reorganization and subsequent exchanges of TPG Operating Group partnership units for common stock was $811.6 million and $331.3 million, respectively. Approximately $495.1 million of the Tax Receivable Agreement liability is attributable to Related Parties further described in Note 13 and $316.6 million is attributable to non-affiliates recorded in other liabilities. During the year ended December 31, 2025, certain holders of Common Units exchanged 35,939,394 Common Units for an equal number of shares of Class A Common Stock as described in Note 19 to the Consolidated Financial Statements. In connection with these exchanges, the Company recorded an additional liability pursuant to the Tax Receivable Agreement of $476.1 million. During the year, the liability pursuant to the Tax Receivable Agreement increased by an additional $13.8 million primarily due to changes in estimates used in measuring the liability, including updates to the state tax rates and other assumptions to estimate future payment obligations under the Tax Receivable Agreement. During the year ended December 31, 2025, the Company made payments of $9.6 million in connection with the Tax Receivable Agreement.
The following is a tabular reconciliation of unrecognized tax benefits, excluding interest and penalties (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits - January 1 | $ | 1,998 | $ | 1,987 | $ | 2,024 | |||||||||||
| Additions related to current year positions | 581 | 28 | 711 | ||||||||||||||
Additions related to prior year positions | 338 | — | — | ||||||||||||||
| Reductions for tax positions of prior years | — | — | (360) | ||||||||||||||
| Lapse of statute of limitations | — | — | (386) | ||||||||||||||
| Exchange rate fluctuations | (78) | (17) | (2) | ||||||||||||||
| Unrecognized tax benefits - December 31 | $ | 2,839 | $ | 1,998 | $ | 1,987 | |||||||||||
The Company recognizes interest and penalties accrued on uncertain tax benefits in income tax expense. For the years ended December 31, 2025, 2024 and 2023, the Company recognized interest of $1.3 million, $1.1 million and $0.9 million, respectively. The Company recognized penalties of $1.5 million, $1.1 million and $1.1 million for the years ended December 31, 2025, and 2024 and 2023, respectively.
As of December 31, 2025, the Company has unrecognized tax benefits and accrued interest and penalties of $5.7 million, which, if recognized, would impact the effective tax rate. The Company does not believe that it has any tax position for which it is reasonably possible that it will be required to record significant amounts of unrecognized tax benefits within the next twelve months. The Company applies the provisions of ASC 740, which clarifies the accounting and disclosure for uncertainty in tax positions. The Company analyzed its tax filing positions for all federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions.
In the normal course of business, the Company is subject to examination by U.S. federal and certain state, local and foreign tax regulators. At December 31, 2025, U.S. federal tax returns related to 2022 through 2024 and predecessor entities for the year 2021 are generally open under the normal statute of limitations and therefore subject to examination. State and local tax returns of our predecessor entities are generally open to audit for tax years between 2020 to 2021. In addition, certain foreign subsidiaries’ tax returns from 2011 to 2024 are also open for examination by various regulators. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any current or future audit will have a material adverse effect on the Company’s Consolidated Financial Statements.
Pursuant to the disclosure requirements of ASU 2023-09, the following table summarizes income taxes paid (net of refunds) exceeding 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):
| Year Ended December 31, 2025 | |||||
| US Federal | $ | 4,783 | |||
| US State and Local | |||||
| California | 1,693 | ||||
| New York City | 10,125 | ||||
| Texas | 1,692 | ||||
| Other | 3,611 | ||||
| Foreign | |||||
| India | 1,611 | ||||
| Singapore | 3,666 | ||||
| Other | 3,105 | ||||
| Total income taxes paid (net of refunds) | $ | 30,286 | |||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA, among other things, includes an extension of certain expiring provisions of the Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company will continue to evaluate its future impact as regulations are issued by the U.S. Department of the Treasury.
In December 2021, the Organization for Economic Cooperation and Development (“OECD”) released the Pillar Two Model rules (also referred to as the global minimum tax or Global Anti-Base Erosion “GloBE” rules), which were designed to ensure multinational enterprises pay a certain level of tax within every jurisdiction in which they operate. Several jurisdictions in which the Company operates have enacted these rules. In January 2026, the OECD released Administrative Guidance that introduced new Safe Harbors including one that exempts U.S.-parented multinational groups from various aspects of the GloBE rules. The Company will continue to monitor for legislative changes related to this guidance. As of December 31, 2025, the Company has analyzed enacted legislation and determined that the effects of Pillar Two are not material to the Company’s financial statements.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
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.